Data I/O Corporation is engaged in the design manufacture and sale of programming systems that are used by designers and manufacturers of electronic products. The company's programming system products are used to program integrated circuits with the specific unique data for the product within which the integrated circuits will be used and are an important tool for the electronics industry which is experiencing growing use of programmable integrated circuits. Data I/O markets and distributes its programming systems worldwide. Data I/O Corp. has a market cap of $27.7 million; its shares were traded at around $3.12 with a P/E ratio of 11.1 and P/S ratio of 1.
Highlight of Business Operations:On March 18, 2008, the Company completed the sale of selected patents and patent applications to Leannoux Properties AG L.L.C. Net proceeds were approximately $3.3 million with a net gain of approximately $2.1 million.
As a result of the business down turn we were experiencing in the fourth quarter of 2008 and the uncertain business outlook, additional actions to reduce expenses were taken. This resulted in a restructuring charge primarily related to severance during the fourth quarter of $535,000 and total of $542,000 for the year 2008. During the first quarter of 2009, restructure activities resulted in net additional charges of $22,000 representing severance and costs associated with terminating vehicle leases. At March 31, 2009, $103,000 remains accrued and is expected to be paid out during 2009.
Research and development (“R&D”) spending for the first quarter of 2009 compared to the first quarter of 2008 decreased by approximately $66,000, primarily due to $42,000 of reducing personnel costs related to restructure actions, $30,000 less in R&D material costs, and $22,000 less in recruiting fees with these savings offset in part by $20,000 of increased costs for contractors and $25,000 of increased patent related professional services. R&D as a percentage of net sales increased due to the decrease in sales for the first quarter of 2009. We have completed the transition of the majority of device support operations to our China team. New products include the new software shipped in March 2009 used to manage and control intellectual property in the programming process, as well as FlashCORE III, our new programming architecture, and the PS 388, a new member of the PS family of automated programming system incorporating FlashCORE III announced in April 2009.
Selling, general and administrative (“SG&A”) expenses decreased approximately $351,000 for the first quarter of 2009 compared to the first quarter of 2008 due primarily to a decrease in net personnel costs of approximately $136,000 related to the restructure actions. We also experienced a decrease of approximately $64,000 in bonus expense, $55,000 in travel & entertainment, $40,000 in commissions, and $55,000 in reduced time off accrued pay, offset in part by $21,000 in increased bad debt expense.
Income tax expense recorded for the first quarter of 2009 and 2008 resulted from foreign and state taxes. The tax effective rate differed from the statutory tax rate primarily due to the effect of valuation allowances and state taxes. Data I/O has a valuation allowance of $8,977,000 as of March 31, 2009. Our deferred tax assets and valuation allowance were reduced by $72,000 and $66,000 at March 31, 2009 and 2008, respectively, associated with the requirements of FIN 48 accounting for uncertain tax positions.
Our cash and cash equivalents increased by approximately $1.1 million during the three months ended March 31, 2009 primarily due to the cash received from collecting accounts receivable. Cash provided by operations primarily included a $2.3 million decrease in accounts receivable due to improved collections during the quarter. Cash provided by operations also included a $129,000 decrease in inventory.
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