“Our Aerospace and Defense business continues to be affected by budgetary and funding uncertainties within the U.S. Department of Defense that are not expected to be eliminated until Congress successfully addresses the fiscal cliff and its related issues. Despite the recent quarterly drop in revenue, our improved product mix resulted in a 260 basis point expansion of gross margin when compared to the third quarter of last year.”
“In the long-term, we will continue to invest in new products and programs to further improve the attractiveness of our business portfolio, with a specific emphasis on trusted solutions for identity management, cryptographic key distribution and cyber analytics. We believe that our product mix going forward should help us to maintain our margin in the face of what is likely to be lumpy revenue until the many macroeconomic and policy issues are successfully resolved.”
The Industrial Group
Revenue for our Industrial Group decreased 10.3% to $65.2 million in the third quarter compared to $72.6 million for the prior year period and 21.3% sequentially, primarily as a result of a recent move by commercial vehicle OEM’s to rebalance inventory with lower levels of demand. Gross profit for the quarter was $6.6 million, or 10.1% of revenue, compared to $6.9 million, or 9.5% of revenue for the same period in 2011, reflecting our ability to protect margins despite lower volumes.The Electronics Group Revenue for our Electronics Group was $13.6 million in the third quarter compared to $18.5 million in the prior year period, primarily due to the completion of certain electronic manufacturing and engineering services. Gross profit for the quarter was $2.8 million, or 20.6% of revenue, compared to $3.3 million, or 18.0% of revenue for the same period in 2011, reflecting improved product mix. Outlook Mr. Gill added, “We will continue to concentrate on the daily execution of our business. We expect recent investments in production cells and automation by our Industrial Group to contribute to further margin expansion going forward once volumes return to full replacement levels later next year. Our Electronics Group will continue to face near-term revenue challenges that we expect to be ongoing until the outlook for defense spending is clarified and authorized.”
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