RE:RE:1st qtr Although the statement in the NR shows an adjusted net income before the exceptional development expenses, as shown in quote below, they do not show a significant increase in intangibles (where they normally put certain of these expenses) but seem to have them all in COGS (which would be abnormal since you only put charges in COGS related to the revenue in that period.) The COGS shows clearly decreased margins, to which they refer, but I presume this means they are not to be reimbursed for these costs as normally happens. Maybe I am wrong but there again Tesla contract might be a really good long-lasting relationship that it is worth it. Just glad they expect normalisation this current qtr.
Quote "The decrease was due to reduced gross margins and increased operational costs involved with the undertaking and launch of a new customer program in the start-up stage. If revenues and non-recurring costs associated with this new program were removed from the operating results for the quarter, net income would have increased by $1.3 million to $2.4 million, and earnings per diluted share would have increased by $0.17 to $0.32.
As previously disclosed, during fiscal 2016, the Company began developing ambient lighting products for an electric vehicle OEM, which are sold through Tier 2 relationships. The launch activities associated with investment in this new business were projected to generate less favourable results through to the end of fiscal 2017 quarter one. Second quarter margins on this new program are expected to become consistent with the Company's other automotive programs. "