The company reported a GAAP gross margin of 51.8% and a GAAP operating loss of $107.2 million. As a result of the continued market volatility and the recent decrease in the company’s market capitalization, the company was required under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, to initiate an interim goodwill impairment analysis and wrote off a total of $105.8 million in goodwill during the second quarter of fiscal 2009.

Additionally to the non-cash goodwill impairment charge, the GAAP operating loss and net loss for second quarter of fiscal 2009 incorporates a non-cash charge of $2.7 million for write-down of inventory, $1.5 million associated to restructuring and $158,000 of share-based compensation expense.

Excluding the primarily non-cash charges for the second quarter fiscal 2009 the company reported a 59% non-GAAP gross margin, 7.7% non-GAAP operating margin, $3 million of non-GAAP operating income and $1.7 million of non-GAAP net income, or $0.14 per diluted share. This compares with a 58.7% non-GAAP gross margin, 10.1% non-GAAP operating margin, $4.1 million of non-GAAP operating income, or $0.20 per diluted share, in the year ago quarter.

Comments on the second quarter of fiscal 2009:

External market conditions have triggered the impairment of the goodwill on our balance sheet primarily related to our two protocol acquisitions, CATC and Catalyst, stated LeCroy president and chief executive officer Tom Reslewic. While we are disappointed that we must take this significant non-cash goodwill impairment charge, it does not affect our liquidity, or our banking relationships and agreements, and our ability to capitalize on growth opportunities and execute on our product roadmap remains strong.

In fact, our business continued to perform well in the second quarter, despite the early signs of softening demand in the overall test and measurement market, said Reslewic. Oscilloscope unit orders were the highest in the Company’s history, primarily driven by solid European demand for the new WaveAce(TM), our first offering in the low-cost scope market. Although demand in Europe was relatively strong in the second quarter, orders declined in the U.S. and Asian markets, where many customers postponed their spending as the economic outlook worsened.

We entered the low-cost scope space with some uncertainty about future developments in that market, but we are very pleased with our results to date, Reslewic stated. Despite a challenging economic environment in the December quarter, we sold 22 percent more oscilloscope units than we did in the same period last year. Our new presence in the low-cost scope market enables us to put LeCroy units in the hands of engineers, students and others involved at levels of the design process where brand familiarity and loyalty is typically created.

Our Protocol Solutions Group (PSG) revenues increased more than 20 percent from the sequential first quarter, added Reslewic. We currently have a strong market position for PCI Express Gen II and USB 3.0 and in storage protocols, such as SAS and SATA. Our SAS/SATA orders were up 35 percent from the sequential first quarter. The storage market represents a potentially significant opportunity for PSG as these standards become more widely adopted.

Non-GAAP gross margins increased to 59 percent during the second quarter, Reslewic stated. This is primarily attributable to improved shipments in the protocol products and lower manufacturing costs associated with our latest high-end products. Our ability to improve gross margins this quarter was particularly encouraging considering the unfavorable currency effects in the current quarter.

In anticipation of a weakening demand environment, in the second quarter we began to take aggressive action to reduce LeCroy’s cost structure and focus our business on key growth opportunities, Reslewic added. As previously announced, we reduced the Company’s workforce by 10 percent and terminated several projects that we believed would yield limited return on investment. As a result, LeCroy discontinued its optical scope product line and a protocol program. In the current quarter, we also cut salaries across the board by 10 percent, reduced variable compensation and eliminated the Company’s 401(k) match plan. All these cost-reduction initiatives are expected to generate annual cost savings of approximately $8 million going forward.

Business outlook and the financial guidance:

We believe that LeCroy is well positioned to weather the current recession, stated Reslewic. We have significantly trimmed our fixed costs, and expect to maintain positive non-GAAP operating margins in the low single digits during the downturn. We also expect strong cash generation as we reduce our inventory during the next few quarters. Inventory had increased due to the roll out of new products and our initial plans for higher production rates during the current quarter.

LeCroy’s recently launched products are generating strong interest and gaining market share, Reslewic added. We have enhanced and focused our R&D capabilities, and on the heels of our latest 8 Zi Series of oscilloscopes, we expect to continue launching new products based on the ‘Apollo’ chipset through calendar 2009. The market reaction thus far to our new WaveMaster(R) 8 Zi and WavePro(R) 7 Zi products has been excellent and initial orders have been strong. Our sales force will continue to aggressively call on our customers, and we will be prepared with high-performance products when the economy improves and our customers are ready to increase their investments in test and measurement equipment.

Due to the unusually volatile markets and uncertain economy, we do not have strong visibility beyond the current third fiscal quarter, stated Reslewic. As a result, we are rescinding LeCroy’s full-year 2009 guidance. Until further notice, we will provide guidance solely on a quarterly basis.

While we did not experience a dramatic slowdown in the December quarter, we are concerned about the strength of the demand environment for the first half of calendar 2009, added Reslewic. We have modeled our business to anticipate a year-over-year revenue decline in the range of 10 to 20 percent from our $40 million quarterly revenue baseline. The cost reductions we have taken would enable us to be profitable even in the event of more than a 20 percent decrease in revenue should market conditions deteriorate beyond our current expectations. We currently expect to report revenues for the third quarter of fiscal 2009 in the range of $32 to $36 million, with non-GAAP operating margins in the range of 3 to 5 percent. Based on our view of current market conditions, we are seeing the near-term demand environment in the lower end of that range.