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Gigatronics Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 9, 2010 09:00PM
Gigatronics Inc. (GIGA) filed Quarterly Report for the period ended 2010-06-26. Gigatronics Inc. has a market cap of $11.04 million; its shares were traded at around $2.22 with a P/E ratio of 10.57 and P/S ratio of 0.58.GIGA is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Fiscal 2011 first quarter net sales were $4,701,000, a 5% increase from the $4,469,000 in the first quarter of fiscal 2010. Sales at Giga-tronics Division decreased 8% or $191,000 primarily due to a decrease in military shipments of its products. Sales at Microsource increased 22% or $423,000 during the first quarter of fiscal 2011 versus the first quarter of fiscal 2010 primarily due to an increase in military shipments.
Operating expenses increased 6% or $101,000 in the first quarter of fiscal 2011 over fiscal 2010 due to an increase of $104,000 in product development expenses, offset by a decrease of $3,000 in selling, general and administrative expense. The increase in product development expenses is due to lower customer funded projects.
Giga-tronics recorded a net profit of $13,625,000 or $2.73 per fully diluted share for the first quarter of fiscal 2011 versus a net profit of $333,000 or $0.07 per fully diluted share in the same period last year. A tax benefit of $13,569,000 was recorded for the first quarter of fiscal 2011 versus a $2,000 provision for income taxes for the first quarter of fiscal 2010.
Non-GAAP net income, which excludes share based compensation, for the three month period ended June 26, 2010 would have been $46,000 higher or $13,671,000. Non-GAAP basic earnings per share would have been $2.79 compared to $2.78 as reported. Non-GAAP diluted earnings per share would have been $2.73 compared to $2.73 as reported. For the same period last year, the Company s non-GAAP net income would have been $37,000 higher or $370,000 and the basic and diluted earnings per share would have been $0.08 compared to $0.07 as reported. Management has included this information as this expense is a non-cash item with no net equity impact.
Deferred tax assets are subject to a valuation allowance when management is unable to conclude that its deferred tax assets will more likely than not be realized from the results of operations. The Company has reviewed all available evidence (both positive and negative) as described in Accounting Standards Codification 740. The Company has demonstrated consistent pre-tax book income for the past seven quarters and does not have cumulative losses over the past three years. The Company s FY 2011 Budget and Strategic Plans for FY 2012 and FY 2013 are all forecasted to be profitable. The Company continues to maintain a two year backlog of orders for its YIG (Yttrium, Iron, Garnet) filters and projects continued orders. Its legacy Model 8003 precision scalar analyzer continues to receive orders from the U.S. Navy one of which was booked for $1.1 million in the first quarter. The Company is now serving a new market in the consumer wireless handheld telecommunication market with its high volume production automation switch for which it received several small orders in the first quarter which is expected to lead to much larger orders in the future. The Company has entered the semiconductor market with its new integrated switch product for testing thin-film memory storage components. The Test and Measurement market is forecasted to grow at the rate of 4% per year, per industry forecasting experts. The Company has no known contingencies or unsettled circumstances. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. Based on historical income and projections for future taxable income over the periods in which the deferred tax assets become deductible, management believes the Company is more likely than not to realize benefits of these deductible differences. Management has, therefore, reversed the valuation allowance against its deferred tax assets, resulting in an income tax benefit of $13,569,000 for the three month period ended June 26, 2010. Gross unrecognized tax benefit changed from $120,000 at March 27, 2010 to approximately $799,000 at June 26, 2010 due to additional amounts established for Federal and California tax credits.
As of June 26, 2010, Giga-tronics had $3,235,000 in cash and cash equivalents, compared to $3,074,000 as of March 27, 2010.
Stocks Discussed: GIGA,