Mail Stop 6010
February 21, 2006
Mr. Roger A. Derse
Chief Financial Officer
White Electronic Designs Corporation
3601 E. University Drive
Phoenix, Arizona 85034
Re: White Electronics Designs Corporation
Form 10-K for the Fiscal Year Ended October 1, 2005
File No. 001-04817
Dear Mr. Derse:
We have reviewed your filing and have the following
comments.
We have limited our review of your filing to those items we have
addressed in our comments. Where indicated, we think you should
revise your documents in future filings in response to these
comments. If you disagree, we will consider your explanation as
to
why our comments are inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Year Ended October 1, 2005
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 25
- -Results of Operations, page 31
1. We note that you present non-GAAP measures in the form of a
statement of operations for the year ended October 1, 2005. This
format reflects several non-GAAP measures, including non-GAAP
revenue, non-GAAP cost of sales, non-GAAP selling, general and
administrative expenses, non-GAAP research and development
expenses,
non-GAAP income from operations, non-GAAP income before taxes
which
have not been identified or described to investors. Please note
that
Item 10(e) of Regulation S-K requires that you should provide a
reconciliation of each non-GAAP measure to the most directly
comparable GAAP measure and explain why you believe each measure
provides useful information to investors. Please revise in future
filings to remove the non-GAAP statements of operations format and
disclose those non-GAAP measures used by management with the
appropriate reconciliations. Refer to Item 10(e) of Regulation S-
K
and Frequently Asked Questions No. 8 Regarding the Use of Non-GAAP
Financial Measures dated June 13, 2003.
2. We note that you present non-GAAP financial measures such as
net
income excluding goodwill impairment charges, income tax
adjustment
of $.8 million, and a sales return adjustment of $.2 million.
Please
note that non-GAAP performance measures should not eliminate or
smooth items identified as non-recurring, infrequent or unusual,
when
the nature of the charge or gain is such that it is reasonably
likely
to recur within two years or there was a similar charge or gain
within the prior two years. Please revise your future filings to
remove these non-GAAP measures, or tell us why you believe you are
in
compliance with Item 10(e)(1)(ii)(B) of Regulation S-K.
- -Fiscal Year Ended October 1, 2005 compared to Fiscal Year Ended
October 2, 2004, page 33
- -Income Taxes, page 36
3. Further to the above, we note that you disclose that your
effective tax rate was 31% excluding the goodwill impairment
charges,
income tax adjustment of $.8 million, and a sales return
adjustment
of $.2 million for the year ended October 1, 2005. While this
type
of disclosure is helpful in describing your results from period to
period, it removes focus from the excluded items and may be
misleading to investors. Please revise future filings to discuss
changes in your GAAP-based results, identifying those unique or
material transactions or events that contributed to the changes.
Form 8-K Filed on December 8, 2005
4. We note that you present non-GAAP measures in the form of
statements of operations. This format may be confusing to
investors
as it also reflects several non-GAAP measures, including non-GAAP
revenue, non-GAAP cost of sales, non-GAAP SG&A, non-GAAP research
and
development expenses, non-GAAP income from operations, non-GAAP
income before taxes which have not been identified or described to
investors. Please note that Instruction 2 to Item 2.02 of Form 8-
K
requires that when furnishing information under this item you must
provide all the disclosures required by paragraph (e)(1)(i) of
Item
10 of Regulation S-K and Frequently Asked Questions No. 8
Regarding
the Use of Non-GAAP Financial Measures dated June 13, 2003 for
each
non-GAAP measure presented. Specifically, you should provide a
reconciliation of each non-GAAP measure to the most directly
comparable GAAP measure and explain why you believe each measure
provides useful information to investors.
* To eliminate investor confusion, please remove the non-GAAP
statements of operations format from future filings and only
disclose
those non-GAAP measures used by management with the appropriate
reconciliations.
* Otherwise, confirm that you will revise your Forms 8-K in future
periods to provide all the disclosures required by Item
10(e)(1)(i)
of Regulation S-K for each non-GAAP measure presented in the
statement, and provide us with a sample of your proposed
disclosure.
We may have further comment after receiving your response.
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comment
and provides any requested information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Tara Harkins, Staff Accountant, at (202)
551-
3639 or me at (202) 551-3327 if you have questions regarding these
comments. In this regard, do not hesitate to contact Martin
James,
Senior Assistant Chief Accountant, at (202) 551-3671.
Sincerely,
Michele Gohlke
Branch Chief
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Mr. Roger A. Derse
White Electronic Designs Corporation
February 21, 2006
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