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Pulse Electronics Corporation Reports First Quarter Results

First Quarter Operating Performance

Net sales were $94.1 million compared with $88.0 million in the prior-year quarter due to higher wireless sales as sales to new antenna customers continue to increase, partially offset by ongoing industry pressure and typical lower first quarter seasonality which constrained demand for network products into the beginning of the quarter. Sequentially, net sales increased 4.0 percent compared with fourth quarter net sales of $90.5 million on higher power and wireless sales.

Cost of sales increased 8.8 percent to $75.7 million from $69.6 million in the prior-year quarter. The company’s gross profit margin was 19.5 percent compared with 20.9 percent in the prior-year quarter and 19.1 percent in the fourth quarter. The lower gross margin compared to the prior year reflects higher labor costs, lower pricing and volumes for network and power products, and ramp up costs and inefficiencies associated with the growth in wireless. Compared to the fourth quarter, gross profit margin increased mainly due to improved efficiencies and lower ramp-up costs in wireless.

Operating expenses decreased 11.8 percent to $19.0 million from $21.5 million in the first quarter of 2011. The decrease in spending was due to aggressive expense reduction actions and sustained scrutiny over all discretionary spending.

Operating loss (U.S. GAAP) was $2.1 million compared with a loss of $10.3 million in the prior-year quarter. Non-GAAP operating loss was $0.2 million compared with $2.9 million in the prior-year quarter. The operating loss (U.S. GAAP) included $1.5 million for severance, impairment and associated costs.

The company had $21.1 million of cash and cash equivalents at March 30, 2012 compared with $17.6 million at December 30, 2011. In the first quarter, the company borrowed $11 million on its existing credit facility, the majority of which was used to fund working capital associated with sales growth and planned capital expenditures.

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