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Data I/O Corp. Reports Operating Results (10-Q)

November 13, 2009 | About:
10qk

10qk

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Data I/O Corp. (DAIO) filed Quarterly Report for the period ended 2009-09-30.

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 $37.6 million; its shares were traded at around $4.2 with and P/S ratio of 1.3.

Highlight of Business Operations:

We experienced in the fourth quarter of 2008 a significant decline in business, which together with an uncertain economic outlook caused us to determine that additional cost and expense reduction measures were necessary. We took a restructuring charge of $535,000 in the fourth quarter of 2008, primarily related to severance, to further lower the revenue breakeven point for Data I/O. This business decline continued during the first and second quarters of 2009 and we took additional restructuring actions that resulted in a net charge of $22,000 and $158,000, respectively. During the third quarter of 2009, we incurred an additional charge of $23,000 severance-related costs. We are continuing our efforts to balance business geography shifts, increasing costs and strategic investments in our business with the level of demand and mix of business we expect. Complicating these efforts is the continued current economic uncertainty. With operating costs at approximately $2.6 million, we expect our current quarterly revenue breakeven point to be around $4.7 million.

As a result of the business downturn 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 of $535,000 during the fourth quarter, primarily related to severance, and total of $542,000 for the year. During the first quarter of 2009, restructure activities resulted in net additional charges of $22,000 representing severance and costs associated with terminating vehicle lease. During the second quarter we consolidated our operations into a smaller portion of our leased space, resulting in a lease abandonment restructure charge of $208,000, partially offset by reductions in previously accrued personnel, automobile leases and legal restructuring costs. During the third quarter, we had additional charges of $23,000 in severance related costs. At September 30, 2009, $209,000 remains accrued and is expected to be paid out during 2009, 2010 and 2011. This includes $83,000 in lease abandonment period amounts accrued as other long-term liabilities, which will be fully paid out in July 2011.

The revenue decrease of $2.5 million or 31.9% for the third quarter of 2009 compared to the third quarter of 2008 is primarily due to the current economic downturn with the associated industry excess capacity and general reduction in capital spending. We experienced decreased sales in all geographies and in each of our product lines. However, revenues did include shipments of our new FlashCORE III programmers. The backlog of orders totaled $876,000 at the end of the third quarter of 2009, a decrease compared to the backlog at September 30, 2008 of $1.3 million.

Selling, general and administrative (“SG&A”) expenses decreased approximately $653,000 for the third quarter of 2009 compared to the third quarter of 2008. This was due primarily to $180,000 lower bonus expense in the third quarter of 2009 compared to $300,000 for bonus expense for the third quarter of 2008 and approximately $275,000 personnel and other savings from restructure actions, as well as lower: bad debt expense, marketing expense, depreciation, travel cost, facilities expense, employee benefit charges and investor relations expense.

During the first nine months of 2009 compared with the same period in 2008, SG&A expense decreased approximately $1,785,000. This was due primarily to $544,000 lower bonus expense in the first nine months of 2009 compared to $698,000 for bonus expense for the first nine months of 2008 and approximately $680,000 personnel and other savings from restructure actions, as well as lower bad debt expense, marketing expense, depreciation, travel cost, facilities expense, employee benefit charges and investor relations expense.

Our cash and cash equivalents increased by approximately $2 million during the nine months ended September 30, 2009 primarily due to collection of customer receivables and inventory reductions, offset in part by the loss from operations and payment of accrued liabilities. Cash provided by operations primarily included a $2.2 million decrease in accounts receivable due the lower sales volume and improved collections and a $700,000 decrease in inventories.

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