SAN RAMON, Calif., Aug. 4, 2010 (GLOBE NEWSWIRE) -- Giga-tronics Incorporated (Nasdaq:GIGA) reported today a net profit of $13,625,000 or $2.73 per fully diluted share for the quarter ended June 26, 2010 primarily due to a change in the valuation allowance against the Company's deferred tax asset. This compares with a net profit of $333,000 or $0.07 per fully diluted share for the same period a year ago. Net sales increased 5% to $4,701,000 in the first quarter of fiscal 2011 compared to $4,469,000 in the first quarter of fiscal 2010. Gross margin of $1,933,000 decreased by $181,000 over the same quarter last year. Gross margin as a percentage of net sales decreased by 6.2% to 41.1% in the first quarter of fiscal 2011 as compared to 47.3% in the first quarter of fiscal 2010 due to a change in product mix. Operating expenses increased 6% or $101,000 in the first quarter of fiscal 2011 over fiscal 2010 primarily due to an increase of $104,000 in product development expenses. The increase in product development expenses is due to lower customer funded projects. Orders increased 22% in the first quarter of fiscal 2011 to $3,079,000 from $2,533,000 for the first quarter of fiscal 2010.
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. The Company is now serving a new market in the consumer wireless handheld telecommunication market with its high volume production automation switch. 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. 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.
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 profit would have been $37,000 higher or $370,000 and the basic and diluted share profit would have been $0.08 compared to $0.07 as reported.