Fourth Quarter Operating Performance
Net sales were $87.8 million compared to $90.4 million in the prior-year quarter due to lower demand in the network and power segments and weakness in wireless products due to lower infrastructure antenna sales. Sequentially, consolidated net sales decreased 7.5 percent compared to third quarter net sales of $94.8 million due primarily to lower demand for network and power products across the industry late in the third quarter that carried over into the fourth quarter as well as typical seasonality and wireless smartphone demand weakness.
Cost of sales decreased 2.9 percent to $68.7 million from $70.7 million in the prior-year quarter. The company’s gross profit margin was 21.7 percent compared with 21.8 percent in the prior-year quarter and 22.8 percent in the third quarter. Gross profit margin was essentially flat compared to the prior year as higher production costs were offset by favorable product mix. The sequential decrease in gross margin was mainly due to unfavorable cost absorption due to lower volumes.
Operating expenses were $17.3 million, a decline of 8.6 percent from the fourth quarter of 2012, mainly due to results of actions related to the previously announced expense reduction initiative. Operating expenses declined 6.1 percent compared to the third quarter due to expense reductions and lower compensation expense.Operating profit (U.S. GAAP) was $1.2 million compared with a loss of $4.6 million in the fourth quarter of 2012, mainly due to a $5.5 million increase in legal reserves that occurred in the prior year. Non-GAAP operating profit was $2.2 million compared with $1.3 million in the prior-year quarter and $3.6 million in the third quarter. The company had $26.9 million of cash and cash equivalents at December 27, 2013 compared with $31.5 million at December 28, 2012. The decrease in cash mainly reflects capital expenditures, refinancing transaction fees and expenses, and working capital needs. In the fourth quarter, the company generated $2.7 million in cash flow from operations and increased its overall cash balance from the third quarter by $1.3 million.