White Electronic Designs Corp. Q2 2009 Earnings Call Transcript

| About: White Electronic (WEDC)

White Electronic Designs Corp. (WEDC) Q2 2009 Earnings Call May 13, 2009 4:30 AM ET

Executives

Joe Diaz – Lytham Partners

Roger Derse – Vice President, Chief Financial Officer

Analysts

[Dan Weston – Westcap Management Group]

Tom Carpenter – Hilliard W. L. Lyons, LLC.

Mark Jordan – Noble Financial Group

Robert Spivy – Abernathy Group

Sander Bosky – SAR Asset Management

Sam Bergman – Bayberry Capital Group

[Steve Bauman – Vivathare]

Scott Louis – Louis Capital Management

Operator

Welcome to the White Electronic Designs Corp. Q2 financial results conference call. (Operator Instructions) I would now like to introduce Mr. Joe Diaz of Lytham Partners.

Joe Diaz

Thank all of you for joining us to review the financial results of White Electronic Designs Corporation. With us on the call today is Roger Derse, Vice President, Chief Financial Officer and a member of the Interim Office of the President.

At the conclusion of today's prepared remarks we will open the call for a question and answer session. If anyone participating on today's call text copy of the press release, it is available on the company's website at www.whiteedc or numerous financial websites on the internet.

Before we begin with prepared remarks, we submit for the record the following statement. Certain statements made during the course of this conference call constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will and other similar statements of expectation identify forward-looking statements.

Specific forward-looking statements in this conference call include but are not limited to anticipated reduction in defense programs, not likely affecting programs that the company focuses on, the company's book to bill ratio, disposal of continued operations in fiscal year 2009, the likely benefits of a more efficient operating structure, the possibility that the review of strategic alternatives will identify or result in a transaction involving the company or any other strategic action by the company.

Additionally, other factors that could materially and unexpectedly affect the company's results are set forth in the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. The company cautions you not to place undue reliance on its forward-looking statements. The company does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this conference call or to reflect the occurrence of unanticipated events.

With that said, I'd like to turn the call over now to Roger Derse, Vice President, Chief Financial Officer and a member of the Interim office of the President.

Roger Derse

I would like to thank everyone participating on today's call. We appreciate your continued interest in White. As you can see from today's press release, we had a strong quarter and first half for the fiscal year. There were a number of significant highlights and I would like to briefly run through them.

In the continuing operations area we reported Q2 revenue of $17.1 million. Second quarter non-GAAP income from continuing operations was $1.6 million or $0.07 per diluted share. For the first half of fiscal 2009, bookings were up 36% when compared to the first half of last year, and up 28% when compared to the second half of last year, fiscal 2008.

Anti-tamper bookings were $15.4 million in the first half of fiscal 2009, exceeding the $4.8 million that we booked in all of fiscal year 2008.

In discontinued operations, we have made significant progress is disposing of certain operations as we work to sharpen our focus as a leading defense electronics provider. On April 3, 2009 we completed the sale of the assets of our display systems division to VIA Optronics. We concluded the disposal of our commercial micro electronics product lines and we expect to complete all production at our interface electronics division by June 2009 and finish the disposal of the division by the end of the fiscal year.

Now for the second quarter fiscal 2009 results. For the second fiscal quarter, net sales were $17.1 million, a 29% increase when compared to $13.3 million in the first quarter of fiscal 2009 and a 17% increase over $14.6 million reported in the comparable quarter of the previous year.

Income from continuing operations for the quarter was $1.2 million or $0.05 per diluted share compared to income from continuing operations of $1.3 million or $0.06 per diluted share in the second quarter of fiscal year 2008.

Financial results for the quarter were negatively impacted by the expenses of approximately $700,000 associated with the recent discontinued proxy contest and shareholder agreements. On a non-GAAP basis, excluding the impact of these extraordinary expenses, income from continuing operations would have been $1.6 million or $0.07 per diluted share.

Bookings for continuing operations for the quarter totaled $17.5 million compared to $11.6 million in the comparable period in fiscal 2008. Bookings for the first quarter of the year totaled $37 million and resulted in a book to bill ratio of 1.22 to 1 which represents a 36% increase over first half fiscal 2008 bookings and a 28% increase over second half fiscal 2008 bookings

This is a strong indication that revenues will continue to grow in future quarters.

Anti-tamper bookings for the first half totaled $15.4 million, a significant improvement from the $4.8 million on anti-tamper bookings for all of fiscal 2008. When I reference anti-tamper, please note that the product category includes the growing integrated circuit card/GPS receiver boards which include our anti-tamper component.

Backlog at the end of the second quarter was $45.1 million compared to $44.8 million at the end of the previous quarter. Gross margin from continuing operations for the quarter was 43% compared with 41% in the comparable quarter last year. We continue to believe that we will be able to consistently operate the business with gross margins that center around 40% compared to the 25% to 30% of previous years.

Our second quarter results demonstrate that focusing the operations of the company where we have clear competitive advantage delivers operational efficiencies.

On the cash and interest income, at the end of the second quarter, the company had $57.1 in cash and no debt. Due to the dramatic decrease in interest rates, the company has experienced a significant drop in interest income which historically contributed to operating income. Interest in the second quarter of fiscal 2009 was $59,000 compared to $456,000 in the second quarter of 2008.

Clearly that impacted the bottom line results of the quarter. We believe that interest rates will remain relatively low going forward and consequently interest income is expected to remain lower for the remainder of fiscal 2009. We recognize that this is not unique to White and reflects the general economic state of today.

On to the balance sheet, you will notice that we had significant increases in our current assets and liabilities from the end of fiscal 2008. Our accounts receivable increased $4.6 million and our days sales outstanding referred to as DSO, was 90 days versus 68 days at September 27, 2008.

This was due to the timing of our invoices as a higher percentage of sales were in the last month of the quarter as well as the reclassification of $1.3 million of display receivables from discontinued to continuing operations as they were not part of the asset sale to VIA. We expect our DSO to return to more typical levels by the end of the fiscal year.

Inventories increased about $2.1 million to $17.5 million at quarter end. This increase is primarily in preparation for our increased production in the coming quarter. Account payable increased $1.9 million due to the reclassification of about $700,000 from discontinue to continued operations as they were not part of the asset sale to VIA as well and the timing of course of cash disbursements.

Now the business outlook; as we have discussed previously our defense electronic strategy addresses three fundamental defense electronics categories; missiles and ordinance, aircraft and communication and net centric operations.

There is a significant procurement focus in the defense sector on more sophisticated missiles, smart ordinance and GPS based radios that enhances war fighter safety and minimizes collateral damage while enhancing conflict engagement. We are serving this expanding market with anti-tamper components and more recently, integrated circuit card assemblies that incorporate our anti-tamper components.

Anti-tamper bookings for the first half of fiscal year totaled $15.4 million, far exceeding the bookings of the fiscal year 2008 in its entirety of $4.8 million. Please note approximately $10 million of the $15 million of bookings related to anti-tamper components only and approximately $5 million was for integrated circuit cards with our anti-tamper components.

As note in our release, we feel very positive that White is expanding beyond modules to integrated circuit cards/GPS receiver boards. This is an important revenue driver that will expand as we move in the fiscal year 2010.

The discontinued operations status as I said earlier, we completed the sale of our display systems division to VIA on April 3. We also finalized the disposition of our commercial micro electronic product lines during the quarter and we expect the interface electronics division in Columbus, Ohio to complete all production by June 2009 and then dispose of this division by the end of the fiscal year.

We believe that we now have a more focused company will all of its significant assets, financial, technological and personnel poised to play an even larger role as a highly integrated defense electronics provider.

In terms of our strategic alternatives process, a special committee of the Company's Board of Directors, the Strategic Alternatives Committee, is continuing its exploration and review of strategic alternatives for the company.

The company continues to work closely with its financial advisor Jefferies Quarterdeck, a division of Jefferies and Company through this strategic alternatives review. Wilson Sonsini is acting as legal advisor. Consistent with its mandate from the Board of Directors, this special committee is continuing its thorough review of all strategic alternatives including the company continuing as an independent public company, merging with or acquiring another public or private defense electronics company or being acquired by a strategic or financial investor.

The Strategic Alternatives Committee is giving due consideration and deliberation with respect to all opportunities that are available to the company with the goal of identifying what it believes is the best strategy and is committed to completing the process as expeditiously as possible while ensuring that alternatives are given appropriate consideration.

Therefore the company will not commit to a specific timetable for the completion of this committees deliberations or recommendations. It is the intent of this committee that upon completion of this review process, it will make one or more recommendations to the Board regarding strategic alternatives.

With that, I'd now like to open up the call for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first call comes from [Dan Weston – Westcap Management Group]

[Dan Weston – Westcap Management Group]

Could you break out the book to bill for Q2 please?

Roger Derse

The book to bill for Q2 is 1.02. The book to bill for quarter one was 1.47 for the composite of 1.22.

[Dan Weston – Westcap Management Group]

Do have a clean or adjusted EBITDA number for Q2?

Roger Derse

I have an EBITDA for Q2 about $2.3 million for Q2 only.

[Dan Weston – Westcap Management Group]

And what would that make on adjusted basis your half?

Roger Derse

About $3.4 million for the first half.

[Dan Weston – Westcap Management Group]

You mentioned that, your broke out I think anti-tamper from the modules business and I missed that. So the bookings for just anti-tamper for Q2 please.

Roger Derse

Let me first start off, historically as you know, White was a component hybrid module, multi-chip house and then we introduced anti-tamper around the 2001 period and our focus was anti-tamper on those components only, and it's in the recent six months that we are embarking of the circuit card assembly area which of course our focus is not to just be into circuit cards.

We're very focused specialty integrated circuit card manufacturer that is using the anti-tamper components together. So when we refer to the $15 million for instance for the entire year, that was broke out to the $10 million of the components only and about $5 million to the circuit cards for the full $15 million.

If we wanted to look at the second quarter only, we had about $9 million in total of which about $7.6 million was bookings for the components only and about $1.7 million for circuit card.

[Dan Weston – Westcap Management Group]

With the strength of the quarter, I would have expected your cash balances to be up rather than down sequentially. Could you just talk to the cash being a little bit further down sequentially.

Roger Derse

Actually it is up from year end and the first quarter we did indicate we had a little bit of an anomaly in the first quarter. We had an extremely large pick up in our accounts receivable that was abnormal. Q1 receivables was $8 million which was abnormally low. So the $58 million was a little bit on an anomaly and we are right on track relative to our cash.

We did of course temper it with the fact that we had the consumption of cash as we increase our investment in inventory and other related support items for our second half.

Operator

Your next question comes from Tom Carpenter – Hilliard W. L. Lyons, LLC.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

It's good to see you guys turning this around since last fall. On the cash, did you receive the money from the firm that you sold the display division to before the end of the quarter or is that part of your accounts receivable?

Roger Derse

That was received. The $2.3 million was received.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

Should we see the cash position concerning the accounts receivable, it's kind of high this quarter with some of the changes that you had, should we see cash position pick up quite a bit through the June quarter or is it still going to be a fairly heavy investment period?

Roger Derse

I think it's going to improve. Let me give you one point. We specifically made a remark about the re-class of the receivables that were not part of the sale to VIA and those receivables were round figures about $1.4 million to $1.5 million. As of last week, more than half of those were already collected and realized, so they will certainly flush out quickly.

I would expect that we're fairly well positioned from an inventory standpoint for the forward two quarters and just continue to focus on production.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

So that was kind of an anomaly quarter and it will correct itself.

Roger Derse

In reality the first quarter was a little bit of an anomaly because we had the huge collections that our receivables were way down and we were in a very, very good position and that's why you saw it around $58 million. In the second quarter we obviously had this issue of the time of our invoicing. We'll see a lot of that liquidate, but then keep in mind we have a lot coming in.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

With the revenue being fairly strong this quarter compared to the last quarter and the quarter before that, did any of the backlog or bookings that you had maybe move up versus, I think you had a big quarter that you were going to do in the last part of this year. Did any of that move up to this quarter? You've been very busy the last couple of weeks.

Roger Derse

That's a very good question because we had a press release that we went out with that indicated about $7 million that related to Euro fighter, was anticipated to be shipped in the final month of the fiscal year. That in the course of re-forecasting and revising our build schedule and delivery schedule, that $7 million moved up and half of it was shipped in the second quarter and half of it is expected to ship in the third quarter and then several of our other orders have now come in and we've adjusted.

So that even higher hockey stick that we were projecting a very, very large fourth quarter has softened a bit, but that's a good example of adjustments that we make all the time.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

I'm glad you brought up Euro fighter, is that the F-35? Is the Euro fighter the F-35?

Roger Derse

No.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

The F-22?

Roger Derse

No. The Euro fighter is the Euro fighter.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

The F-35, the F-22, the Euro fighter, a lot of those names have been in the news and I think the government's talking about shifting production of some, maybe producing less of others but producing them more quickly. I know you have lots of programs across different lines with various countries. Can you talk about the impact of some of the defense changes over the next year or two on some of your bigger programs?

Roger Derse

It's another good question. As you heard in the script that we just covered, we feel that we have a significant focus on missiles and ordinance and net centric operations and we didn't mention aircraft because aircraft has always been there for us. It's a base level of revenue. We know that F-22 is in the cross hairs for perhaps a reduction.

Our play on an F-22 per copy is less than $20,000 a copy as far as White's participation. Just like B-22 Osprey, we have less than $5,000 a copy on that. Euro fighter and Joint Strike fighter, we have much greater plays, but the Joint Strike fighter is an important program that's going to roll out over the next years. It's not necessarily very heavily active right now and the Euro fighter keeps going into some additional buys that we have a fairly significant play on the Euro fighter.

So in response to the domestic programs which would be the F-22 or F-35 or B-22 Osprey, I think we're in good position to not really feel the impact of changes on those highly visible programs.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

You're also having some very good success with not just the modules but with the circuit cards. I think you said you had $5.4 million in the first quarter and $1.7 million in the second quarter. What do you see that business running at the second half of this year and also next year? I imagine that you're going to order from a company or two but I think you on with several firms.

Roger Derse

We are bidding and we have a number of programs across a number of customers that are now evolving where we're jointly participating in miniaturized using the expertise of White to work in the small footprint arena on those circuit card assemblies that are going into such things as smart ordinance, revised missiles.

The ordinance is quite excited in the munitions that they're down to 105 and we're putting intelligence in 105 mm munitions, and of course the GPS radios. Keep in mind that the play for this year is still strongly associated with the anti-tamper components and that the circuit card integration activities are beginning to roll out.

We're past prototypes. We're starting on production on some particular orders and we don't necessarily see that side of the business impacting us particularly heavily until the fourth quarter, and I'll probably have a little bit better position on that in our next call.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

On other initiatives on the strategic alternatives, I suppose you are waiting for the results of that to see if there's any opportunity for you to fit in with another firm or private equity, but if you decide to go forward, having that large cash position and given the economic state, there's got to be some attractive opportunities for you out there to make an accretive acquisitions. If you do move forward past your strategic review committee and decide to stay independent, when do you think we can see the company acquire some businesses either in complementary areas or some that give you extra technology with the military over the next five years?

Roger Derse

The key here is that we are executing to a very, very dynamic strategic plan that we rolled out to the Board in October of last year. That strategic plans outlines what you're seeing now as far as the enhanced revenue drivers that are coming into play relative to the circuit card integration as well as movement into such things as solid state drives, because after all our roots are in the flashier area, so we feel it's a natural extension, as well as on those GPS receiver boards, there's a component on there that is RF and while we are not an RF house, we feel that once again we can get a greater play, leveraging our SG&A with the customers that we currently serve.

So as we look at going forward, we strongly feel that monies that will be expended will be in the area of adding the technology capabilities, whether that be a tuck in acquisition of an engineering team, a smaller operation to provide us RF capabilities, whether it is in solid state embarking on an in-house effort or aligning ourselves with something else.

But this is the nature of activities that we're talking about. We're not talking about those classic go out and spend a large sum of money on an organization to bolt onto White to get the top line. That's just not the case.

Now as far as the timeline, we would see something as we are executing on the now forward directions of those new opportunities, and that's something that's out in the 12 month period. Will it have a revenue impact on '09? No. Will it have a revenue impact on the first half of '10? Probably not.

Tom Carpenter – Hilliard W. L. Lyons, LLC.

So this will be in a transcript. I'd like the Board to recognize that shareholders would much prefer to see the company put some of the cash to work than own $59,000 of interest during the quarter.

Roger Derse

Clearly.

Operator

Your next question comes from Mark Jordan – Noble Financial Group.

Mark Jordan – Noble Financial Group

Talk a little bit about the impact of lowering your board business will have on your gross margin. You had a great quarter here, 43% gross margin. You talk about trending towards a 40% longer term. Is that because with the growth of the board business, that will pull down the average margin a little bit?

Roger Derse

I think that's absolutely correct. The one thing that we are now doing, and it's a real interesting modeling exercise because the opportunities that we're looking at and have been afforded to us through our key customers are fairly significant and the quantity of integrated circuit card assemblies that we might bring in house in the next 12 month period, as such trying to model that impact on gross margin, overhead rates etc., we've conservatively stated that we feel that it will be a slight decrease.

Keep in mind the intent here never has been an intent to be a board house, board stuffer etc. We're talking about very unique, in many cases jointly developed miniaturized communications receiver boards, so there's a lot of value add there. So we really don't feel it's going to tarnish that 43% by much.

That's why we say in and around 40% and I think as some of these production volumes start to come into play in the first half of '10, we'll have a much better sense as to what that margin is, because we are carrying a fairly good sized footprint here in anticipation of this business.

Mark Jordan – Noble Financial Group

The $17 million in revenue is kind of a break out quarter for the company. It continued with bookings. You alluded that if you pulled in the Euro fighter into the second and third quarter, you also I believe stated that you thought that third and fourth quarter revenues would be at or above Q2 levels. So should we now extrapolate that moving forward that the $17 million level is kind of now the new base and that you'll be working to build from there higher over time?

Roger Derse

Certainly seems like a good assumption to work with.

Mark Jordan – Noble Financial Group

What is the net assets being held for sale and when do you believe that those should be converted?

Roger Derse

We have about $3 million of assets held for sale as it relates to the Columbus operation. The interesting thing about Columbus, we're going to have a very strong third quarter in Columbus merely with last time buys etc. If you noted our comments, the production is going to be completed in June. That's a very firm book end. They will be completed in June, the third week in June and we let the lion's share of the last people go.

We're going to just carry receivables into the July period and a building that we're working, is approximately around $1 million, carrying it at about $750,000, but we'll probably go $750,000 to $1 million to get rid of. So you're going to see that close out over the July/August period and we should wrap it up.

Mark Jordan – Noble Financial Group

Could you give us a little bit of a flavor for how diverse you are anti-tamper customer base is and could you share with us some of the three or four key accounts that you've been working with.

Roger Derse

I'd love to talk about this, but we are highly restricted especially on where we're going and where we're playing right now both from a customer standpoint and a program standpoint. I'd love to talk about it but it's just not something that you'd like to put under your front door or your alarm system and say that your alarm system has such and such a anti-tamper security mechanism.

Mark Jordan – Noble Financial Group

As you've run through the alternatives that could occur, I would through out you didn't mention a significant recapitalization because clearly buying back a significant amount of stock at current levels would be significantly accretive to share earnings, especially with this higher earnings rate that you're starting to show. So I'd throw that in as a comment.

Roger Derse

I appreciate that comment. We have several of our Board members that are on the call today as well. They will certainly hear the call. It's duly noted and I thank you.

Operator

Your next question comes from Robert Spivy – Abernathy Group.

Robert Spivy – Abernathy Group

We all understand how big of a space the GPS and the circuit board for your anti-tamper device is as a whole, but when you look two years down the line, how big do you see it being for you as a business, just so we can get our minds around the actual number that we could theoretically see from White and what you'd like to see from White down the line?

Roger Derse

I think total available market in this area is evolving and there's more and more applications. Let me give you an example. If you take munitions, it wasn't even contemplated three to six months ago that GPS receiver board could be put into a munitions at 105 mm. It wasn't even contemplated.

There are a lot of total available market type calculations and assessments that go on every day. This one is a very tough one because as we are very, very skilled in the area of space saving, high reliability and miniaturization, the relationship with our customers, we've afforded them the opportunity to play in areas where it wasn't even thought of six months ago.

So I think some of the numbers will come out over the next quarter. I can suggest to you that we'll do a little homework on that and maybe I can report some sense of what that market is next quarter.

Robert Spivy – Abernathy Group

For you specifically, what kind of a size are you hoping to see in two year? Anything you want to throw out there or do you just want to do the homework?

Roger Derse

Do the homework.

Robert Spivy – Abernathy Group

All of interface, all of the IED is in the held for sale now?

Roger Derse

Correct.

Robert Spivy – Abernathy Group

Just in relation to the strategic alternatives process, and I know what the answer is probably going to be, but I figure I'm going to ask it anyway, have you anything more that you're prepared to talk to anybody and how do you feel about the opportunities that are out there for you over the next few quarters? Is it getting better or worse?

Roger Derse

As you prefaced your question, you can ask the question but unfortunately I can't make the response. All I can assure you is that our process that is underway with the Strategic Alternatives Committee is "all about the process' and it's being very well conducted and orchestrated by Jefferies and the spectrum of players and alternatives, etc. have been deeply engaged and we're very encouraged that it will draw to a close in the near future.

Operator

Your next question comes from Sander Bosky – SAR Asset Management.

Sander Bosky – SAR Asset Management

The book to bill for the current quarter was 1.02 and your backlog was $45 million and with your expectation to talking about a $17 million quarter going forward, could you address when you expect that $45 million to complete and talk about what your pipeline, the kind of stuff you have in the pipeline that might increase the dollars going forward?

Roger Derse

We really don't talk too much going forward, but I can give you a little flavor. Historically we've made statements that our backlog rolls out about 65% or so in the next 12 month period at any point. So you could take your 45%, 65%, that's what's going to roll out over 12 months.

I will tell you that we're very encouraged with the strength of our backlog as it relates, and it's an age old issue when you hear, gee I booked $15 million, I booked $20 million etc., that you wonder well is that going to do anything for me in the near term or is it going to be out there two or three years.

We have a very strong position in our backlog as it rolls out in the next six months so we could make that casual remark that we have strength in this second half, but I would just use the general 65% as a planning number.

Sander Bosky – SAR Asset Management

As far as the $700,000 expense, is that in the current quarter and as far as, is there any fees relative to Jefferies in the current quarter or will it be a success fee if a deal gets done?

Roger Derse

I believe the terms are all deal related as most investment bankers are. There were no expenses recorded on Jefferies for the quarter and the $700,000 was specifically associated with the shareholder related issue which was processed in our second quarter.

Operator

Your next question comes from Sam Bergman – Bayberry Capital Group.

Sam Bergman – Bayberry Capital Group

Can you talk about some of the programs without mentioning a specific program you're designed in for the next 12 months?

Roger Derse

I'm sorry I can't. I can't give you the programs but I will tell you that we're designed in a considerable amount of programs because most of our programs, we're sole sourced on. Keep in mind that the underlying history of White with their multi-chip modules, 80% of those are standard product. The engineer identifies is, be it the S-ram, Flash, etc., and designs it into the program and that's what carries forward.

So a lot of our business falls into that category so it's really not a short list, it's a very, very long list.

Sam Bergman – Bayberry Capital Group

In regard to the interface division, the size of receivables that are expected to on the book in July, are there any costs associated with that division or any other unusual items?

Roger Derse

No. I would hope that you would appreciate that there is a classic expense that you incur at the time you do an activity just like we completed the activity up in Portland. Do we have a severance cost that will be associated at the time the last people leave and I'd say substantially when the last people leave in June. We have a carryover of about 5 people into July just to wrap up and vacate the building and consummate the residual sale of all the equipment etc.

Let's just use an approximate number of $0.5 million that's associated with that but we're going to have some favorable results out of the last build. We'll probably have some record shipments in the third quarter just getting the last business of that operation out the door.

Sam Bergman – Bayberry Capital Group

Can you give us a little flavor for the first five or six weeks of this quarter in terms of bookings?

Roger Derse

I'm sorry I can't.

Operator

Your next question comes from [Steve Bauman – Vivathare]

[Steve Bauman – Vivathare]

Just want to touch briefly on the margin question about the board business that you discussed before. It sounds like while you think the board business may have a slightly adverse affect on margins at least compared to the quarter that you just reported, that you don't think it's going to be hugely impactful to margins. Is that because the board business is still relatively small and going to be relatively small or is the margin difference between the board business and your straight component business really not that big?

Roger Derse

Keep in mind we don't run this business to gross margin percent. We need to make that clear. We don't run the business to gross margin percent, we run it to gross margin dollars. And in absolute dollars relative to floating down to up dollars, not margin, we really have a favorable impact.

The intent once again is not to be a circuit card or dumb assembly board house. That's just not our play. We're doing joint designs of very unique circuit card assemblies but it just so happened it's a circuit card. So that's where we really feel that it's near and very similar to what we derived on the components themselves.

Some of the quantities that we see are starting to run up and you would expect that good prudent buying on the defense side might suggest that you have to give away a little bit to get a much larger play. So it's really a bit new to us and we'll be able to probably speak to it a little closer in the next quarter.

[Steve Bauman – Vivathare]

It doesn't sound like you think it's going to make your margins significantly more volatile than they've been already.

Roger Derse

Absolutely not. This is just not a situation where you're entertaining business that is 20% margin and what percentage of the total business is now in the 20% margin category. That's what I will admit. That's the exciting aspect of what we're doing today, is that everything is in and around, we have very, very tightly related defense electronics products that they're all centering in and around that number.

Operator

Your next question comes from Scott Louis – Louis Capital Management.

Scott Louis – Louis Capital Management

I wanted to ask about the competitive landscape a little bit with the circuit card assembly. Is it much different from where you were with the components where you were one of just two or three people who were doing the anti-tamper. Let me just get a little color there.

Roger Derse

I think once again the play, and that's where you really have to be careful. We're not doing board work. It's just not our play. So therefore we're working with very unique circuit cards. We're doing the integration with our anti-tamper, and since we're a primary and in many cases, sole player for those anti-tamper components, then we're the sole player for the boards. You're not running large competition out there.

Scott Louis – Louis Capital Management

So Lockheed or whoever the prime is, do they have an option to say we'll take the components. Somebody else can do the board with your components cheaper than you or is this the kind of thing that you're so intimately involved with the design you're really the sole option if they want to do a board like that.

Roger Derse

I would say we're driving to the latter. Of course, that's the most optimal play because we're not just doing the, oh here's the print go build the board.

Scott Louis – Louis Capital Management

As you get involved in more of these board designs, do you have elevated engineering and development expenses or is it relatively minimal or are the Lockheed's of the world picking it up?

Roger Derse

That's a very good question. As we have been both at the board level and the operations committee level and Dan Tarantine and myself analyzing the required skill set to support this side of the business, keep in mind that when we were in the commercial micro electronics arena, we did the surface mount work. It's not something that we've just acquired a bunch of equipment and decided we wanted to start doing surface mount.

This was something that we were doing. It's something that was acquired. It was a kernel of commercial activities that were retained, so we had that expertise and retained that expertise. We just need to enhance it.

We obviously need to put it under the mill spec umbrella but there's not a sizeable block of talent that's necessary. I think there's some elasticity that we need to understand in the areas of the procurement to support, the production control to support, the quality to support, a lot of those indirect costs.

But from an engineering standpoint, a lot of this has been done quite frankly with our customers jointly and kind of shared cost and admittedly it's new to us, but it's being regularly assessed as to whether we have the right talent pool to do it.

Operator

Your next question comes from [Dan Weston – Westcap Management Group]

[Dan Weston – Westcap Management Group]

In early April you announced $8.5 million or $8.6 million of GPS orders which looked like it was subsequent to your quarter. Were any of those orders included in the bookings for Q2?

Roger Derse

No it wouldn't be.

[Dan Weston – Westcap Management Group]

The buy back authorization that you have in place, since the authorization was given there haven't been any shares that have been repurchased there?

Roger Derse

There was a very minor slice of shares that were acquired back but that program is inactive at this point and the Board and the Strategic Alternatives Committee is going through their process and at the conclusion of that process will report and there may or may not be a movement on that program.

[Dan Weston – Westcap Management Group]

So the buyback program is classified as a strategic alternative and they're not mutually exclusive from one another?

Roger Derse

I would say that's very true.

Operator

There are no further questions at this time. I would like to turn the floor back over to our management team for any closing comments.

Roger Derse

Again I would like to thank you for participating on today's call. We feel we've made progress in better positioning the company for more predicable and consistent performance going forward as a defense electronics manufacturer and supplier.

I would also like all of our investors to know that going forward we are dedicated to providing a high level of communication with them. We invite all of our investors to initiate dialogue with the company and to contact us by phone as well as via email regarding any and all issues. We would be pleased to try to help you in any way, to answer any questions or to provide clarifications that will provide you with a better understanding of the company.

Our investor relations firm and partners will provide you with a high level of service in tracking down any information that you need. They will also work to arrange conference calls where appropriate that require management's time and attention to address important topics.

Our contact data is prominently featured on our press releases. Please do not hesitate to contact us. We want to assure our shareholders that we appreciate their investment in White and that we will be attentive to their needs.

In closing, with the leading edge technology that we're know for, the high level engineering talent that we have in house and the strong financial underpinnings of the company, we believe that the future is bright and we are dedicated to drive enhanced value for our loyal shareholders.

We thank you for your time and we look forward to talking with you again at the conclusion of the next quarter.

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