operating income as a percentage of sales for fiscal year 2011 was 2.7 percent compared to 3.7 percent for fiscal year 2010. the decrease in operating income as a percentage of sales was due to a decline in gross margin , partially offset by the leveraging of certain operating expenses and by improving efficiencies during fiscal year 2011. net income for fiscal year 2011 was $ 5.7 million or $ 0.55 per diluted share , as compared to net income of $ 8.7 million or $ 0.85 per diluted share for fiscal year 2010. the decrease in net income for fiscal year 2011 as compared to fiscal year 2010 was primarily due to an approximate 1.5 percentage point decline in our gross margin . also , our fiscal year 2010 results include an income tax benefit of $ 1.4 million , resulting in part from the release of our valuation allowance on deferred tax assets related to our domestic net operating loss carryforwards that occurred in the third quarter of fiscal 2010 . 16 we maintain a strong balance sheet with a current ratio of 2.7 and a long-term debt to equity ratio of 0.11. total cash used in operating activities as defined on our cash flow statement was $ 2.6 million during fiscal year 2011. however , we maintain sufficient liquidity for our expected future operations and had $ 6.0 million in borrowings on our revolving line of credit with wells fargo , n.a . of which $ 24.0 million remained available at july 2 , 2011. we believe cash flow from operations , our borrowing capacity , and equipment lease financing should provide adequate capital for planned growth over the long term . results of operations comparison of the fiscal year ended july 2 , 2011 with the fiscal year ended july 3 , 2010 the following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales . the financial information and discussion below should be read in conjunction with the consolidated financial statements and notes contained in this annual report . replace_table_token_5_th * percent change from negative to positive is not considered meaningful . net sales net sales were $ 253.8 million , and $ 199.6 million in fiscal years 2011 and 2010 , respectively . net sales increased $ 54.2 million during fiscal year 2011 as compared with fiscal year 2010. this increase in net sales was primarily driven by an approximate $ 77.9 million increase in revenues related to new programs for both new and longstanding customers . this was partially offset by a $ 18.5 million decline related to decreased demand from certain current customer programs . in addition , during fiscal year 2011 we experienced an approximately $ 5.2 million decline related to the negative impact of end-of-life customer programs and to a lesser extent customer program losses . the negative impact resulting from industry-wide shortages in the global supply chain that occurred throughout most of the year and the uncertain macroeconomic environment are reflected in the analysis of our new and longstanding customers programs as discussed above . 17 the following table shows the revenue by industry sectors as a percentage of revenue for fiscal years 2011 and 2010 : replace_table_token_6_th we provide services to customers in a number of industries and produce a variety of products for our customers in each industry . as we continue to diversify our customer base and win new customers we may continue to see a change in the industry concentrations of our revenue . sales to foreign locations represented 31.9 percent , and 17.9 percent of our total net sales in fiscal years 2011 , and 2010 , respectively . cost of sales total cost of sales as a percentage of net sales was 91.9 percent , and 90.4 percent in fiscal years 2011 , and 2010 , respectively . total cost of materials as a percentage of net sales was approximately 73.9 percent , and 68.6 percent in fiscal years 2011 , and 2010 , respectively . the change from year-to-year is primarily the result of higher material content in certain new customer programs and changes in product mix . production and support costs as a percentage of net sales were 18.0 percent , and 21.8 percent in fiscal years 2011 , and 2010 , respectively . the decrease in fiscal year 2011 is primarily related to the leveraging of our fixed costs as a percentage of sales during the fiscal year . we provide for obsolete and non-saleable inventories based on specific identification of inventory against current demand and recent usage . the amounts charged to expense for these inventories were approximately $ 0.3 million , and $ 2.2 million in fiscal years 2011 , and 2010 , respectively . the large provision in fiscal year 2010 was primarily due to a discontinuance of manufacturing for certain customers that became no longer viable . we provide warranties on certain products we sell and estimate warranty costs based on historical experience and anticipated product returns . the amounts charged to expense are determined based on an estimate of warranty exposure . the net warranty expense was approximately $ 158,000 and $ 45,000 in fiscal years 2011 , and 2010 , respectively . warranty expense for fiscal years 2011 and 2010 is related to workmanship claims on keyboards and ems products . gross profit gross profit as a percentage of net sales was 8.1 percent , and 9.6 percent in fiscal years 2011 , and 2010 , respectively . story_separator_special_tag in addition to the cash requirements presented above , we have various other accruals which are not included in the table above . we owe our suppliers approximately $ 21.4 million for accounts payable and shipments in transit at the end of the fiscal year . we generally pay our suppliers in a range from 30 to 120 24 days depending on terms offered . these payments are financed by operating cash flows and our revolving line of credit . we believe that cash flows generated from operations , leasing facilities , and funds available under the revolving credit facility will satisfy cash requirements for a period in excess of 12 months and into the foreseeable future . critical accounting policies and estimates preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets , liabilities , revenues and expenses . note 1 to our consolidated financial statements describes the significant accounting policies used in the preparation of our consolidated financial statements . management believes the most complex and sensitive judgments , because of their significance to our consolidated financial statements , result primarily from the need to make estimates about effects of matters that are inherently uncertain . the most significant areas involving management judgments are described below . actual results in these areas could differ from management 's estimates . inactive , obsolete , and surplus inventory reserve we reserve for inventories that we deem inactive , obsolete or surplus . this reserve is calculated based upon the demand for the products that we produce . demand is determined by expected sales or customer forecasts . if expected sales do not materialize , then we would have inventory in excess of our reserves and would have to charge the excess against future earnings . in the case where we have purchased material based upon a customer 's forecast , we are usually covered by lead-time assurance agreements with each customer . these contracts state that the financial liability for material purchased within agreed upon lead-time and based upon the customer 's forecasts , lies with the customer . if we purchase material outside the lead-time assurance agreement and the customer 's forecasts do not materialize or if we have no lead-time assurance agreement for a specific program , we would have the financial liability and may have to charge inactive , obsolete or surplus inventory against earnings . allowance for doubtful accounts we value our accounts receivable net of an allowance for doubtful accounts of $ 111,000 at july 2 , 2011 and july 3 , 2010. this allowance is based on estimates of the portion of accounts receivable that may not be collected in the future . the estimates used are based primarily on specific identification of potentially uncollectible accounts . such accounts are identified using publicly available information in conjunction with evaluations of current payment activity . however , if any of our customers were to develop unexpected and immediate financial problems that would prevent payment of open invoices , we could incur additional and possibly material expenses that would negatively impact earnings . accrued warranty an accrual is made for expected warranty costs , with the related expense recognized in cost of goods sold . we review the adequacy of this accrual quarterly based on historical analysis and anticipated product returns and rework costs . as we have made the transition from manufacturing primarily keyboards to primarily ems products , our exposure to warranty claims has declined significantly . our warranty period for keyboards is generally longer than that for ems products . we only warrant materials and workmanship on ems products , and we do not warrant design defects for ems customers . income taxes income tax expense includes u.s. and international income taxes and the provision for u.s. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested . certain income and expenses are not reported in tax returns and financial statements in the same year . the tax effect of such temporary differences is reported as deferred income taxes . the deferred income taxes are classified as current or long-term based on the classification of the related asset or liability . the most significant areas involving management judgments include deferred income tax assets and liabilities , uncertain tax positions , and research and development tax credits . our estimates of the realization of the deferred tax assets related to our net operating loss carryforwards and tax credits is based upon our estimates of future taxable income which may change . 25 stock-based compensation stock-based compensation is accounted for according to financial accounting standards board ( fasb ) accounting standards codification ( asc ) 718 , compensation  stock compensation . asc 718 requires us to expense the fair value of employee stock options , stock appreciation rights and other forms of stock-based compensation . under the fair value recognition provisions of asc 718 , share-based compensation cost is estimated at the grant date based upon the value of the stock option and at each reporting period for stock appreciation rights classified as liability awards and is recognized as expense ratably over the requisite service period of the award ( generally the vesting ) . determining the appropriate fair value model and calculating the fair value of share-based awards requires judgment , including estimating the expected life of the share-based award , the expected stock price volatility over the expected life of the share-based award and forfeitures . to determine the fair value of stock based awards on the date of grant and at each reporting period for any stock appreciation rights that may be classified as liability awards , we use the black-scholes option-pricing model . inherent in this model are assumptions related to expected stock price volatility , option life , risk-free interest rate and dividend yield . the risk-free interest rate is a less-subjective assumption as it is

capital resources and liquidity cash flows used in operating activities were $ 2.6 million in fiscal year 2011 as compared to cash provided by operating activities of $ 3.7 million and $ 10.0 million in fiscal years 2010 and 2009 , respectively . the $ 6.3 million decrease in cash provided by operating activities in fiscal year 2011 as compared with fiscal year 2010 was primarily due to an increase in trade receivables , inventory , and a decrease in accounts payable . trade receivables increased by $ 5.7 million as a result of the increase in sales that occurred during the fourth quarter of fiscal year 2011. the $ 2.1 million increase in inventory was attributable to our recent and expected growth in production levels for a number of new programs . we purchase inventory based on customer forecasts and orders and expected lead times , and when those forecasts can not be met or changes are made to lead times , inventory can increase . the $ 3.0 million decrease in accounts payable was primarily driven by the timing of payments and terms of the supply chain related to new programs . accounts payable fluctuates with changes in inventory levels , volume of purchases , and negotiated supplier terms . the $ 6.3 million decrease in cash provided by operating activities in fiscal year 2010 as compared with fiscal year 2009 was primarily due to an increase in trade receivables and inventory , partially offset by an increase in accounts payable . trade receivables increased by $ 10.1 million as a result of the increase in sales that occurred during the fourth quarter of fiscal year 2010. the $ 9.7 million increase in inventory was attributable to new customer programs and increasing lead times on certain components which led to some scheduled shipments not being shipped by the end of the fiscal year . we purchase inventory based on customer forecasts and orders and expected lead times , and when those forecasts can not be met or changes are made to lead times , inventory can increase .


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```capital resources and liquidity cash flows used in operating activities were $ 2.6 million in fiscal year 2011 as compared to cash provided by operating activities of $ 3.7 million and $ 10.0 million in fiscal years 2010 and 2009 , respectively . the $ 6.3 million decrease in cash provided by operating activities in fiscal year 2011 as compared with fiscal year 2010 was primarily due to an increase in trade receivables , inventory , and a decrease in accounts payable . trade receivables increased by $ 5.7 million as a result of the increase in sales that occurred during the fourth quarter of fiscal year 2011. the $ 2.1 million increase in inventory was attributable to our recent and expected growth in production levels for a number of new programs . we purchase inventory based on customer forecasts and orders and expected lead times , and when those forecasts can not be met or changes are made to lead times , inventory can increase . the $ 3.0 million decrease in accounts payable was primarily driven by the timing of payments and terms of the supply chain related to new programs . accounts payable fluctuates with changes in inventory levels , volume of purchases , and negotiated supplier terms . the $ 6.3 million decrease in cash provided by operating activities in fiscal year 2010 as compared with fiscal year 2009 was primarily due to an increase in trade receivables and inventory , partially offset by an increase in accounts payable . trade receivables increased by $ 10.1 million as a result of the increase in sales that occurred during the fourth quarter of fiscal year 2010. the $ 9.7 million increase in inventory was attributable to new customer programs and increasing lead times on certain components which led to some scheduled shipments not being shipped by the end of the fiscal year . we purchase inventory based on customer forecasts and orders and expected lead times , and when those forecasts can not be met or changes are made to lead times , inventory can increase .
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 Suspicious Activity Report : operating income as a percentage of sales for fiscal year 2011 was 2.7 percent compared to 3.7 percent for fiscal year 2010. the decrease in operating income as a percentage of sales was due to a decline in gross margin , partially offset by the leveraging of certain operating expenses and by improving efficiencies during fiscal year 2011. net income for fiscal year 2011 was $ 5.7 million or $ 0.55 per diluted share , as compared to net income of $ 8.7 million or $ 0.85 per diluted share for fiscal year 2010. the decrease in net income for fiscal year 2011 as compared to fiscal year 2010 was primarily due to an approximate 1.5 percentage point decline in our gross margin . also , our fiscal year 2010 results include an income tax benefit of $ 1.4 million , resulting in part from the release of our valuation allowance on deferred tax assets related to our domestic net operating loss carryforwards that occurred in the third quarter of fiscal 2010 . 16 we maintain a strong balance sheet with a current ratio of 2.7 and a long-term debt to equity ratio of 0.11. total cash used in operating activities as defined on our cash flow statement was $ 2.6 million during fiscal year 2011. however , we maintain sufficient liquidity for our expected future operations and had $ 6.0 million in borrowings on our revolving line of credit with wells fargo , n.a . of which $ 24.0 million remained available at july 2 , 2011. we believe cash flow from operations , our borrowing capacity , and equipment lease financing should provide adequate capital for planned growth over the long term . results of operations comparison of the fiscal year ended july 2 , 2011 with the fiscal year ended july 3 , 2010 the following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales . the financial information and discussion below should be read in conjunction with the consolidated financial statements and notes contained in this annual report . replace_table_token_5_th * percent change from negative to positive is not considered meaningful . net sales net sales were $ 253.8 million , and $ 199.6 million in fiscal years 2011 and 2010 , respectively . net sales increased $ 54.2 million during fiscal year 2011 as compared with fiscal year 2010. this increase in net sales was primarily driven by an approximate $ 77.9 million increase in revenues related to new programs for both new and longstanding customers . this was partially offset by a $ 18.5 million decline related to decreased demand from certain current customer programs . in addition , during fiscal year 2011 we experienced an approximately $ 5.2 million decline related to the negative impact of end-of-life customer programs and to a lesser extent customer program losses . the negative impact resulting from industry-wide shortages in the global supply chain that occurred throughout most of the year and the uncertain macroeconomic environment are reflected in the analysis of our new and longstanding customers programs as discussed above . 17 the following table shows the revenue by industry sectors as a percentage of revenue for fiscal years 2011 and 2010 : replace_table_token_6_th we provide services to customers in a number of industries and produce a variety of products for our customers in each industry . as we continue to diversify our customer base and win new customers we may continue to see a change in the industry concentrations of our revenue . sales to foreign locations represented 31.9 percent , and 17.9 percent of our total net sales in fiscal years 2011 , and 2010 , respectively . cost of sales total cost of sales as a percentage of net sales was 91.9 percent , and 90.4 percent in fiscal years 2011 , and 2010 , respectively . total cost of materials as a percentage of net sales was approximately 73.9 percent , and 68.6 percent in fiscal years 2011 , and 2010 , respectively . the change from year-to-year is primarily the result of higher material content in certain new customer programs and changes in product mix . production and support costs as a percentage of net sales were 18.0 percent , and 21.8 percent in fiscal years 2011 , and 2010 , respectively . the decrease in fiscal year 2011 is primarily related to the leveraging of our fixed costs as a percentage of sales during the fiscal year . we provide for obsolete and non-saleable inventories based on specific identification of inventory against current demand and recent usage . the amounts charged to expense for these inventories were approximately $ 0.3 million , and $ 2.2 million in fiscal years 2011 , and 2010 , respectively . the large provision in fiscal year 2010 was primarily due to a discontinuance of manufacturing for certain customers that became no longer viable . we provide warranties on certain products we sell and estimate warranty costs based on historical experience and anticipated product returns . the amounts charged to expense are determined based on an estimate of warranty exposure . the net warranty expense was approximately $ 158,000 and $ 45,000 in fiscal years 2011 , and 2010 , respectively . warranty expense for fiscal years 2011 and 2010 is related to workmanship claims on keyboards and ems products . gross profit gross profit as a percentage of net sales was 8.1 percent , and 9.6 percent in fiscal years 2011 , and 2010 , respectively . story_separator_special_tag in addition to the cash requirements presented above , we have various other accruals which are not included in the table above . we owe our suppliers approximately $ 21.4 million for accounts payable and shipments in transit at the end of the fiscal year . we generally pay our suppliers in a range from 30 to 120 24 days depending on terms offered . these payments are financed by operating cash flows and our revolving line of credit . we believe that cash flows generated from operations , leasing facilities , and funds available under the revolving credit facility will satisfy cash requirements for a period in excess of 12 months and into the foreseeable future . critical accounting policies and estimates preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets , liabilities , revenues and expenses . note 1 to our consolidated financial statements describes the significant accounting policies used in the preparation of our consolidated financial statements . management believes the most complex and sensitive judgments , because of their significance to our consolidated financial statements , result primarily from the need to make estimates about effects of matters that are inherently uncertain . the most significant areas involving management judgments are described below . actual results in these areas could differ from management 's estimates . inactive , obsolete , and surplus inventory reserve we reserve for inventories that we deem inactive , obsolete or surplus . this reserve is calculated based upon the demand for the products that we produce . demand is determined by expected sales or customer forecasts . if expected sales do not materialize , then we would have inventory in excess of our reserves and would have to charge the excess against future earnings . in the case where we have purchased material based upon a customer 's forecast , we are usually covered by lead-time assurance agreements with each customer . these contracts state that the financial liability for material purchased within agreed upon lead-time and based upon the customer 's forecasts , lies with the customer . if we purchase material outside the lead-time assurance agreement and the customer 's forecasts do not materialize or if we have no lead-time assurance agreement for a specific program , we would have the financial liability and may have to charge inactive , obsolete or surplus inventory against earnings . allowance for doubtful accounts we value our accounts receivable net of an allowance for doubtful accounts of $ 111,000 at july 2 , 2011 and july 3 , 2010. this allowance is based on estimates of the portion of accounts receivable that may not be collected in the future . the estimates used are based primarily on specific identification of potentially uncollectible accounts . such accounts are identified using publicly available information in conjunction with evaluations of current payment activity . however , if any of our customers were to develop unexpected and immediate financial problems that would prevent payment of open invoices , we could incur additional and possibly material expenses that would negatively impact earnings . accrued warranty an accrual is made for expected warranty costs , with the related expense recognized in cost of goods sold . we review the adequacy of this accrual quarterly based on historical analysis and anticipated product returns and rework costs . as we have made the transition from manufacturing primarily keyboards to primarily ems products , our exposure to warranty claims has declined significantly . our warranty period for keyboards is generally longer than that for ems products . we only warrant materials and workmanship on ems products , and we do not warrant design defects for ems customers . income taxes income tax expense includes u.s. and international income taxes and the provision for u.s. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested . certain income and expenses are not reported in tax returns and financial statements in the same year . the tax effect of such temporary differences is reported as deferred income taxes . the deferred income taxes are classified as current or long-term based on the classification of the related asset or liability . the most significant areas involving management judgments include deferred income tax assets and liabilities , uncertain tax positions , and research and development tax credits . our estimates of the realization of the deferred tax assets related to our net operating loss carryforwards and tax credits is based upon our estimates of future taxable income which may change . 25 stock-based compensation stock-based compensation is accounted for according to financial accounting standards board ( fasb ) accounting standards codification ( asc ) 718 , compensation  stock compensation . asc 718 requires us to expense the fair value of employee stock options , stock appreciation rights and other forms of stock-based compensation . under the fair value recognition provisions of asc 718 , share-based compensation cost is estimated at the grant date based upon the value of the stock option and at each reporting period for stock appreciation rights classified as liability awards and is recognized as expense ratably over the requisite service period of the award ( generally the vesting ) . determining the appropriate fair value model and calculating the fair value of share-based awards requires judgment , including estimating the expected life of the share-based award , the expected stock price volatility over the expected life of the share-based award and forfeitures . to determine the fair value of stock based awards on the date of grant and at each reporting period for any stock appreciation rights that may be classified as liability awards , we use the black-scholes option-pricing model . inherent in this model are assumptions related to expected stock price volatility , option life , risk-free interest rate and dividend yield . the risk-free interest rate is a less-subjective assumption as it is

