UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 1, 1995
[ ] 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 MICROWAVE, 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 13057
East Syracuse, New York (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: 315-432-8909
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Securities Act:
Common Stock, $.01 Par Value
----------------------------
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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 aggregate market value of the voting stock held by non-affiliates of
the Registrant at September 18, 1995 was approximately $28,714,288.
The number of shares of Registrant's Common Stock outstanding on September
18, 1995 was 4,056,042.
Portions of the Registrant's Proxy Statement for use in connection with its
Annual Meeting of Shareholders to be held on December 6, 1995 are incorporated
into Part III of this Annual Report on Form 10K.
1
<PAGE>
PART I
Item 1. Business
General Development of Business
Anaren Microwave, Inc. (hereinafter referred to as "Anaren" or "the
Company") was incorporated in 1967 as Micronetics, Inc., a name that was changed
to Anaren Microwave, Inc. during 1967.
Anaren designs, develops, manufactures and markets microwave signal
processing devices which receive and analyze radar signals and other microwave
transmissions. The Company is a leader in high probability of intercept
technology used to detect and measure the character of radar signal pulses in a
crowded signal environment. This capability is critical in computer-aided
tactical electronic warfare.
Also fundamental to the Company's products are its wideband signal
processing network and stripline circuitry technologies. Based on these
technologies, Anaren developed its microwave integrated circuits (MICs) and
Components, which remain an important product line, and has progressed into the
design and development of digital frequency discriminators (DFDs), Digital RF
Memory (DRFMs) and electronic support measures receivers (ESM Receivers).
Anaren's products are included in electronic countermeasure systems which
are deployed on military platforms such as ships, aircraft and ground
installations for the interception, analysis and identification of radar signals
and other microwave transmissions. The Company currently sells its ESM Receivers
primarily to foreign governments and its DFDs and DRFMs to the United States and
foreign governments principally through prime contractors. The Company sells its
MICs, Components and antenna feed networks for both military and commercial uses
to prime contractors chiefly through sales representatives, both in the United
States and foreign countries.
Recently, the Company has estalished a leadership position, based on
proprietary manufacturing technology, in the areas of microwave components and
assemblies for communications satellites and ground based wireless
infrastructure equipment.
Narrative Description of Business
Microwave Technology and Electronic Warfare
Microwaves are electromagnetic waves similar to ordinary radio waves except
that the wavelengths are very short and the frequency of oscillation is very
high. These high frequencies of oscillation enable microwave signals to carry
large amounts of information. This and other unique properties make them
especially suitable for radar and communications applications and for other
technologies.
Modern military operations have become increasingly dependent upon the use
of microwave signals in such critical battlefield functions as target detection,
weapons guidance and intelligence. This has led in turn to the emergence of
increasingly sophisticated and rapidly evolving electronics support measures and
electronic countermeasures, which broadly define electronic warfare. For
example, the reliance of most modern offensive weapons systems upon radar
targeting and guidance has prompted the development of defense systems which
rapidly and reliably detect and identify hostile weapons and weapons platforms
by means of their radar emissions. Interception and interpretation of such
signals is essential to modern military tactics.
2
<PAGE>
Signal analysis permits the determination of such factors as the angle of
arrival, the location and movement of the equipment emitting the signal, the
identity of such equipment, and the type of platform on which it is located.
Signal characteristics may reveal hostile intent; for example, if search radar
signals are superseded by those of a high-pulse-rate fire control radar, it may
mean that a missile has been launched.
The technical requirements and performance characteristics of radar systems
vary considerably depending upon the particular applications involved. In a
tactical combat situation, the velocity of modern weapons and the use of
deceptive transmission techniques make probability of intercept and speed of
analysis the most critical factors.
Radar Receiver Systems - Background
Radar is used by military forces for target detection, weapons guidance,
navigation and other purposes. It typically operates in the microwave portion of
the electromagnetic spectrum at frequencies between 1 and 20 gigahertz. Such
high frequencies and wide bandwidth require that a receiving device monitor
simultaneously a number of signals and rapidly discriminate among them.
A radar signal strikes a potential target and is reflected back to the
transmitter, where it can provide information as to the target's bearing, range,
course, speed and, perhaps, size. A radar receiving system can intercept a
transmitted radar signal, which can then be analyzed for its military
intelligence value. The pulse trains of radar signals have a variety of
characteristics such as carrier frequency, pulse duration, pulse repetition,
frequency and emitting antenna rotation rate, all of which vary with the type of
radar transmitting the signal. Once determined, these characteristics can be
compared to the parameters of radars known to be associated with specific
platforms, and identification of the transmitter and its platform may be
possible.
A typical radar receiving system consists of specialized receivers and
other subassemblies which interface with signal processors and display units.
Display and interface equipment present processed data to the equipment
operators, command-level personnel, fire control systems, electronic
countermeasures systems, or recording devices for later analysis. A key element
of this presentation is the transferal of only the relevant information gleaned
from the total signal environment.
The Company concentrated its early efforts in the manufacture of components
for radar receiving systems and has since expanded into microwave integrated
circuits, digital frequency discriminators and digital electronic support
measures receivers. The Company's DFDs, DRFMs and ESM Receivers are designed for
use in a variety of electronic countermeasures and radar receiver systems.
Recently, the Company has focused on the development of RF signal distribution
networks for military radar antenna systems and cellular infrastructure
equipment.
Company Products
Digital Electronic Support Measures Receivers (ESM Receivers)
The ESM Receiver is the sensor subsystem of an electronic countermeasures
system. The ESM Receiver intercepts microwave signals which it converts to
digital information and performs certain analyses relating to the signal's
strength and frequency, and angle of arrival, time of arrival and pulse width.
This data is then fed into the system's computer for processing, allowing the
defense electronics system to determine instantaneously whether the radar signal
is being emitted from a friendly or unfriendly source. The system then indicates
appropriate actions, such as a simple evasion, passive
3
<PAGE>
or active missile launch, electronic jamming or physical deception such as chaff
dispensing.
The Anaren ESM Receiver is more accurate and substantially smaller and
lighter than competitive products. With a high probability of intercept, it
monitors a full 360 degree circle and gives continuous readings of the entire
radar signal environment regardless of its signal density. Anaren's ESM Receiver
is accurate to within two degrees in identifying the direction of an incoming
radar signal and transmits the data to a preprocessor within fifteen
nanoseconds. The mode of operation and precision of the Company's ESM Receivers
enable the electronic countermeasures systems that incorporate them to monitor
and respond to unfriendly signals passively, i.e., without emitting a radar or
other signal that might reveal its position.
Currently, ESM Receivers are sold to foreign governments through a prime
contractor, Racal Defence Electronics, (Radar) Ltd. ("Racal") to be used with
electronic countermeasures systems by the navies of Denmark, Brazil, West
Germany and Turkey, and the Swiss Army. The current selling price of an ESM
Receiver is approximately $750,000. See also "Backlog" and "Managements
Discussion and Analysis of Financial Condition and Results of Operations".
Digital Frequency Discriminators (DFDs) and Digital RF Memory (DRFM)
Anaren is well-known as a leading supplier of Digital Frequency
discriminators, which are receivers for computerized radar analysis systems. The
DFD instantaneously detects and measures the frequency of radar signals and
outputs to a computer a digital word describing each signal for further
analysis. Anaren's DFDs simultaneously monitor a broad spectrum of frequencies
so that they are sensitive at any given moment to a larger threat environment
than conventional narrow band receivers. DFDs are used in radar warning
receivers, electronic support measures receivers and electronic countermeasures
systems. The Company believes that its ability to manufacture wideband stripline
microwave networks has permitted it to become the leading manufacturer worldwide
of small, less expensive digital frequency discriminators for naval and airborne
applications.
Anaren's DFDs are used on ships, tactical aircraft and land based vehicles
or installations, with most of these platforms utilizing several DFDs in various
on-board defense systems. DFDs range in price from approximately $10,000 to
$70,000 per unit.
Anaren sells DFDs to the United States government and foreign governments
primarily through prime contractors and also incorporates the DFD in its own ESM
Receiver. The Company's customers for the DFD include Elisra Electronic Systems,
Ltd., ITT Avionics Division, Signaal, Racal, Raytheon Company, Westinghouse,
Loral Federal Systems Division, Northrop Corp., Gold Star Electric Company and
Amecom Litton.
The Digital RF Memory is a forward evolution of the technology developed in
the Digital Frequency Discriminator and is part of the jamming portion of a
defense system. It stores received signals for later recall and use by the
system's jammer to deceive unfriendly radar. This device allows the jamming
system to generate false radar images with extraordinary fidelity and deny radar
acquisition. If the radar is unable to acquire the target then it is unable to
launch its offensive munitions. A DRFM is required to deceive the newer class of
radars that utilize more precise processing techniques.
This product has been made necessary by advances in the increasingly more
sophisticated enemy radars which will be in widespread use during this decade.
4
<PAGE>
Anaren sells DRFMs to Westinghouse, I.T.T., A.I.L., Norwegian Defense and
A.E.G. Telefunken for airborne applications. Current selling prices for DRFMs
range from approximately $60,000 to $125,000 per unit.
Microwave Integrated Circuits (MICs) and Components
Microwave Integrated Circuits are subassemblies which combine microwave
components with other electronic parts. They are built to customer
specifications for projects in the electronic warfare and radar detection
sectors of the defense electronics market. MICs are currently used in radar
simulators and radar jamming pods as well as in ground based and airborne
direction finding systems.
The Company's MIC business has been characterized by long-term
relationships with a number of prime contractors in the defense industry,
including AIL (A Division of Eaton Corporation), Emerson Electric Company,
E-Systems, Inc., Grumman Corporation, Hughes Aircraft Company, Litton
Industries, Inc., Sperry Corporation, Westinghouse Electric Corporation, and
Sedco Systems (A Division of Raytheon Company).
The Company's catalog components ("Components") include over 400 standard
items offered to a worldwide customer base in the radar, communications and test
equipment markets. The microwave components are based on "stripline circuitry",
the use of computer produced artwork to define the paths of flow and processing
of microwave signals. To produce stripline circuits, master artwork is applied
to a layer of non-conducting material which is specially treated and processed.
The resulting products are enclosed in casework which is also produced through
the use of computer controlled and directed processes. Components are building
blocks of microwave integrated circuits (including the company's MICs),
assemblies and subsystems.
Recently, in order to expand the applications within this product line, the
Company has begun developing antenna feed networks for military phased array
radar systems and commercial communication satellite systems utilizing an
evolution of the stirpline circuitry technology. Military phased array radar
systems are large RF signal distribution networks that distribute the RF signal
to each of the thousands of transmit/receive modules found in a typical military
phased array radar.
Satellite antenna feed networks are microwave signal distribution networks
comprised of passive signal splitters and combiners. These networks
traditionally large, complex, and heavy, are widely utilized in modern
communications satellites to allow for multiple beams of differing sizes to be
supported for a single antenna array. Anaren's proprietary stripline technology
and expertise in designing these complex structures has allowed the Company to
rapidly penetrate this growing market. These networks are utilized on the
proposed Low Earth Orbiting (LEO) satellite wireless communications networks as
well as Geo Synchronous communications satellites. These networks are designed
to customer specifications and range in price from approximately $25,000 to
$750,000 per system. Current customers include, Lockheed Martin, Westinghouse,
Raytheon Co., Siemans, and Thorn EMI.
Additionally, this same stripline circuitry technology is being used in the
development of components and networks for cellular infrastructure equipment.
Products ranging in price from approximately $2 to $1,000 have been developed
for this market segment. As wireless technologies move higher in frequency for
spectrum availability and increase in complexity to support the rapidly
increasing demand for service, demand for Anaren's microwave design and
manufacturing expertise has increased significantly. As a result of recently
developed proprietary manufacturing techniques, Anaren is able to provide very
competitively priced microwave components and assemblies in high volume, meeting
the very challenging price and delivery demand of wireless
5
<PAGE>
infrastructure OEMs. Current customers for these products include, Motorola,
Hughes Network Systems, AT&T, Hewlett Packard, Ericsson, Inc, Nortel (Northern
Telecom) and Nokia.
Information concerning sales of the above product groups is contained in
"Management Discussion and Analysis of Financial Condition and Results of
Operations."
Marketing and Customers
Anaren currently sells its ESM Receivers to foreign governments and its
DFDs and DRFMs to the United States and foreign governments principally through
prime contractors. The Company sells its MICs and Components to prime
contractors through sales representatives both in the United States and foreign
countries. Anaren's senior officers assist in marketing the Company's ESM
Receivers and certain DFDs to end-user governments by discussing with them their
program needs and familiarizing them with Anaren's product specifications. The
Company's product group managers provide technical support. The Company's
wholly-owned subsidiary in Frimley, England (Anaren Microwave, Ltd.) is
responsible for marketing and sales in Europe and the Middle East.
A wireless products group has been established to support the sale and
manufacture of products for wireless infrastructure OEMs.
During the fiscal year ended July 1, 1995, approximately 48% of the
Company's sales were attributable to contracts with prime contractors to
numerous offices and agencies of the United States government. The Company had
two customers who received shipments in excess of 10% of consolidated net sales.
Approximately 31% of the Company's consolidated net sales resulted from
shipments to Racal Defense Electronics under several contracts, 24% resulted
from shipments to Raytheon Co. under several contracts. No one other contract
and no other customer accounted for more than 10% of shipments.
During fiscal year 1995, sales to foreign customers, most of which were
prime contractors to foreign governments, accounted for approximately 53% of the
Company's consolidated net sales and included shipments to seventeen separate
countries. All the Company's contracts with foreign customers are payable in
U.S. dollars. See note 12 to the consolidated financial statements for the sales
to foreign customers for each of the last three fiscal years.
Export sales of reconnaissance systems must be approved by the United
States Department of State. Any tightening of restrictions on export of military
hardware could adversely affect the Company's sales to foreign customers.
All of the Company's contracts with prime contractors to United States and
foreign governmental departments or their agencies are fixed price contracts,
some of which require delivery over time periods in excess of one year. With
this type of contract, the Company agrees to deliver products at an agreed upon
price except for costs incurred because of change orders issued by the customer.
Some of these contracts contain provision for escalation due to inflation
incurred between the effective contract date and the delivery date, and are
subject to various statutes, regulations and provisions governing defense
contracts.
6
<PAGE>
Backlog
At July 1, 1995, the Company's backlog of orders was $13,800,000 as
compared with $15,600,000 at July 2, 1994. All of the orders included in backlog
are covered by signed contracts, most of which contain customary provisions
permitting termination at any time at the customer's convenience upon the making
of a termination payment to the Company.
The Company's Digital Frequency Discriminator and Digital RF Memory
accounted for 26% and 32% of the backlog at July 1, 1995 and July 2, 1994,
respectively; the ESM Receivers comprised approximately 14% of the backlog in
1995 and 20% of the backlog in 1994 and MIC and Component products comprised 60%
and 30% of the backlog at July 1, 1995 and July 2, 1994, respectively.
Approximately 75% of the July 1, 1995 backlog is expected to be recognized as
revenue during fiscal 1996.
Manufacturing and Engineering
The Company's manufacturing operations are vertically integrated from the
production of specialized hybrid circuits to the final assembly of complete
subsystems, such as ESM Receivers.
The Company manufactures its products from standard components as well as
from items which are manufactured by vendors to the Company's specifications. A
majority of assembly and subsystems products contain microprocessors, for which
proprietary software is designed and tested by the Company's engineers and
technicians.
The Company utilizes skilled permanent and contract personnel in the
manufacture of its products. Quality assurance checks are performed on purchased
items, work in process, and finished products. Because of their complexity,
final tests are performed on all products by highly skilled engineers and
technicians.
Most of the Company's contracts for assemblies and subsystems have required
engineering efforts to modify existing Company products to meet a particular
customer's specific technical and installation requirements.
Competition
Anaren's competitors include both foreign and domestic companies, many of
which are larger, have greater financial resources, and are better known than
Anaren. Major competitors include Raytheon Company, Lockheed Sanders, Litton
Industries, Inc., Elettronica (Italy) FEI Microwave, Whittaker Corp.,
Watkins-Johnson Company, Macom, Inc. and Thomson-CSF S.A. (France).
The principal competitive factors in both the domestic and foreign market
are technical performance, reliability, ability to produce and price. Based on a
combination of these factors, the Company believes that it competes favorably in
its markets. The Company's most important competitive attributes are its
emphasis on technical superiority and its ability to produce in quantity to
specific delivery schedules. Once a particular supplier's products have been
selected for incorporation in a military system, further competition by other
vendors during the life cycle of the program may be limited.
Research, Development and New Products
The Company believes that its continued success depends in large part on
its ability to develop and extend its technology to new product applications.
The Company's primary efforts in this regard are focused on development, design,
engineering and implementation activities rather than pure research. Most of the
Company's professional staff have been involved at various times and in varying
degrees in these activities.
7
<PAGE>
Research and development expenses were approximately $939,000 in fiscal 1995,
$560,000 in fiscal 1994 and $923,000 in fiscal 1993 and were funded solely from
the Company's current operating budget.
Existing development efforts are focused on (i) evolutions of current
technologies to aid airborne receiver systems in the location and unambiguous
identification of radar platforms; (ii) variants of existing products for use on
additional platforms, including aircraft and land based applications; (iii)
microwave sensors capable of detecting and decoding increasingly more complex
signal patterns; and (iv) the development of advanced multilayer stripline
manufacturing processes for use in low cost light weight applications. The
Company believes that it is at the forefront of microwave signal processing
technology in terms of ability to deal with complex environments of exotic
signals.
Suppliers
The Company purchases most of its raw materials from a variety of vendors
and most of these raw materials are available from a variety of sources. The
Company has one vendor which represents approximately 15% of the Company's raw
material purchases, but the Company believes the substitute sources of supply
are readily available for these and all other products purchased.
Effects of Inflation
The Company does not believe that its operations are materially effected by
inflation. Contract prices for items deliverable over a period in excess of one
year are normally indexed for inflation, thereby offsetting any increase in
operating costs due to inflation.
Employees
As of July 1, 1995, the company employed 198 persons fulltime. Of these
employees, approximately 90% comprise the engineering and manufacturing staff,
and approximately 10% are in management and support functions.
Executive Officers of the Registrant
The following is a list of the Company's executive officers, their ages and
their positions as of July 1, 1995. Each executive officer is elected for a term
of one year at the reorganizational meeting of the board of directors following
the annual shareholders meeting.
Name Age Position
---- --- --------
Hugh A. Hair 60 Chief Executive Officer,
Director
Carl W. Gerst, Jr. 58 Vice Chairman & Chief
Technical Officer
Lawrence A. Sala 32 President
Gert R. Thygesen 40 Vice President Operations
Joseph E. Porcello 43 Vice President Finance
8
<PAGE>
Item 2. Properties
The Company's principal property is a 105,000 square foot administrative,
manufacturing and engineering facility located in East Syracuse, New York. The
administrative, manufacturing and engineering plant was constructed during
fiscal 1981 and expanded during fiscal 1985. This facility houses all of the
Company's marketing, manufacturing, administrative, research and development,
systems design and engineering experimentation and drafting activities. The
construction of this facility was financed through the issuance of Onondaga
County Industrial Revenue Bonds in the original amount of $5,940,000 (see note 5
to the consolidated financial statements for information concerning encumbrances
on the facility).
Anaren Microwave, Ltd. leases a 20,000 square foot facility in Frimley,
England which houses the administrative, marketing, repair and engineering
operations of that subsidiary (see note 1 to the consolidated financial
statements). Annual rental cost of this facility is approximately $360,000 per
year.
Item 3. Legal Proceedings
There are no material pending legal proceedings against the Company or its
subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year covered by this Form 10-K
there were no matters submitted to a vote of security holders.
9
<PAGE>
PART II
Item 5. Market for the Company's Common Stock and Related Security Holder
Matters
The Company's common stock is traded on the over-the-counter market under
the NASDAQ symbol ANEN.
The following table sets forth the closing sale prices in the NASDAQ
National Market System for the Common Stock for the quarters indicated
Fiscal 1994 Fiscal 1995
Quarter Quarter
1st 2nd 3rd 4th 1st 2nd 3rd 4th
High 3-5/8 3-1/2 3-1/4 3 3-1/8 3-5/8 3 8-1/4
Low 1-15/16 2-3/4 2 2-1/2 2-1/8 2 1-7/8 2-3/8
The Company has approximately 849 security holders of record at September
18, 1995.
The Company has never paid a cash dividend on its common stock, and is
restricted by its credit arrangements as to the amount of cash dividends which
may be paid during any fiscal year (see note 5 to the consolidated financial
statements).
The Company's Board of Directors has not set a policy with regard to the
payment of dividends.
10
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
July 1 July 2, June 26, June 27, June 30,
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Summary of Consolidated Statements
of Operations:
Net Sales ........................................................... $ 17,996 $ 20,237 $ 26,996 $ 33,020 $ 30,981
-------- -------- -------- -------- --------
Costs and Expenses:
Costs of Sales ................................................. 13,081 14,415 19,306 22,819 20,808
Provision for losses on contracts .............................. 300 1,570 -- -- --
Marketing, Research and Development ............................ 3,967 3,490 4,081 7,090 5,620
General and Administrative ..................................... 2,041 2,266 2,399 3,263 2,856
Restructuring Costs ............................................ 360 -- 452 633 --
-------- -------- -------- -------- --------
Total Costs and Expenses ................................... 19,749 21,741 26,238 33,805 29,284
-------- -------- -------- -------- --------
Operating Earnings (Loss) ........................................... (1,753) (1,504) 758 (785) 1,697
Interest Expense .................................................... 213 271 434 594 575
Other Income, Primarily Interest .................................... 164 298 134 90 118
-------- -------- -------- -------- --------
Earnings (Loss) before Income Taxes and
cumulative effect of change in accounting
principle ......................................................... (1,802) (1,477) 458 (1,289) 1,240
Income Tax Expense (benefit) ........................................ (330) (115) 180 (384) 454
-------- -------- -------- -------- --------
Earning (loss) before cumulative effect
of change in accounting principle ................................. (1,472) (1,362) 278 (905) 786
Cumulative effect of change in accounting
for postretirement benefits other than pensions ................... -- (995) -- -- --
-------- -------- -------- -------- --------
Net Earnings (loss) ........................................ $ (1,472) $ (2,357) $ 278 $ (905) $ 786
======== ======== ======== ======== ========
Earnings (loss) Per Share ........................................... $ (.36) $ (.53) $ .06 $ (.20) $ .18
======== ======== ======== ======== ========
Weighted Average Shares Outstanding ................................. 4,047 4,435 4,530 4,503 4,408
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
July 1, July 2, June 26, June 27, June 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working Capital ..................................................... $ 13,258 $ 16,245 $ 17,592 $ 19,040 $ 21,442
Total Assets ........................................................ $ 23,365 $ 27,942 $ 28,470 $ 32,437 $ 34,083
Long-Term Debt (less current installments) .......................... $ 1,052 $ 1,760 $ 2,482 $ 4,748 $ 5,361
Stockholders' Equity ................................................ $ 18,824 $ 21,679 $ 24,098 $ 24,074 $ 24,721
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further discussion regarding the fiscal 1994 change in
accounting for postretirement benefits other than pensions.
11
<PAGE>
Items 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth the Company's net sales by product line for
each of the fiscal years in the three year period ended July 1, 1995.
Fiscal Year Ended
-----------------
July 1 July 2 June 26
1995 1994 1993
------- ------- -------
(In Thousands)
MICs and Components .............. $ 6,902 $ 4,847 $ 8,061
DFDs and DRFMs ................... 5,512 12,128 11,746
ESM Receivers and Special
Projects ..................... 5,582 3,262 7,189
------- ------- -------
Total Net Sales .................. $17,996 $20,237 $26,996
======= ======= =======
Net sales historically associated with particular product lines may not be
indicative of future trends because of the relative size of individual orders
and changes in the Company's emphasis on specific product lines. See "Business -
Company Products" and "Business - Backlog".
Effective July 1, 1991, the Company changed its accounting period from a
fiscal year ending June 30 to a 52-53 week fiscal year. References herein to the
current fiscal year are for the 52 week period ended July 1, 1995. Fiscal 1994
and fiscal 1993 ended on July 2, 1994 and June 26, 1993. Fiscal 1994 was a 53
week period, while fiscal 1993 was a 52 week period. The impact of this change
on reported results was insignificant.
Results of operations for fiscal 1995 continue to reflect the overall
decline in the worldwide defense market and the production problems with the
Ground Based Radar program suffered by the Company during the first half of the
year. Net sales for fiscal 1995 were $17,996,000, down 11% from fiscal 1994,
while the net loss for fiscal 1995 was $1,472,000 compared to a net loss in the
previous year of $2,356,000. The loss in fiscal 1994 included a one time charge
against earnings of $995,000 to recognize the cumulative effect of adopting
statement of Financial Accounting Standards No. 106 - Employers Accounting for
Postretirement Benefits other than Pensions.
The 11% decline in sales revenue in fiscal 1995 was due to a 50% decrease
in shipments of DFD products and a 90% drop in sales of DRFM products. During
this same period, shipments of MIC and Component products rose 42% and sales of
ESM Receivers and Special Project products rose 71%, including a 41% increase in
shipments of Anaren Microwave, Ltd., the Company's foreign subsidiary in
England, offsetting a large portion of the decrease in the DFD and DRFM product
lines.
Shipments of DFD products fell 50%, or $4,150,000, in fiscal 1995 compared
to fiscal 1994. This decrease was due to lower unit volume on a number of both
domestic and foreign defense programs in this product area. These programs,
which include the Northrop ALQ-135 program, the Loral Federal Systems STAR
program a Deutche German Jammer program and the Raytheon SLQ-32 and LAMPS
programs, represented approximately $5,200,000 worth of shipments in fiscal 1994
compared to $1,500,000 in shipments during fiscal 1995.
12
<PAGE>
New orders for DFD products totaled $2,400,000 in fiscal 1995, down 38%
from $4,000,000 in fiscal 1994. This decline in new DFD orders reflects the
continuing decline in U.S. Government defense spending and the lack of any new
programs or significant upgrades to U.S. Air Force or Navy airborne electronic
warfare capabilities for which the Company's DFD products would be applicable.
Firm backlog for DFD products was $2,500,000 at July 1, 1995, down 42% from
$4,300,000 at July 2, 1994. Of this amount, approximately 80% is expected to
ship in fiscal 1996 and the remainder in fiscal 1997.
DRFM sales fell $3,400,000 or 75% in fiscal 1995 versus 1994 sales volume
due to the low level of backlog in this product area at the beginning of fiscal
1995, $670,000, compared with firm backlog of $3,500,000 at the beginning of
fiscal 1994. Although customer interest in both the U.S. and foreign defense
market for DRFM technology remains high, new orders for DRFM products totaled
only $910,000 in fiscal 1995 and the Company does not expect any significant new
orders in this product line until the second half of fiscal 1996. Firm backlog
for DRFM products was $1,000,000 at July 1, 1995 all of which is scheduled to
ship in fiscal 1996.
Shipments of ESM Receivers and Special Project products, which includes the
sales of Anaren Microwave, Ltd., the Company's English subsidiary, rose 71% in
fiscal 1995 compared to fiscal 1994. This increase reflects both a substantial
increase in the number of ESM receiver systems shipped in fiscal 1995 and a 41%
rise in shipments by Anaren Microwave, Ltd. The increase in Anaren Ltd. sales
was due to a $140,000 rise in simulator sales in fiscal 1995 resulting from
billings on a $1,600,000 simulator contract with the Dutch Air Force, which had
been previously delayed in fiscal 1994. Sales were further augmented by a large
order for spare ESM receiver parts totaling $450,000 and a $150,000 increase in
European sales of off the self catalog component parts. Firm backlog for Anaren
Microwave, Ltd. at July 1, 1995 was $650,000 compared to $1,600,000 at July 2,
1994. This decrease in backlog was due to the delay in the finalization of a
large simulator contract from an Asian customer. This contract was finalized in
the first quarter of fiscal 1996 and shipment levels for 1996 are expected to
approximate 1995 levels.
Fiscal 1995 Sales of ESM receiver systems rose $1,400,000 over fiscal 1994
sales levels due to a tripling of the number of systems shipped in the current
year, to three, compared to only one system shipped in fiscal 1994. Each of
these systems, which are deployed for ship defense, sells for approximately
$750,000. Firm backlog in this product area at July 1, 1995 was approximately
$870,000, which represented one ESM receiver and orders for various spare parts,
all of which is scheduled for delivery in fiscal 1996. New orders in this
product area are solely dependent on sales by a European customer who has
marketed this system worldwide for over fifteen years. Presently, the Company
expects no new orders for full systems in fiscal 1996, but does believe that
continuing requirements for spare parts and repairs will maintain a sales level
of $500,000 to $1,000,000 a year for the foreseeable future.
Shipments of MIC and Component products rose $2,000,000, or 42%, in fiscal
1995 compared to fiscal 1994, due to a $2,700,000 increase in third and fourth
quarter fiscal 1995 revenues in this product area versus the same six months in
fiscal 1994. This increase was a result of bringing the U.S. Army Ground Based
Radar program, which the Company is currently producing for Raytheon Company
under a $3,800,000 contract, into full factory production at the end of January
1995. Shipments under this contract were severely limited in the first six
months of fiscal 1995 due to difficulties in meeting the customers technical
specifications and manufacturing process problems. During the second quarter of
fiscal 1995, the Company received some technical relief from the customer and
during January 1995 many of the manufacturing process problems were
13
<PAGE>
resolved allowing for a six fold rise in shipment volume on this program in the
last five months of the just completed year.
Sales of MIC and Components products in the second six months of fiscal
1995 were further augmented by the shipment of fifteen preproduction beamforming
networks for the Iridium satellite spacebase telephone system program valued at
over $500,000 and the first $200,000 in shipments of new wireless surface mount
components developed during the first half of fiscal 1995.
During fiscal 1995, the Company received several significant new contracts
in the MIC and Component product line with new orders totaling over $10,900,000.
Of this amount, approximately $2,100,000 represented off-the-shelf microwave
catalog components, $6,300,000 represented additional funding from Raytheon
Company for production of antenna feed network for the Iridium project; and
$1,000,000 represented additional funding of the E2C military airborne
surveillance program. In addition to the above, the Company received
approximately $600,000 in orders for its new wireless surface mount component
products. Wireless components were a new product line for the Company in fiscal
1995. These newly developed products have generated a significant amount of
interest within the wireless communications industry and are expected to be an
important segment of future Company sales. At July 1, 1995 firm backlog for MIC
and Component products was $8,200,000 of which approximately $6,000,000
represented production order for the Iridium project. Approximately 63% of the
firm backlog in this product area is expected to ship in fiscal 1996 and the
remainder is scheduled to ship in fiscal 1997.
Consolidated total orders received during fiscal 1995 were approximately
$16,130,000, down 21% from $20,400,000 in fiscal 1994, and continue to reflect
the decline in the worldwide defense market. Firm backlog for all product lines
was $13,700,000 at July 1995 down 12% from $15,600,000 at July 2, 1994.
The net loss for fiscal 1995 was $1,472,000 compared to a net loss for
fiscal 1994, before the cumulative effect of the Accounting change for FAS No.
106, of ($1,362,000). This drop in earnings was a direct result of the declining
sales levels; smaller margins caused by production problems, rising research and
development expenses and the recording of provisions for both severance costs
and an additional contract losses amounting to $360,000 and $300,000
respectively during the year.
During fiscal 1995 the Company recorded a net charge against earnings of
$300,000 which reflected additional net provisions for projected losses on fixed
price contracts. This net provision consisted of a $1,050,000 charge against
earnings in the second quarter of fiscal 1995 to provide for expected additional
cost overruns on production contracts, which was subsequently reduced by a
$750,000 credit in the fourth quarter to reflect the successful recovery of a
portion of the cost overruns from a customer. Principal among these contracts is
the Army Ground Based Radar program which represented over $2,000,000 in fiscal
1995 revenues and $1,000,000 in projected fiscal 1996 revenues. This contract,
which is being produced for the Raytheon Company, was previously identified as
being in a loss position at the end of fiscal 1994 and anticipated cost overruns
were recorded at that time as part of a $1,570,000 loss provision. The
additional $1,050,000 loss provision record in the second quarter of fiscal 1995
was necessary due to production process problems identified during that quarter
which required significant additional engineering expenditures and resulted in
increased estimates for labor, material and scrap costs to complete the
contract. During the third quarter and subsequent to recording this additional
provision for losses, the Company submitted a claim for added scope work under
this program and was successful, in July 1995, in negotiating a settlement for
$750,000 in additional funding. This additional revenue was recorded as a
reduction in the loss provision in the fourth quarter of fiscal
14
<PAGE>
1995, increasing net earnings in that quarter and reducing the net loss for the
year by that same amount. There remains approximately $1,000,000 worth of
product to be delivered under the Army Ground Based Radar Program in fiscal 1996
and the Company believes that the current loss provision allowance at July 1,
1995 is adequate to cover currently anticipated cost overruns.
During the second quarter of fiscal 1995, the Company recorded a $360,000
restructuring charge against earnings, which represented severance and
outplacement costs for reductions in engineering and overhead personnel. These
personnel reductions were made to better position the Company, competitively, in
the new wireless/defense business environment and consisted primarily of
personnel assigned to product areas associated with the declining military
defense business.
Gross margin on sales was 27.3% in fiscal 1995, a 1.5 percent decline over
gross margins of 28.8% in fiscal 1994. This small drop in gross margin was
caused by higher fixed overhead costs per sales dollar due to the significant
decline in shipments during fiscal 1995 compared to the prior year and by
increases in manufacturing production process costs required to set up automated
production facilities for the Company's new commercial wireless products.
During fiscal 1995, approximately $2,000,000 of costs incurred in building
products for shipment were charged against the allowance for contract losses
established at the end of fiscal 1994 and increased by $1,050,000 during the
second quarter of fiscal 1995. These expenses represent cost overruns incurred
on units shipped during fiscal 1995, which had been previously identified and
provided for when the loss provision allowance was established. The Company
expects that gross margin levels will improve in fiscal 1996 as shipment levels
improve. It is the Company's intention to monitor shipment levels and production
costs to ensure that future costs are in line with expected sales revenue.
Research and Development expense was $939,000 in fiscal 1995 up 68% over
$560,000 in fiscal 1994. This increase reflects a significant rise in the second
half of fiscal 1995 in the volume of prototype development for the Company's new
wireless cellular base station products. Current development efforts are being
concentrated on adapting existing Company technologies to produce products which
are targeted at existing potential customer base station applications and
present both improved performance and significant cost savings compared to the
products currently being used by potential customers. Research and development
expenditures are expected to fluctuate in the future based on sales levels and
customer new product requirements.
Marketing expense rose $97,000 or 3% in fiscal 1995 compared to fiscal
1994, due mainly to the increased resources required to penetrate the wireless
commercial marketplace. During fiscal year 1995 the Company added sales
personnel dedicated to the wireless market and increased its advertising and
travel expenditures by 47% and 28%, respectively, in order to serve this new
marketplace and expanded customer base. This is a new business area for the
Company and this increased marketing investment is not expected to be reflected
in significant sales in this market until the second half of fiscal 1996 and
fiscal 1997. Fiscal 1996 marketing expenditures are expected to rise and
fluctuate with rising sales levels and new market demands.
General and administrative expenses fell 10% in fiscal 1995 versus fiscal
1994. This reduction was the result of lower travel and professional service
expenses and continuing reductions in personnel through attrition and
reassignments. Fiscal 1996 general and administrative expenses are expected to
run at or slightly above fiscal 1995 levels depending on business levels.
15
<PAGE>
Interest expense fell 22% in fiscal 1995 compared to fiscal 1994, while
other income decreased 45% during this same period. The drop in interest expense
mirrors the decline in the level of debt outstanding during the current year,
which more than offset the general rise in interest rates experience in fiscal
1995. Other income, which is primarily interest income, fell $134,000 in fiscal
1995. Although investable cash balances and interest rates were comparable in
fiscal 1995 and 1994, during 1994 the Company sold an idle fixed asset resulting
in a one time profit of approximately $108,000. No such comparable sale of
assets occurred in fiscal 1995.
Despite a 41% increase in sales volume in fiscal 1995, the Company's
foreign subsidiary, Anaren Microwave, Ltd., recorded an operating loss of
($327,000) compared to an operating loss of ($364,000) in fiscal 1994. The loss
incurred was due to delays in delivery and cost overruns on a $1,800,000
simulator contract for the Dutch Air Force. This contract, which was scheduled
for completion in June 1995, has suffered from software engineering problems and
is now scheduled for completion in the first quarter of calendar 1996.
Fluctuations in foreign currency exchange had no material effect on the
results of operation for Anaren Microwave, Ltd., as the exchange rate for the
British pound varied little during fiscal 1995.
Consolidated income tax benefit was ($330,000) in fiscal 1995 versus an
expected tax benefit of ($612,572) based on 34% of the loss before income taxes
and the cumulative effect of change in accounting principle. The majority of the
difference between the actual tax benefit recognized and the expected tax
benefit calculated on the loss incurred was due to the Company's equity in the
operating loss of its English subsidiary which is not subject to U.S. taxation
and an increase in the deferred tax asset valuation allowance required by the
new tax accounting rules (FAS No. 109) adopted by the Company at the beginning
of fiscal 1994. Under the new tax accounting rules the Company must assess the
realizability of deferred tax assets, considering whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income in the period in which those temporary differences
become deductible. Management of the Company has considered the scheduled
reversal of deferred tax liabilities and projected future taxable income in
making the assessment of the realizability of the deferred tax asset balances at
July 1, 1995. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, the Company believes it is more likely than not that it will realize
the benefit of these deductible differences, net of the existing valuation
allowances at July 1, 1995. (See note 9 to the consolidated financial
statements).
16
<PAGE>
Fiscal 1994 Compared to Fiscal 1993
Effective June 27, 1993 the Company adopted Statements of Financial
Accounting Standards No. 106 - Employers Accounting for Postretirement Benefits
Other Than Pensions (FAS No. 106) and No. 109 - Account for Income Taxes (FAS
No. 109). The cumulative effect of adopting FAS No. 106, at June 27, 1993, was
to decrease fiscal 1994 earnings by $994,727 while the effect of adopting FAS
No. 109 was immaterial to the results of operations.
Results of operations for fiscal 1994 showed declines in both earnings and
net sales. Sales revenue fell in almost all product areas due to the ongoing
softness in the worldwide defense market, while the Company suffered a net loss
before the cumulative effect of the accounting change for FAS No. 106 due to a
$1,570,000, pretax charge against fourth quarter earnings for a provision for
losses on contracts. Net sales for fiscal 1994 were $20, 237,000, down 25% from
fiscal 1993, while the net loss before the cumulative effect of the accounting
change for FAS No. 106 was $1,362,000 down $1,640,000 from earnings of $278,000
in fiscal 1993. Including the cumulative effect of the accounting change in
fiscal 1994 resulted in a net loss of $2,356,000 for the year.
The 25% fall off in sales revenue in fiscal 1994 compared to fiscal 1993,
consisted of a 40% drop in shipments of Component products, a 24% fall in sales
of DRFM products, and a 55% decline in shipments of ESM Receivers and Special
Project products, which included a 20% decline in sales by Anaren Microwave,
Ltd., the Company's subsidiary in England. DFD product revenue rose 23% during
this same period.
Sales revenue for DFD and DRFM products rose a total of approximately
$400,000 in fiscal 1994 compared to fiscal 1993. The increase was the result of
a $1.5 million increase in DFD product sales, coupled with a $1.1 million
decrease in DRFM product sales during fiscal 1994.
Shipments of DRFM products fell $1.1 million in fiscal 1994 compared to
fiscal 1993. This decline in DRFM product sales was expected by the Company due
to the cancellation of the Navy's Airborne Self Protection Jammer (ASPJ) program
in December, 1992. In the first half of fiscal 1993, prior to the cancellation,
the Company shipped approximately 34 ASPJ DRFM units valued at $4.0 million
under this program. During fiscal 1994 the Company shipped $3.6 million of DRFM
products of which $1.5 million represented approved termination claims under the
previously canceled ASPJ program. The remaining $2.1 million in shipments were
spread over four different customers for mainly small quantity, engineering
preproduction models ranging from $50,000 - $111,000 in price and included, in
most cases, significant amounts of revenue for non-recurring engineering work.
At July 2, 1994 firm backlog for DRFM products was $670,000 compared to
$3.5 million at June 26, 1993.
DFD product sales rose $1.5 million or 23% in fiscal 1994 compared to
fiscal 1993, partially offsetting the declines seen in the Company's other
product areas. This increase was due to the $8.4 million backlog at the
beginning of fiscal 1994 which was 20% higher than fiscal 1993 levels. Major
program shipments in fiscal 1994 included $2.3 million to Northrop for DFDs
under the ALQ-135 program, $1.1 million to Racal Defense in the U.K. for DFDs
and engineering design costs for the PHILIP program and $0.7 million to Deutsche
in Germany for a German Air Force jammer program. Also during fiscal 1994 the
Company recognized as revenue $322,000 for approved termination charges for the
DFD product portion of the ASPJ program which was canceled by the U.S.
government in the second quarter of fiscal 1993.
17
<PAGE>
New orders for DFD products totaled $4.0 million in fiscal 1994, down 50%
from $8.0 million in fiscal 1993. The drop in new orders was due to an
indefinite delay in the letting of the next production lot of the Northrop
ALQ-135 program, which had provided over $3.0 million in new orders during
fiscal 1993. Firm backlog for DFD products was $4.3 million at July 2, 1994 down
49% from $8.4 million at June 26, 1993 due to the previously discussed decline
in new orders.
Sales revenue for ESM Receivers and Special Project products, which
includes the sales of Anaren Microwave, Ltd. the Company's English subsidiary,
fell 55% in fiscal 1994 compared to fiscal 1993, due to a substantial decrease
in the number of ESM receiver systems shipped in fiscal 1994.
U.S. generated sales revenue from ESM Receivers and Special Project
products amounted to $1.1 million in fiscal 1994 compared to $4.5 million in
fiscal 1993. This substantial drop in sales in this product area was anticipated
by the Company as firm backlog for these products at the start of fiscal 1994
was only $200,000 compared to $2.2 million at the beginning of fiscal 1993.
During fiscal 1994 the Company shipped one ESM receiver valued at $750,000 and
billed $400,000 for Special Project engineering work and repair charges,
compared to fiscal 1993, during which the company shipped five ESM receiver
systems and billed over $1.0 million for Special Project engineering work and
repairs. At the beginning of the second quarter of fiscal 1994, the Company
received new orders totaling $3.75 million for five ESM receiver systems from a
European customer. One of these systems was delivered in the second half of
fiscal 1994 and the remainder were delivered in fiscal 1995 and the first
quarter of fiscal 1996. Firm backlog in this product area was approximately $3.1
million, at July 2, 1994.
Sales of Anaren Microwave, Ltd., the Company's foreign subsidiary in
England, declined 20% in fiscal 1994 compared to fiscal 1993. This drop was
caused by a delay in the development of a $1.6 million simulator for the Dutch
Air Force due to engineering problems and customer design changes. Sales were
further depressed by a lower than expected rate of new orders due to customer
funding problems and program delays, which resulted in new orders for fiscal
1994 of $1.4 million compared to $3.1 million in fiscal 1993. At July 2, 1994
firm backlog for Anaren Microwave Ltd. was $1.6 million compared to $2.4 million
at June 26, 1993.
Shipments of MIC and Component products fell $3.2 million in fiscal 1994
compared to fiscal 1993. This decline was due to a $1.6 million drop in the
shipment of "build to print" stripline components and a $1.6 million fall off in
shipments of receiver and control devices. The decline in shipments of stripline
components was the result of the completion of several large "build to print"
orders in this product area during the last quarter of fiscal 1993 which had
averaged approximately $900,000 per quarter in sales revenue during that fiscal
year. The drop in sales revenue of receiver and control devices resulted from
the completion of numerous small contracts under several old military programs
which had reached the end of their expected life span or had not been included
in future military procurement due to defense budget reductions.
The Company received several significant new contracts in the Component
product line during fiscal 1994 with new orders totaling over $7,800,000. Of
this amount, $1,200,000 represented additional funding from Raytheon Co. for the
continuing design and production of antenna feed networks for the Iridium
project; a space-based worldwide communications system, and $2,900,000
represented funding, also from Raytheon, for the Army Ground Based Radar
program. At July 2, 1994 firm backlog for Component products was $4,600,000
compared with $1,500,000 at the end of fiscal 1993. Of this amount $3,700,000
shipped in fiscal 1995.
18
<PAGE>
Consolidated total orders received during fiscal 1994 were $20,400,000 up
slightly from $20,200,000 in fiscal 1993. Firm backlog for all product lines was
$15,600,000 at July 2, 1994 down 3% from $16,100,000 at June 26, 1993.
The loss for fiscal 1994 before the cumulative effect of the accounting
change for FAS No. 106 was $1,362,000 down $1,640,000 from earnings of $278,000
in fiscal 1993. This drop in earnings occurred, despite the maintenance of gross
margin levels and the continuing reductions in marketing, general and
administrative, research and development and interest expenses, as a direct
result of the lower sales levels and the recording of a $1,570,000 provision for
contract losses in the fourth quarter of fiscal 1994.
The Company recorded a $1,570,000 charge against earnings for the fourth
quarter of fiscal 1994 which represented a provision for projected losses on
contracts. This charge which reduced earnings before income taxes and the
cumulative effect of the change in accounting principle by $1,570,000 for both
the year and quarter ended July 2, 1994, represented expected cost overruns on
production contracts scheduled to ship in fiscal 1995. The contracts to which
the loss provision applied were fixed price sub-contracts for U.S. Government
military programs amounting to $3,936,000 in fiscal 1995 and projected 1996
sales, which was 25 percent of the Company's backlog at July 2, 1994. Principal
among these contracts are the Army Ground Based Radar and ALQ 184 programs which
amounted to $3,675,000 in fiscal 1995 and projected fiscal 1996 revenues and are
being produced for Raytheon Company. The Army Ground Based Radar program was six
months behind schedule and requirements to meet program product specifications
had resulted in significant increases in projected material and manufacturing
costs to complete the contract. The ALQ 184 production units were in an unfunded
engineering redesign phase which had also resulted in significant cost overruns.
Gross margin on sales was 28.8% in fiscal 1994, a small improvement over
the 28.5% gross margin experience in fiscal 1993. The Company was able to
maintain gross margin levels, despite the $6,800,000 decrease in sales volume,
due to the cost cutting measure instituted in fiscal 1993. These measures, which
included personnel reductions, operating expense controls and capital equipment
acquisition limits, were successful in realizing expense reductions in all
production functions which mirrored the reduction in revenues.
Research and development expense for fiscal 1994 was $560,000 down 39% from
$923,000 in fiscal 1993. This decrease was due to greater emphasis by the
Company on obtaining development funds from customer sources and a concerted
effort by Company management to keep research and development expenditures in
line with sales revenue. Research and development efforts in fiscal 1994 were
concentrated on adapting Company technology to produce new component products
which are suitable for use in the commercial wireless communications market.
Marketing and general and administrative expenses fell 7% and 6%,
respectively, in fiscal 1994 compared to fiscal 1993. These reductions were
further results of the Company's ongoing restructuring and cost containment
programs instituted in fiscal 1992 and 1993 in anticipation of lower sales
brought about by the declining defense budget and the government termination of
the ASPJ program. Marketing expense fell due to a $40,000 reduction in
commission expense caused by lower sales volume, a $100,000 drop in labor costs
achieved through continuing personnel reductions and a $40,000 reduction in
outside consultant expense due to better utilization of in-house staff. The
decline in general and administrative expense was brought about by a $25,000
reduction in travel expense and a $90,000 decrease in labor costs due to
attrition of personnel and salary reductions.
19
<PAGE>
Interest expense declined 38% in fiscal 1994 compared to fiscal 1993, while
other income rose 123% over this same period. The drop in interest expense
reflects both the lower level of interest rates in the market during fiscal 1994
and a 29% reduction in long-term debt balances during that year compared to
fiscal 1993. Other income, which is primarily interest income, increased
significantly due to the large investable cash balances during the fiscal 1994
which more than offset the lower interest rates available on investments.
Additionally, other income was further augmented in fiscal 1994 by a profit of
$108,000 on the sale of a fixed asset, which had previously been capitalized and
used to demonstrate new technologies to customers.
The Company's foreign subsidiary, Anaren Microwave, Ltd., continued to
suffer from the effects of lower sales volume and recorded an operating loss of
$364,000 in fiscal 1994 compared to an operating loss of $348,000 in fiscal
1993. The loss incurred was due, principally to the 20% decline in sales revenue
and the high level of fixed costs in place at the English facility. Presently,
the facility produces simulators for the foreign market place and serves as a
European repair facility for the Company DFD and ESM receiver products. In order
to remedy this situation, the Company instituted a cost reduction program at
this facility in the last quarter of fiscal 1994 which resulted in a 30%
reduction in personnel and the elimination of some company benefits.
Additionally, the Company began the process to move the facility to smaller
quarters, at substantially lower rent and operating costs. The goal of these
cost reduction efforts was to significantly lower the revenue required in order
to make the facility profitable in the future.
Fluctuations in foreign current exchange had no material effect on the
results of operation for Anaren Microwave, Ltd., as the exchange rate for the
British pound varied little during fiscal 1994.
Consolidated income tax benefit was $(115,627) in fiscal 1994 versus an
expected tax benefit of $(502,306) based on 34% of the loss before income taxes
and the cumulative effect of change in accounting principle. The majority of the
difference between the actual tax benefit recognized in the financial statements
and the expected tax benefit calculated on the loss incurred was due to an
increase in the deferred tax asset valuation allowance required by the new tax
accounting rules (FAS No. 109) adopted by the Company at the beginning of fiscal
1994. Under the new tax accounting rules the Company must assess the
realizability of deferred tax assets, considering whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income in the period in which those temporary differences
become deductible. Management of the Company has considered the scheduled
reversal of deferred tax liabilities and projected future taxable income in
making the assessment of the realizability of the deferred tax asset balances at
July 2, 1994. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, the Company believed, it was more likely than not that it would
realize the benefit of these deductible differences, net of the existing
valuation allowances at July 2, 1994. (See note 9 to the consolidated financial
statements).
20
<PAGE>
Liquidity and Capital Resources
Despite the loss incurred in fiscal 1995 and the continuing decline in
military sales levels, the Company was able to maintain a strong and highly
liquid financial position throughout the year. As of July 1, 1995, the Company's
cash position had declined $1,417,000 compared to the end of fiscal 1994 due to
$1,089,000 in payments on various short and long-term debt and an additional
$1,459,000 expended on the purchase of treasury stock in the first quarter of
fiscal 1995. During this same period, net working capital fell approximately
$3,000,000 due to a $1,870,000 decline in inventory, a $948,000 reduction in
accounts receivable and the aforementioned consumption of cash required to fund
debt payments, capital equipment additions and the purchase of treasury stock.
Long-term liabilities, which consist of the Company's unfunded liability
for postretirement health care costs under FAS No. 106 and long-term debt in the
form of various capitalized lease obligations, decreased $646,000 in fiscal
1995. This decline represents repayment of debt as the Company, presently, has
no plans to fund the long-term liability recognized under FAS No. 106. No new
long term debt was taken on during this period as the Company's cash balances
were more than adequate to fund both long and short term cash needs.
Capital equipment additions in fiscal 1995 amounted to $1,297,000 and
consisted primarily of equipment needed to build a high volume automated
production line for the Company's new wireless telecommunications component
products which were under development in fiscal 1995. The additions were funded
entirely by cash generated by operations. Capital equipment expenditures for
fiscal 1996 have been budgeted at approximately $1,000,000 and will consist
primarily, of additional automated high volume production equipment to further
boost production of the new wireless products as well as factory production for
the Iridium project which is slated to begin in the first quarter of fiscal
1996. These additions will continue to be funded by cash generated from
operations and currently existing cash balances as management believe that these
cash resources will be more than adequate to meet these financing needs.
During fiscal 1994, the Company modified its existing loan agreement with
its principal bank in order to obtain better terms and covenants. The modified
agreement provided for a $3.5 million line of credit which was fully secured by
the assets of the Company. This credit facility had no annual fees and interest
on any outstanding loan balance was charged at prime + 3/4 % per annum. Under
the terms of the modified agreement the Company was required to maintain a $0
loan balance for at least thirty days consecutively each fiscal year and was
required to meet certain covenants relating to earnings, retained earnings and
capital equipment acquisitions. This credit facility expired on March 31, 1995.
Presently, the Company is in the process of negotiating a new credit
facility with its bank. Were this credit facility not made available, the
Company believes that its cash requirements for the foreseeable future will be
satisfied by currently invested cash balances, expected cash flow from
operations and progress payments from customers.
21
<PAGE>
In October 1992, the Board of Directors of the Company approved a program
to repurchase shares of the Company's common stock in the open market or through
privately negotiated transactions at prevailing market prices. Under this
program, the Company had repurchased 186,004 shares at a total cost of $386,336
as of July 2, 1994. Subsequent to the July 2 year end, the Board approved an
additional $1,500,000 in funding for the stock repurchase program. Through
October 1, 1994 the Company acquired an additional 492,300 shares at a total
cost of $1,459,278, including 400,000 shares from Global Securities, Inc., at a
price of $3.00 a share. This investment was made as the Board of Directors felt
that the Company's stock was undervalued and a repurchase at that time was in
the best interest of all shareholders. Existing cash balances were used to fund
this stock purchase and no additional purchases were made during the remainder
of fiscal 1995. Presently, the Company has no plans to purchase additional
treasury stock in fiscal 1996.
22
<PAGE>
Item 8. Financial Statements and Financial Statement Schedules
The financial statements and financial statement schedules called for by
this item are submitted as a separate section of this report.
The unaudited supplementary financial information required by this item is
contained in note 13 to the consolidated financial statements which have been
submitted as a separate section of this report.
23
<PAGE>
Item 9. Disagreements of Accounting and Financial Disclosure
None
24
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant
Information required by this item, other than executive officers which
appears in Part I hereof, is contained in the Registrant's proxy statement for
the December 6, 1995 Annual Meeting of Shareholders and is incorporated by
reference herein.
Item 11. Executive Compensation
Information required by this item is contained in the Registrant's proxy
statement for the December 6, 1995 Annual Meeting of Shareholders and is
incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is contained in the Registrant's proxy
statement for the December 6, 1995 Annual Meeting of Shareholders and is
incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
Information required by this item is contained in the Registrant's proxy
statement for the December 6, 1995 Annual Meeting of Shareholders and is
incorporated by reference herein.
25
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page
----
(a) 1. and 2. Financial Statements and Schedules:
Reference is made to the List of Financial
Statements and Financial Statement Schedules
hereinafter contained ............................... 29
3. Exhibits:
Reference is made to the List of Schedules
hereinafter contained ............................... 29
(b) Reports on Form 8-K:
No Reports of Form 8-K were filed by the Company during the
last quarter of the fiscal year ended July 1, 1995.
(c) Exhibits:
Reference is made to the List of Exhibits hereinafter
contained .......................................................... 49
26
<PAGE>
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, Anaren Microwave, Inc. has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Anaren Microwave, Inc.
Hugh A. Hair
------------------
Chief Executive Officer
Carl W. Gerst, Jr.
------------------
Treasurer
Joseph E. Porcello
------------------
Vice President of Finance/Controller
Date: September 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Lawrence A. Sala Abraham Manber
- - ------------------ ------------------
Director Director
William J. Mackay Herbert I. Corkin
- - ------------------ ------------------
Director Director
Dale F. Eck
- - ------------------
Director
Date: September 22, 1995
27
<PAGE>
ANAREN MICROWAVE, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
July 1, 1995 and July 2, 1994
(With Independent Auditors' Report Thereon)
28
<PAGE>
ANAREN MICROWAVE, INC.
AND SUBSIDIARIES
Index to Consolidated Financial Statements
Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets as of July 1, 1995 and July 2, 1994
Consolidated Statements of Operations for the Years ended
July 1, 1995, July 2, 1994, and June 26, 1993
Consolidated Statements of Stockholders' Equity for the Years ended
July 1, 1995, July 2, 1994, and June 26, 1993
Consolidated Statements of Cash Flows for the Years ended
July 1, 1995, July 2, 1994, and June 26, 1993
Notes to Consolidated Financial Statements
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Anaren Microwave, Inc.:
We have audited the consolidated financial statements of Anaren Microwave, Inc.
and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Anaren Microwave,
Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended July 1, 1995, in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 8 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement No. 106, "Employers' Accounting For Postretirement Benefits Other Than
Pensions" effective June 27, 1993. As discussed in notes 1 and 9, effective June
27, 1993, the Company also changed its method of accounting for income taxes to
adopt the provisions of the Financial Accounting Standards Board's Statement No.
109, "Accounting for Income Taxes."
KPMG Peat Marwick LLP
Syracuse, New York
August 18, 1995
30
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 1, 1995 and July 2, 1994
Assets 1995 1994
----------- -----------
Current assets:
Cash and cash equivalents $ 2,139,795 3,556,517
Receivables, less allowance for bad debts of
$13,000 in 1995 and 1994 6,112,540 7,060,127
Refundable income taxes 330,000 101,190
Inventories 6,853,755 8,724,141
Prepaid expenses 235,047 290,931
----------- -----------
Total current assets 15,671,137 19,732,906
----------- -----------
Net property, plant and equipment 7,616,207 8,042,306
----------- -----------
Other assets, net 77,762 166,309
----------- -----------
$23,365,106 27,941,521
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 712,264 1,092,858
Provision for losses on contracts 588,031 1,570,000
Accounts payable 705,101 536,454
Accrued expenses 408,060 288,940
----------- -----------
Total current liabilities 2,413,456 3,488,252
----------- -----------
Postretirement benefit obligation 1,075,834 1,013,996
Long-term debt, less current installments 1,051,881 1,760,165
----------- -----------
Total liabilities 4,541,171 6,262,413
----------- -----------
Stockholders' equity:
Common stock of $.01 par value. Authorized
12,000,000 shares; issued 4,850,016 and
4,824,216 shares in 1995 and 1994, respectively 48,500 48,242
Additional paid-in capital 15,057,521 14,981,992
Retained earnings 5,729,991 7,201,673
----------- -----------
20,836,012 22,231,907
Less cost of 892,274 and 399,974 treasury shares
in 1995 and 1994, respectively 2,012,077 552,799
----------- -----------
Total stockholders' equity 18,823,935 21,679,108
----------- -----------
Commitments (note 11)
$23,365,106 27,941,521
=========== ===========
See accompanying notes to consolidated financial statements.
31
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended July 1, 1995, July 2, 1994, and June 26, 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 17,995,752 20,237,226 26,996,093
------------ ------------ ------------
Costs and expenses:
Cost of sales 13,081,115 14,414,798 19,306,281
Provision for losses on contracts 300,000 1,570,000 --
Marketing 3,027,667 2,930,818 3,157,639
Research and development 938,927 559,633 923,009
General and administrative 2,041,097 2,265,954 2,399,089
Restructuring 360,000 -- 451,750
------------ ------------ ------------
Total costs and expenses 19,748,806 21,741,203 26,237,768
------------ ------------ ------------
Operating earnings (loss) (1,753,054) (1,503,977) 758,325
------------ ------------ ------------
Other (expense), income:
Interest expense (212,588) (271,472) (434,413)
Other, primarily interest income 163,960 298,077 133,857
------------ ------------ ------------
Total other (expense), income (48,628) 26,605 (300,556)
------------ ------------ ------------
Earnings (loss) before income taxes and
cumulative effect of change in accounting
principle (1,801,682) (1,477,372) 457,769
Income tax expense (benefit) (330,000) (115,627) 179,323
------------ ------------ ------------
Earnings (loss) before cumulative effect of
change in accounting principle (1,471,682) (1,361,745) 278,446
Cumulative effect of change in accounting
for postretirement benefits other than
pensions -- (994,727) --
------------ ------------ ------------
Net earnings (loss) $ (1,471,682) (2,356,472) 278,446
============ ============ ============
Earnings (loss) per share:
Earnings (loss) before cumulative effect
of change in accounting principle (.36) (.31) .06
Cumulative effect of change in accounting
for postretirement benefits other than
pensions -- (.22) --
------------ ------------ ------------
Net earnings (loss) per share $ (.36) (.53) .06
============ ============ ============
Weighted average shares outstanding 4,046,729 4,434,801 4,530,491
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended July 1, 1995, July 2, 1994, and June 26, 1993
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock Total
------------------------- Paid-in Retained ------------------------- Stockholders'
Shares Amount Capital Earnings Shares Amount Equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 27, 1992 4,777,559 $ 47,776 14,913,042 9,279,699 213,970 $ (166,463) 24,074,054
Net earnings -- -- -- 278,446 -- -- 278,446
Stock issued under employee
stock purchase plan 14,893 149 23,680 -- -- -- 23,829
Stock options exercised 2,400 24 3,276 -- -- -- 3,300
Purchase of treasury shares -- -- -- -- 145,904 (281,671) (281,671)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at June 26, 1993 4,794,852 47,949 14,939,998 9,558,145 359,874 (448,134) 24,097,958
Net loss -- -- -- (2,356,472) -- -- (2,356,472)
Stock issued under employee
stock purchase plan 2,964 29 5,958 -- -- -- 5,987
Stock options exercised 26,400 264 36,036 -- -- -- 36,300
Purchase of treasury shares -- -- -- -- 40,100 (104,665) (104,665)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at July 2, 1994 4,824,216 48,242 14,981,992 7,201,673 399,974 (552,799) 21,679,108
Net loss -- -- -- (1,471,682) -- -- (1,471,682)
Stock options exercised 25,800 258 75,529 -- -- -- 75,787
Purchase of treasury shares -- -- -- -- 492,300 (1,459,278) (1,459,278)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at July 1, 1995 4,850,016 $ 48,500 15,057,521 5,729,991 892,274 $(2,012,077) 18,823,935
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended July 1, 1995, July 2, 1994, and June 26, 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (1,471,682) (2,356,472) 278,446
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Cumulative effect of change in
accounting principle -- 994,727 --
Depreciation and amortization 1,722,686 1,702,427 1,652,116
Deferred income taxes -- (297,627) (83,177)
Gain on sale of equipment -- (108,427) --
Changes in:
Provision for losses on contracts (981,969) 1,570,000 --
Receivables 947,587 (911,184) 3,355,242
Income taxes (228,810) (73,623) 369,692
Inventories 1,870,386 (171,151) 2,353,153
Prepaid expenses 55,884 (110,929) 13,178
Other assets 88,547 (20,633) 10,532
Accounts payable 168,647 83,049 (774,011)
Accrued expenses 119,120 (111,743) (453,101)
Postretirement benefit obligation 61,838 19,269 --
------------ ------------ ------------
Net cash provided by operating
activities 2,352,234 207,683 6,722,070
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from the sale of equipment -- 825,000 --
Capital expenditures (1,296,587) (1,254,198) (669,226)
------------ ------------ ------------
Net cash used in investing activities (1,296,587) (429,198) (669,226)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (725,526) (670,431) (624,550)
Net borrowings (repayments) under
revolving line of credit (363,352) 338,961 (1,972,754)
Proceeds from the issuance of common
stock 75,787 42,287 27,129
Purchase of treasury stock (1,459,278) (104,665) (281,671)
------------ ------------ ------------
Net cash used in financing activities (2,472,369) (393,848) (2,851,846)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (1,416,722) (615,363) 3,200,998
Cash and cash equivalents at beginning of year 3,556,517 4,171,880 970,882
------------ ------------ ------------
Cash and cash equivalents at end of year $ 2,139,795 3,556,517 4,171,880
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
July 1, 1995, July 2, 1994, and June 26, 1993
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Anaren
Microwave, Inc. and its wholly-owned subsidiaries ("the
Company"). All significant intercompany balances and transactions
have been eliminated in consolidation. The years ended July 1,
1995, July 2, 1994 and June 26, 1993 consisted of 52, 53 and 52
weeks, respectively.
(b) Operations
The Company is engaged in the design, engineering and manufacture of
microwave components and integrated microwave assemblies and
subsystems for use in sophisticated microwave installations.
Revenue is recognized upon the shipment of the product.
Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Anaren
Microwave, Ltd., a wholly-owned subsidiary, is incorporated in
England to serve primarily the European marketplace and to
perform specific research and development projects.
(c) Cash Equivalents
Cash equivalents consist of short-term repurchase agreements, with
maturities of three months or less.
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of
buildings and land improvements is calculated by the
straight-line method over an estimated service life of 25 years.
Machinery and equipment is depreciated primarily by the
straight-line method based on estimated useful lives of 3 to 10
years.
(e) Per Share Data
Per share data are based on the weighted average number of shares
outstanding. Options outstanding under the stock option plans are
excluded from the weighted average number of shares as their
inclusion would be anti-dilutive or not material.
(f) Pension Plan
Pension plan costs for the Company's defined benefit plan are
recognized in accordance with the requirements of Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions." The projected unit credit method is utilized for
measuring net periodic pension costs over the employees' service
life. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be
earned in the future, and such contributions meet the minimum
funding requirements set forth in the Employee Retirement Income
Security Act of 1974.
35 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(g) Postretirement Benefits
The Company sponsors a defined benefit health care plan for
substantially all retirees and employees. Effective June 27,
1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting of Postretirement
Benefits Other Than Pensions," which establishes a new accounting
principle for the cost of retiree health care and other
postretirement benefits (also see note 8). Prior to 1994, the
Company recognized these benefits on the pay-as-you-go method
(i.e., cash basis). The cumulative effect of the change in method
of accounting for postretirement benefits other than pensions is
reported in the fiscal 1994 consolidated statement of operations.
(h) Income Taxes
Effective June 27, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" on a prospective basis. The cumulative effect
of the initial adoption of Statement 109 was insignificant. Under
the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates.
Pursuant to the deferred method under APB Opinion 11, which was
applied in fiscal 1993 and prior years, deferred income taxes are
recognized for income and expense items that are reported in
different years for financial reporting purposes and income tax
purposes using the tax rate applicable in the year of the
calculation. Under the deferred method, deferred taxes are not
adjusted for subsequent changes in tax rates.
(i) Reclassifications
Certain 1994 balances have been reclassified to conform with the 1995
presentation.
(2) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and are summarized as follows:
1995 1994
---------- ----------
Raw materials $2,804,720 3,616,191
Work-in-process 3,266,194 4,234,333
Finished goods 782,841 873,617
---------- ----------
$6,853,755 8,724,141
========== ==========
36 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Property, Plant and Equipment
Components of property, plant and equipment are as follows:
1995 1994
----------- -----------
Land and land improvements $ 1,362,050 1,362,050
Buildings 5,094,722 5,091,997
Machinery and equipment 21,968,931 20,675,069
----------- -----------
28,425,703 27,129,116
Less accumulated depreciation
and amortization 20,809,496 19,086,810
----------- -----------
$ 7,616,207 8,042,306
=========== ===========
The gross amount of assets recorded under capital leases amounted to
$2,382,662 as of July 1, 1995 and July 2, 1994. Accumulated
amortization on assets under capital leases amounted to $1,972,282 and
$1,495,750 at July 1, 1995 and July 2, 1994, respectively.
(4) Accrued Expenses
Accrued expenses are summarized as follows:
1995 1994
----------- -----------
Compensation $ 143,788 18,157
Commissions 77,771 109,000
Other 186,501 161,783
----------- -----------
$ 408,060 288,940
=========== ===========
(5) Long-term Debt
Long-term debt is comprised as follows:
1995 1994
----------- -----------
Industrial Development Revenue Bonds $ 1,133,334 1,360,001
Capitalized lease obligations 630,811 1,129,670
Revolving line of credit -- 363,352
----------- -----------
1,764,145 2,853,023
Less current installments 712,264 1,092,858
----------- -----------
$ 1,051,881 1,760,165
=========== ===========
37 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Long-term Debt, Continued
In August 1985, Onondaga County Industrial Development Agency (OCIDA)
issued revenue bonds bearing interest at 75% of the prime rate in the
amount of $3,400,000. The prime rate was 9% at July 1, 1995. The
proceeds from the bonds were used to construct additions to the
Company's manufacturing facility and for the purchase of additional
land and equipment. The related lease agreement, which matures on
November l, 2000, requires semi-annual principal payments of $113,333,
plus interest.
The substance of the agreement is a lease-purchase transaction between the
Company and OCIDA and a cross-guarantee agreement between the Company
and bondholder (the bank) under which the Company has guaranteed the
payments on the bonds which in the aggregate equal the total payment
required under the lease agreement. Substantially all property, plant
and equipment, exclusive of equipment capitalized under separate lease
agreements, has been pledged to collateralize the bonds.
Under the provisions of the agreement the Company may pay cash dividends up
to 35% of the net earnings in any fiscal year, or if, after giving
effect to such dividends, the Company's retained earnings at the end
of the fiscal year equals or exceeds $2.0 million. Additionally, the
agreement requires maintenance of a minimum current ratio, working
capital, retained earnings and tangible net worth, as defined. The
Company has complied with all restrictions and covenants, or has
obtained the necessary waivers for technical violations.
The Company has various capital lease agreements for machinery and
equipment. The Company did not incur any new capital lease obligations
in 1993, 1994 or 1995. Future minimum lease payments are summarized as
follows: $525,490 in 1996, and $150,516 in 1997. Included in the
minimum lease payments is $45,195 of imputed interest.
The Company maintained a revolving line of credit providing principal
drawings of $3,500,000 through December 31, 1994. This credit facility
carried interest on outstanding borrowings at the prime rate plus 3/4%
and was secured by assets of the Company which are not otherwise
pledged under lease agreements.
Maturities of long-term debt, exclusive of capitalized lease obligations,
are $226,666 from 1996 to 1999, and $226,670 in 2000.
Cash payments for interest were $186,824, $254,986 and $449,098 during
fiscal 1995, 1994 and 1993, respectively.
(6) Stock Option Plans
Under the Company's Incentive Stock Option Plan (ISO), 1,000,000 shares of
common stock were reserved for the granting of options to officers and
key employees. Options are granted at the fair market price of shares
at the date of grant, become exercisable 20% at the date of grant and
20% per year thereafter, and must be exercised within 10 years of the
date of grant.
38 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Stock Option Plans, Continued
The Company also has a Non-Statutory Stock Option Plan (NSO) which allows
for the granting of options to Board members and nonemployees. Under
the Plan, 100,000 shares of common stock were reserved for the
granting of options at prices to be determined by the Board (options
granted to Board members may not be less than the fair market value on
the date of grant). Options become exercisable immediately and must be
exercised within five years of the date of grant.
Information for the three years ended July 1, 1995 with respect to these
plans are as follows:
Shares
-------------------------------
ISO NSO Total Option Price
-------- -------- -------- -------------
Outstanding at June 27, 1992 733,720 82,500 816,220 $1.38 to 6.88
Canceled (23,970) -- (23,970) $1.38 to 6.88
Exercised (2,400) -- (2,400) $ 1.38
-------- -------- --------
Outstanding at June 26, 1993 707,350 82,500 789,850 $1.38 to 6.88
Canceled (59,400) -- (59,400) $1.38 to 6.88
Exercised (26,400) -- (26,400) $ 1.38
-------- -------- --------
Outstanding at July 2, 1994 621,550 82,500 704,050 $1.38 to 6.88
Canceled (25,930) (7,500) (33,430) $1.38 to 6.88
Exercised (10,800) (15,000) (25,800) $1.38 to 4.12
-------- -------- --------
Outstanding at July 1, 1995 584,820 60,000 644,820 $1.38 to 6.88
======== ======== ========
Shares exercisable at
July 1, 1995 584,820 60,000 644,820 $1.38 to 6.88
======== ======== ========
Shares available for grant
at July 1, 1995 -- 24,000 24,000
======== ======== ========
39 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Employee Benefit Plans
The Company has a non-contributory defined benefit pension plan covering
substantially all of its employees. Benefits under this plan generally
are based on the employee's years of service and compensation. The
Company makes annual contributions to the plan equal to the maximum
amount that can be deducted for income tax purposes. The following
table sets forth the plan's funded status at July 1, 1995 and July 2,
1994:
1995 1994
----------- -----------
Actuarial present value of accumulated benefit
obligation (vested $3,378,784 in 1995 and
$3,006,292 in 1994) $ 3,430,914 3,099,483
Effect of assumed increase in compensation
levels 386,074 407,250
----------- -----------
Projected benefit obligation for services rendered
to date 3,816,988 3,506,733
Plan assets at fair value 3,960,127 3,100,649
----------- -----------
Plan assets in excess (less than) projected
benefit obligation 143,139 (406,084)
Unrecognized net loss (gain) (320,292) 182,495
Unrecognized prior service cost 170,111 228,432
Unrecognized net transition asset (15 year
amortization) 75,725 85,191
----------- -----------
Prepaid pension asset $ 68,683 90,034
=========== ===========
The following table details the components of net pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Service cost $ 146,354 143,784 160,069
Interest cost 259,167 237,680 227,303
Actual return on plan assets (794,687) (183,443) (115,975)
Net amortization and
deferral 571,524 (16,222) (74,862)
------------ ------------ ------------
Net pension cost $ 182,358 181,799 196,535
============ ============ ============
</TABLE>
The projected benefit obligation was determined using an assumed discount
rate of 7.5% and an assumed long-term rate of increase in compensation
of 5% for 1995 and 1994. The assumed long-term rate of return on plan
assets was 8.0% for 1995 and 1994.
Plan assets consist principally of equity securities, and U.S. government
and corporate obligations.
40 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Employee Benefit Plans, Continued
The Company maintains a voluntary contributory salary savings plan to
which participants may contribute up to 15% of their total
compensation. The Company contributes an amount equal to 50% (25% in
1993) of the participants' contribution up to a maximum of 3% of the
participants' compensation. During fiscal 1995, 1994 and 1993, the
Company contributed $112,255, $39,140 and $35,721, respectively, to
this plan.
The Company also maintains an Employee Stock Purchase Plan which allows
for employees to purchase common shares of the Company through payroll
deductions over a period not to exceed twenty-four months. At the
discretion of the Board, shares may be sold to employees under this
plan at not less than 85% of fair market value.
(8) Postretirement Benefits
The Company provides medical coverage for current and future eligible
retirees of the Company plus their eligible dependents. Employees
generally become eligible for retiree medical coverage by retiring
from the Company after attaining at least age 55 with 15 years of
service (current active employees at June 27, 1993 are eligible by
retiring after attaining at least age 55 with 10 years of service).
Existing retirees at June 27, 1993 pay approximately $30 per month for
health care coverage and the Company is responsible for paying the
remaining costs. For this group, any increase in health care coverage
costs for retired employees will be shared by the Company and retirees
on a fifty-fifty basis, while any increase in coverage costs for
retiree dependents will be totally paid by the retirees. For eligible
new retirees, employees retiring after June 26, 1993, the Company will
contribute a fixed dollar amount towards the cost of the medical plan.
Any future cost increases for the retiree medical program for these
participants retiring after June 26, 1993 will be charged to the
retiree.
As discussed in note 1, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", as of June 27, 1993 and
elected to immediately recognize the accumulated postretirement
benefit obligation as of that date as the cumulative effect of a
change in accounting principle. There was no income tax benefit
recognized upon the adoption of Statement 106 as the recoverability of
such deferred tax asset would not be assured. The effect of adopting
Statement 106 on earnings, and the net periodic postretirement benefit
cost for the year ended July 2, 1994 was a decrease of $1,013,996, and
an increase of $19,269, respectively.
The following table presents the plan's accumulated postretirement benefit
obligation at July 1, 1995 and July 2, 1994:
1995 1994
----------- -----------
Retirees $ 474,517 574,432
Fully eligible active plan participants 259,458 136,281
Other active participants 275,714 303,283
Unrecognized net gain 66,145 --
----------- -----------
Accumulated postretirement benefit
obligation $ 1,075,834 1,013,996
=========== ===========
41 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Other Postretirement Benefit Plans
Net period postretirement benefit cost for the years ended July 1, 1995
and July 2, 1994 include the following components:
1995 1994
----------- -----------
Service cost $ 30,522 26,709
Interest cost 71,089 74,605
----------- -----------
Net periodic postretirement benefit cost $ 101,611 101,314
=========== ===========
For measurement purposes, a 12% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was
assumed for fiscal 1995; the rate was assumed to decrease gradually to
5% by the year 2005 and remain at that level thereafter. The health
care cost trend rate assumption has an effect on the amounts reported.
However, as the Company contributes a fixed dollar amount to the plan
for the active employee group, this impact is minimized. For example,
increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement
benefit obligation as of July 1, 1995 by $19,000 and the aggregate of
the service and interest cost components of net periodic
postretirement benefit cost for the year ended July 1, 1995 by $1,400.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at July 1, 1995 and July 2,
1994.
(9) Income Taxes
As discussed in note 1, the Company adopted Statement 109 as of June 27,
1993. The cumulative effect of this change in accounting for income
taxes determined as of June 27, 1993 was insignificant.
42 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Income Taxes, Continued
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------------ ------------ ------------
<S> <C> <C> <C>
Year ended July 1, 1995:
U.S. Federal $ (330,000) -- (330,000)
State -- -- --
------------ ------------ ------------
$ (330,000) -- (330,000)
============ ============ ============
Year ended July 2, 1994:
U.S. Federal $ 151,000 (206,331) (55,331)
State 31,000 (91,296) (60,296)
------------ ------------ ------------
$ 182,000 (297,627) (115,627)
============ ============ ============
Year ended June 26, 1993:
U.S. Federal 230,000 (75,404) 154,596
State 32,500 (7,773) 24,727
------------ ------------ ------------
$ 262,500 (83,177) 179,323
============ ============ ============
</TABLE>
A reconciliation of the expected consolidated income tax expense
(benefit), computed by applying the U.S. Federal corporate income tax
rate of 34% to earnings (loss) before income taxes and cumulative
effect of change in accounting principle, to income tax expense
(benefit), is as follows:
1995 1994 1993
--------- --------- ---------
Expected consolidated income
tax expense (benefit) $(612,572) (502,306) 155,641
State income taxes, net of
federal income tax benefit -- (39,795) 16,320
Equity in loss of subsidiaries
not subject to taxation 198,662 51,696 5,130
Change in valuation allowance 58,336 366,219 --
Other, net 25,574 8,559 2,232
--------- --------- ---------
$(330,000) (115,627) 179,323
========= ========= =========
Deferred income taxes result from timing differences in recognition of
revenue and expense for tax and financial statement purposes. Sources
of the timing differences arising during the year ended June 26, 1993
and the tax effect of each included in the tax provision were as
follows:
Uniform capitalization $(63,928)
Tax under book depreciation (11,317)
DISC subsidiary earnings taxable in
subsequent year (7,932)
--------
$(83,177)
========
43 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Income Taxes, Continued
In 1992, Federal deferred tax credits of $164,948 were reduced based upon
their expected amortization during the carryforward period for
financial statement purposes. Upon realization of the tax benefits of
the carryforwards in 1993, $94,131 previously eliminated from the
deferred tax accounts were reinstated by a charge to operations.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
July 1, 1995 and July 2, 1994 are presented below:
1995 1994
----------- -----------
Deferred tax assets:
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of
1986 $ 18,077 87,160
Provision for losses on contracts 229,332 612,300
Retirement benefits 15,012 3,056
Postretirement benefits 413,788 395,458
General business credit carryforwards 30,594 30,594
Federal net operating loss carryforward 614,543 --
State net operating loss carryforwards 114,034 26,852
State investment tax credit carryforwards 735,123 678,223
Alternative minimum tax credit
carryforwards 227,952 542,195
Other 42,412 5,070
----------- -----------
Total gross deferred tax assets 2,440,867 2,380,908
Less valuation allowance (1,752,847) (1,694,511)
----------- -----------
Net deferred tax assets 688,020 686,397
----------- -----------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation (688,020) (678,466)
Other -- (7,931)
----------- -----------
Total gross deferred liabilities (688,020) (686,397)
----------- -----------
Net deferred taxes $ -- --
=========== ===========
44 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Income Taxes, Continued
The valuation allowance for deferred tax assets as of July 1, 1995 and
July 2, 1994 was $1,752,847 and $1,694,511, respectively. The net
change in the total valuation allowance for the year ended July 1,
1995 was an increase of $58,336. In assessing the realizability of
deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income
over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the
existing valuation allowances at July 1, 1995.
At July 1, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of $1,807,568 which are available to
offset future federal taxable income, if any, through 2010. At July 1,
1995, the Company has net operating loss carryforwards for state
income tax purposes of $2,303,725 which are available to offset future
state taxable income, if any, through 2010. The Company also has
investment tax credit carryforwards for state income tax purposes of
$735,123 which are available to reduce future state income taxes, if
any, through 2005. In addition, the Company has alternative minimum
tax credit carryforwards of $227,952 which are available to reduce
future federal regular income taxes, if any, over an indefinite
period.
Cash payments for income taxes were $30,113, $287,202 and $581,250 in 1995,
1994 and 1993, respectively.
(10) Restructuring
During fiscal 1993, the Company received notification of termination of a
contract with the U.S. Navy. In light of the anticipated reduction in
revenue as a result of this termination, the Company instituted cost
cutting measures and restructuring charges of $451,750 were
recognized. In November 1994, the Company further implemented cost
cutting measures designed to reduce overhead costs and improve
operating efficiencies. This program included severance of employees
and reorganization of the manufacturing and engineering functions of
the Company. A restructuring charge amounting to $360,000, consisting
of severance costs, was recognized as a result of the November 1994
program.
(11) Commitments
The Company is obligated under various equipment and premises operating
leases. Future minimum payments under noncancelable operating leases
for the next five years and thereafter are summarized as follows:
$378,485 from 1996 to 2000; and $5,172,630 after 2000. Rent expense
for equipment and premises held under operating leases for the years
ended July 1, 1995, July 2, 1994 and June 26, 1993 was $378,485,
$516,972, and $788,436, respectively.
45 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Commitments, Continued
The Company maintains a letter of credit arrangement with Fleet Bank of
Massachusetts, N.A. Under the arrangement in effect as of July 1,
1995, Fleet issued a letter of credit in the amount of approximately
$620,000 as required under a contract between the Company and the
Dutch Air Force. At July 1, 1995, the Company was required to maintain
a compensating balance of approximately $620,000 in support of this
letter of credit.
(12) Foreign Operations
The Company is engaged in principally one line of business, the design,
engineering and manufacture of microwave components and integrated
microwave assemblies and subsystems for use in sophisticated microwave
installations. The following table shows financial information about
the Company's foreign operations:
<TABLE>
<CAPTION>
Years ended
--------------------------------------------
July 1, 1995 July 2, 1994 June 26, 1993
------------ ------------ -------------
<S> <C> <C> <C>
Net sales:
United States $ 14,929,495 18,068,575 24,272,113
European affiliate 3,066,257 2,168,651 2,723,980
------------ ------------ ------------
Consolidated net
sales $ 17,995,752 20,237,226 26,996,093
============ ============ ============
Operating profit (loss):
United States $ (1,474,358) (1,113,061) 805,522
European affiliate (327,324) (364,311) (347,753)
------------ ------------ ------------
Consolidated total $ (1,801,682) (1,477,372) 457,769
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Years ended
--------------------------------------------
July 1, 1995 July 2, 1994 June 26, 1993
------------ ------------ -------------
<S> <C> <C> <C>
Identifiable assets:
United States $ 20,941,042 25,958,041 26,247,563
European affiliate 2,424,064 1,983,480 2,222,498
------------ ------------ ------------
Consolidated total $ 23,365,106 27,941,521 28,470,061
============ ============ ============
</TABLE>
Sales to customers located outside the United States amounted to $9,498,737
in 1995, $6,968,142 in 1994, and $9,483,017 in 1993. In 1995, sales to
two customers (approximately $4,600,000 and $3,000,000, respectively)
exceeded 10% of consolidated net sales. In 1994, sales to four
customers (approximately $2,500,000, $2,500,000, $2,200,000 and
$2,200,000, respectively) exceeded 10% of consolidated net sales. In
1993, sales to four customers (approximately $3,700,000, $3,600,000,
$3,100,000 and $3,000,000, respectively) exceeded 10% of consolidated
net sales.
46 (Continued)
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited quarterly financial
information for the years ended July 1, 1995 and July 2, 1994:
<TABLE>
<CAPTION>
1995 Quarter Ended
--------------------------------------------------------------
Oct. 1 Dec. 31 April 1 July 1
------------ ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 4,154,419 2,955,363 4,684,707 6,201,263
============ ========== ========= ==========
Cost of sales $ 2,929,509 2,558,220 3,191,757 3,774,534
============ ========== ========= ==========
Provision for losses on
contracts $ -- 1,050,000 -- (750,000)
============ ========== ========= ==========
Restructuring $ -- 360,000 -- --
============ ========== ========= ==========
Earnings (loss) before
cumulative effect of
change in accounting
principle $ (123,397) (2,498,865) (124,272) 1,274,852
============ ========== ========= ==========
Net earnings (loss) $ (123,397) (2,498,865) (124,272) 1,274,852
============ ========== ========= ==========
Earnings (loss) per share:
Earnings (loss) before
cumulative effect of
change in accounting
principle $ (.03) (.60) (.04) .31
====== ==== ==== ====
Net earnings (loss) per
share $ (.03) (.60) (.04) .31
====== ==== ==== ====
</TABLE>
During the second quarter ended December 31, 1994, the Company recorded a
provision for losses on contracts of $1,050,000. This provision
represents expected cost overruns on fixed price contracts with
anticipated fiscal 1995 and 1996 shipping schedules. During the fourth
quarter ended July 1, 1995, the Company was successful in negotiating
favorable price adjustments amounting to $750,000 relating to
contracts which the Company had recorded provisions for losses in the
second quarter of 1995 and prior. These price adjustments are
recognized as an offset to the provision for contract losses.
During the second quarter ended December 31, 1994, the Company recorded a
restructuring provision of $360,000 for severance of employees
resulting from the reorganization of the manufacturing and engineering
functions of the Company.
The 1995 current federal income tax benefit of $330,000 was recognized in
the fourth quarter of 1995 when such amount was determined. Allocation
of this benefit in earlier quarters would result in a reduction of the
reported net loss of $22,600, $457,300, and $22,700 for the first,
second and third quarters, respectively, and a decrease in the
reported income for the fourth quarter of $172,600.
47
<PAGE>
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Quarterly Financial Data (Unaudited), Continued
<TABLE>
<CAPTION>
1994 Quarter Ended
--------------------------------------------------
Sept. 25 Dec. 25 March 26 July 2
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 5,046,744 4,794,234 4,334,380 6,061,868
=========== ========= ========== ==========
Cost of sales $ 3,636,351 3,294,817 2,882,221 4,601,409
=========== ========= ========== ==========
Provision for losses on
contracts $ -- -- -- 1,570,000
=========== ========= ========== ==========
Earnings (loss) before
cumulative effect of
change in accounting
principle $ 13,382 64,465 7,327 (1,446,919)
=========== ========= ========== ==========
Cumulative effect of change
in accounting principle $ (994,727) -- -- --
=========== ========= ========== ==========
Net earnings (loss) $ (981,345) 64,465 7,327 (1,446,919)
=========== ========= ========== ==========
Earnings (loss) per share:
Earnings (loss) before
cumulative effect of
change in accounting
principle $ -- .01 -- (.32)
=========== ========= ========== ==========
Cumulative effect of change
in accounting principle $ (.22) -- -- --
=========== ========= ========== ==========
Net earnings (loss) per
share $ (.22) .01 -- (.32)
=========== ========= ========== ==========
</TABLE>
During the fourth quarter ended July 2, 1994, the Company recorded a
provision for losses on contracts of $1,570,000. This provision
represents expected cost overruns on fixed price contracts with
anticipated fiscal 1995 shipping schedules.
48
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation of Registrant and
amendments thereof.
(i) Restated Certificate of Incorporation is
incorporated by reference to Exhibit 3(a) to
Registrant's Registration Statement of Form S-1
(No. 2-42704).
(ii) Amendment, filed December 19, 1980, is
incorporated by referenced to Exhibit 4.1(ii) to
Registrant's Registration Statement of Form S-2
(No. 2-86025).
(iii) Amendment, filed March 18, 1985 is
incorporated by reference to the identically
numbered exhibit to the Registrant's Annual Report
on Form 10-K (Commission File No. 0-6620) for the
year ended June 30, 1987.
(iv) Amendment, filed December 14, 1987, is
incorporated by reference to Exhibit 4(a) (iv) to
the Registrant's Registration Statement on Form
S-8 (33-19618).
* 3.2 Registrant's By-Laws, as amended.
** 4.2 Lease Agreement between the Registrant and the
Onondaga County Industrial Development Agency,
dated June 1, 1980.
*** 4.5 Amendment, dated August 21, 1985 to Lease
Agreement between the Registrant and the Onondaga
County Industrial Development Agency.
******** 4.6 Loan agreement, dated June 15, 1990, by and among
Fleet National Bank and the Registrant.
********* 4.7 First amendment to loan agreement, dated July 15,
1993, by and among Fleet National Bank and the
Registrant.
4.8 Second amendment to loan agreement, dated June 24,
1994, by and among Fleet National Bank and the
Registrant.
* 10.1 Registrant's Pension Plan and Trust.
* 10.2 Registrant's Incentive Stock Option Plan.
**** 10.3 Registrant's Employee Stock Purchase Plan.
***** 10.4 Registrant's Non-Statutory Stock Option Plan
****** 10.5 Registrant's Severance Compensation Plan
******* 21 Subsidiaries of Registrant
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule for the twelve month period
ended July 1, 1995
* Incorporated herein by reference by reference to exhibit
4(b) to the Registrant's Registration Statement on Form
S-8 (Registration No. 33-19618).
** Incorporated herein by reference to exhibit 4.4 to the
Registrant's Registration Statement on Form S-2
(Registration No. 2-86025)
*** Incorporated herein by reference to the identically
numbered exhibit to the Registrant's Annual Report on
Form 10-K for the year ended June 30, 1985.
49
<PAGE>
EXHIBIT INDEX (Continued)
**** Incorporated herein by reference from Exhibit No. 4(c)
to the registrant's Registration Statement on Form S-8
(Registration No. 33-1768)
***** Incorporated herein by reference from Exhibit No. 4 to
the registrant's Registration Statement on Form S-8
(Registration No. 33-36761).
****** Incorporated herein by reference to the identically
numbered exhibit to the Registrant's Annual Report on
Form 10-K for the year ended June 30, 1990.
******* Incorporated herein by reference to exhibit No. 22 to
the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1991.
******** Incorporated herein by reference to exhibit No. 4.6 to
the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1991.
********* Incorporated herein by reference to exhibit No. 4.6 to
the Registrant's Annual Report on Form 10-K for the year
ended June 26, 1993.
50
Exhibit 23
Independent Auditors' Consent
The Board of Directors
Anaren Microwave, Inc.:
We consent to incorporation by reference in the Registration Statements (No.
33-19618, No. 33-1768 and No. 33-36761) on Form S-8 of Anaren Microwave, Inc.
of our report dated August 18, 1995, relating to the consolidated balance sheets
of Anaren Microwave, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended July 1, 1995,
which report appears in the July 1, 1995 annual report on Form 10-K of Anaren
Microwave, Inc.
Our report included an explanatory paragraph referring to the Company's changes
in its methods of accounting for postretirement benefits other than pensions and
income taxes.
KPMG Peat Marwick LLP
Syracuse, New York
September 25, 1995
51
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for Anaren Microwave, Inc. filed with form 10K for the
twelve months ended July 1, 1995 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> JUL-01-1995
<CASH> $2,139,795
<SECURITIES> 0
<RECEIVABLES> 6,112,540
<ALLOWANCES> 13,000
<INVENTORY> 6,853,755
<CURRENT-ASSETS> 15,671,137
<PP&E> 28,425,703
<DEPRECIATION> (20,809,496)
<TOTAL-ASSETS> 23,365,106
<CURRENT-LIABILITIES> 2,413,456
<BONDS> 1,051,881
<COMMON> 48,500
0
0
<OTHER-SE> 18,775,435
<TOTAL-LIABILITY-AND-EQUITY> 23,365,106
<SALES> 17,995,752
<TOTAL-REVENUES> 17,995,752
<CGS> 13,081,115
<TOTAL-COSTS> 19,388,806
<OTHER-EXPENSES> 360,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 212,588
<INCOME-PRETAX> (1,801,682)
<INCOME-TAX> (330,000)
<INCOME-CONTINUING> (1,471,682)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,471,682)
<EPS-PRIMARY> ($0.36)
<EPS-DILUTED> ($0.36)
</TABLE>
