UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-27460
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 16-1158413
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
315 Science Parkway, Rochester New York 14620
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (716) 256-0200
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
The number of shares outstanding of the registrant's common stock was
12,721,000 as of October 30, 2000.
<PAGE>
Performance Technologies, Incorporated and Subsidiaries
Index
Page
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Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999 3
Consolidated Statements of Income For The Three
Months Ended September 30, 2000 and 1999 (unaudited) 4
Consolidated Statements of Income For The Nine
Months Ended September 30, 2000 and 1999 (unaudited) 5
Consolidated Statements of Cash Flows For The Nine
Months Ended September 30, 2000 and 1999 (unaudited) 6
Notes to Consolidated Financial Statements For The Nine
Months Ended September 30, 2000 (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2000 1999
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $17,619,000 $ 9,792,000
Marketable securities 13,984,000 22,007,000
Accounts receivable, net 7,363,000 9,474,000
Inventories, net 5,400,000 3,910,000
Prepaid expenses and other 640,000 684,000
Deferred taxes 1,161,000 1,129,000
----------- -----------
Total current assets 46,167,000 46,996,000
Equipment and improvements, net 2,040,000 1,695,000
Software development, net 736,000 451,000
----------- -----------
Total assets $48,943,000 $49,142,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ $ 6,000
Accounts payable 1,080,000 904,000
Income taxes payable 650,000 1,990,000
Accrued expenses 3,457,000 5,087,000
---------- -----------
Total current liabilities 5,187,000 7,987,000
Deferred taxes 281,000 327,000
---------- -----------
Total liabilities 5,468,000 8,314,000
---------- -----------
Stockholders' equity:
Preferred stock
Common stock - $.01 par value; 50,000,000
authorized; 13,260,038 and 13,186,526
shares issued at September 30, 2000 and
December 31, 1999, respectively 133,000 132,000
Additional paid-in capital 13,050,000 12,665,000
Retained earnings 33,079,000 28,003,000
Cumulative translation adjustments 41,000 28,000
Less: Treasury stock - at cost, 211,400 (2,828,000)
shares ---------- -----------
Total stockholders' equity 43,475,000 40,828,000
---------- -----------
Total liabilities and $48,943,000 $49,142,000
stockholders' equity =========== ===========
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (unaudited)
Three Months Ended
September 30,
2000 1999
-------------- ---------------
(restated)
Sales $ 9,244,000 $12,890,000
Cost of goods sold 2,976,000 4,430,000
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Gross profit 6,268,000 8,460,000
----------- -----------
Operating expenses:
Selling and marketing 1,480,000 1,644,000
Research and development 2,301,000 2,279,000
General and administrative 526,000 1,226,000
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Total operating expenses 4,307,000 5,149,000
----------- -----------
Income from operations 1,961,000 3,311,000
Other income, net 492,000 390,000
----------- -----------
Income before income taxes 2,453,000 3,701,000
Provision for income taxes 932,000 1,431,000
----------- -----------
Net income $ 1,521,000 $ 2,270,000
=========== ===========
Basic earnings per share $ .12 $ .17
=========== ===========
Diluted earnings per share $ .11 $ .16
=========== ===========
Net income available to common stockholders $ 1,521,000 $ 2,270,000
=========== ===========
Weighted average number of common shares
used in basic earnings per share 13,199,178 13,173,089
Common equivalent shares 479,319 777,051
----------- -----------
Weighted average number of common shares
used in diluted earnings per share 13,678,497 13,950,140
============ ===========
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (unaudited)
Nine Months Ended
September 30,
2000 1999
----------- -----------
(restated)
Sales $28,927,000 $31,599,000
Cost of goods sold 9,500,000 10,972,000
----------- -----------
Gross profit 19,427,000 20,627,000
----------- -----------
Operating expenses:
Selling and marketing 3,956,000 4,213,000
Research and development 6,720,000 6,248,000
General and administrative 2,081,000 3,051,000
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Total operating expenses 12,757,000 13,512,000
----------- -----------
Income from operations 6,670,000 7,115,000
Other income, net 1,516,000 1,054,000
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Income before income taxes 8,186,000 8,169,000
Provision for income taxes 3,110,000 3,456,000
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Net income $ 5,076,000 $ 4,713,000
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Basic earnings per share $ .38 $ .36
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Diluted earnings per share $ .37 $ .34
=========== ===========
Net income available to common stockholders $ 5,076,000 $ 4,713,000
=========== ===========
Weighted average number of common shares
used in basic earnings per share 13,227,889 13,095,057
Common equivalent shares 678,172 579,628
----------- -----------
Weighted average number of common shares
used in diluted earnings per share 13,906,061 13,674,685
=========== ===========
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
Nine Months Ended
September 30,
2000 1999
----------- -----------
(restated)
Cash flows from operating activities:
Net income $ 5,076,000 $ 4,713,000
Non-cash adjustments:
Depreciation and amortization 952,000 895,000
Other (78,000) (158,000)
Compensation expense 715,000
Changes in operating assets and liabilities:
Accounts receivable 2,118,000 (2,949,000)
Inventories (1,483,000) (531,000)
Prepaid expenses and other 44,000 531,000
Accounts payable 176,000 (716,000)
Accrued expenses (1,630,000) 2,027,000
Income taxes payable (1,340,000) 675,000
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Net cash provided by operating activities 3,835,000 5,202,000
----------- -----------
Cash flows from investing activities:
Purchases of equipment and improvements, net (943,000) (602,000)
Capitalized software development (639,000) (159,000)
Purchase of marketable securities (15,977,000) (23,011,000)
Maturities of marketable securities 24,000,000 1,000,000
----------- -----------
Net cash provided (used) by
investing activities 6,441,000 (22,772,000)
----------- -----------
Cash flows from financing activities:
Repayment of notes payable (6,000) (9,000)
Proceeds from issuance of common stock 385,000 498,000
Purchase of treasury stock (2,828,000)
---------- -----------
Net cash (used) provided by financing
activities (2,449,000) 489,000
---------- -----------
Net increase (decrease) in cash
and cash equivalents 7,827,000 (17,081,000)
Cash and cash equivalents at beginning of period 9,792,000 25,741,000
---------- -----------
Cash and cash equivalents at end of period $17,619,000 $ 8,660,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activity:
Exercise of stock options using 100 and 46,849
shares ofcommon stock in 2000 and 1999,
respectively. $ 4,000 $ 719,000
=========== ===========
<PAGE>
Performance Technologies, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
For The Nine Months Ended September 30, 2000
(Unaudited)
Note - A The unaudited Consolidated Financial Statements of Performance
Technologies, Incorporated and Subsidiaries (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, the
Consolidated Financial Statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. The results for the
interim periods are not necessarily indicative of the results to be expected for
the year. The accompanying Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements of the Company as
of December 31, 1999, as reported in its Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
Note - B During the nine months ended September 30, 2000, 73,512 common shares
were issued upon the exercise of stock options.
Note - C Inventories consisted of the following at September 30, 2000 and
December 31, 1999:
September 30, December 31,
2000 1999
----------- -----------
Purchased parts and components $ 2,728,000 $ 1,822,000
Work in process 3,290,000 2,893,000
Finished goods 223,000 113,000
----------- -----------
6,241,000 4,828,000
Less: reserve for inventory obsolescence (841,000) (918,000)
----------- -----------
Net $ 5,400,000 $ 3,910,000
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<PAGE>
-2-
Performance Technologies, Incorporated and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
All 1999 financial information contained herein has been restated to reflect the
December 1999 acquisition of MicroLegend Telecom Systems, Inc., accounted for as
a pooling of interests. Furthermore, per share amounts have been adjusted to
reflect a three-for-two stock split effected in September 1999.
Diluted earnings per share for the third quarter 2000 amounted to $.11 per
share, compared to $.16 per share for the third quarter 1999. Net income for the
third quarter 2000 amounted to $1.5 million, compared to $2.3 million for the
respective 1999 period. Revenue for the third quarter 2000, amounted to $9.2
million, compared to $12.9 million for the third quarter 1999. Diluted earnings
per share for the first nine months of 2000 increased to $.37, from $.34 for the
same period in 1999. For the nine months ended September 30, 2000, net income
grew to $5.1 million, compared to $4.7 million for the same period in 1999.
Revenue for the nine months ended September 30, 2000 was $28.9 million, compared
to $31.6 million for the respective period in 1999. At September 30, 2000, the
Company had $31.6 million of cash, cash equivalents and marketable securities
and no debt. For the nine months ended September 30, 2000, the Company generated
income from operations, excluding depreciation and amortization (EBITDA), of
$7.6 million, compared to $8.0 million for the same period of 1999.
International sales (shipments outside of North America) amounted to 32% of
total revenue for the first nine months of 2000, compared to 19% for the same
period in 1999.
During the third quarter, the Company introduced several new advanced telecom
products directed toward next-generation telecommunications infrastructure.
These products include the market's first carrier-grade Layer 3 Fault Tolerant
Ethernet switch designed for use in next-generation IP platforms, as well as two
new network access products for T1/E1/J1/T3 network interface capabilities. The
Company also introduced a new IP equipment backplane architecture, IPnexusTM,
targeted at reducing cost and time-to-market for telecom platform integration.
The IPnexus architecture, which was recently submitted to the appropriate open
standards organization for adoption, allows the Company to address opportunities
that exist in the expansion and build out of both the wireline and wireless
telecommunications infrastructure. Given the early interest in this new IP
embedded systems approach, the Company believes many of the platforms being
designed for next-generation telecommunication applications will use this
advanced integration concept. In addition, the Company began shipping a new
Compact PCI (cPCI) version of its SS7 signaling gateway directed toward
integrated SS7 applications. All of these new products are fully integrated into
the IPnexus architecture.
In addition to the recent product activity, the Company collaborated with both
AudioCodes Ltd. and the Motorola Computer Group on a comprehensive, IP-based
telephony demonstration for next-generation softswitch/gateway applications. In
September, using the "standards based" elements provided by the three
organizations, an operating demonstration of an integrated media and signaling
gateway was shown at the Voice On the Net (VON) Conference in Atlanta. This
demonstration, specifically incorporating the Performance Technologies' SS7/IP
signaling and the carrier-grade IP Ethernet switch products, provided all the
media and signaling capabilities required to bridge today's SS7-based voice
network with next-generation IP-based data networks.
The Company also announced several new customer relationships during the
quarter. Samsung Electronics is now utilizing PTI's SS7 products in Sun
Microsystems' carrier-grade platforms for HLR and VLR wireless applications.
Sevis Systems is using the Company's access products for SS7 surveillance
systems, while Clarent Corporation is beginning to integrate PTI's IPnexus
family of SS7 signaling gateways, T1/E1 Access and IP switching products into
their next-generation Voice-over-IP (VoIP) media gateway.
Guidance for the fourth quarter 2000 and for calendar year 2001:
The following are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to the safe harbor
provisions of that Act. The Company supplies products to telecommunications
equipment manufacturers that are integrated into current and next-generation
network systems. Design wins reach production volumes at varying rates,
typically beginning in six to twelve months after the design win occurs. During
the third quarter, the Company recorded six new design wins for its products. A
variety of risks such as schedule delays, cancellations and changes in customer
markets can adversely affect a design win before production is reached and
during deployment. Despite this difficulty, however, and after carefully
assessing a number of forward-looking indicators, management believes it is
prudent to increase revenue and earnings expectations for the fourth quarter and
for 2000. Revenue is expected to increase approximately 10% sequentially from
the third quarter and diluted earnings per share for 2000 is expected to
increase to $.46 or $.47 per share, from previous guidance of $.39 to $.42 per
share. Management intends to continue to invest significantly in sales,
marketing and engineering during the remainder of the year, and into 2001 to
increase the likelihood of success of the Company's long-range strategy. At this
point, management expects 30% revenue growth in 2001 and expects diluted
earnings per share to increase by 20% - 25% in 2001, over 2000. Revenue and
earnings estimates are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and are based on indications
from the Company's customers and predicting when design wins will generate
shipments. These indications and predictions have not been completely reliable
in the past.
Quarter and Nine Months Ended September 30, 2000, compared with
the Quarter and Nine Months Ended September 30, 1999
Sales. Sales for the quarter ended September 30, 2000 were $9.2 million,
compared to $12.9 million for the third quarter 1999. Sales for the nine months
ended September 30, 2000 were $28.9 million, compared to $31.6 million for the
same period in 1999. During the first two quarters of 2000, the Company's
products were grouped into three distinct categories in one market segment:
Signaling System 7 (SS7) and network access products, Lockheed Martin/LAN
interface products (U.S. Government/COTS) and other products (combining non-COTS
LAN interface products, Network Switching and older/legacy products). In the
third quarter, a new product category has been added for IP Switching products
because the new CPC4400 IP Ethernet switch was introduced in August and began
shipping in September. Sales expressed as a percentage of total sales from these
categories represented the following for the three and nine months ending
September 30, 2000 and 1999:
Three Months Ended
September 30,
2000 1999
---------- ---------
SS7 and network access products 87% 58%
Lockheed Martin (government) 0% 28%
IP Switching products 1% 0%
Other products 12% 14%
---------- ---------
Total 100% 100%
========== =========
Nine Months Ended
September 30,
2000 1999
---------- ---------
SS7 and network access products 85% 57%
Lockheed Martin (government) 4% 29%
IP Switching products 0% 0%
Other products 11% 14%
---------- ---------
Total 100% 100%
=========== =========
Signaling System 7 (SS7) and network access products: Revenue from this category
increased to $8.0 million during the third quarter 2000, from $7.5 million for
the third quarter 1999. Sales of SS7 and network access products increased 36%
during the first nine months of 2000 to $24.4 million, over the respective 1999
period.
Lockheed Martin/LAN interface products (U.S. Government/COTS): The contract with
Lockheed Martin for LAN interface products ended in June 2000. For the first
nine months of 2000, shipments amounted to $1 million, or 4% of sales, compared
to $9.2 million, or 29% of sales for the same period during 1999. At the present
time, the customer's procurement requirements are not known and management is
not projecting additional revenue from this customer during the remainder of
2000 or into 2001.
IP Switching: During the third quarter, the Company introduced the CPC4400 IP
Ethernet switch. Shipments to Clarent Corporation amounted to $110,000 during
the third quarter for their next-generation media gateway. The Company has also
delivered more than a dozen CPC4400 evaluation units to several major telecom
equipment suppliers.
Other products: Revenue from this category represented approximately $1.1
million for the third quarter 2000, compared to $1.7 million, for the same
period in 1999. Many of these products are project oriented and shipments can
fluctuate significantly on a quarterly basis. Revenue of other products for the
nine months ending September 30, 2000 amounted to $3.3 million, compared to $4.4
million for the first nine months of 1999. Management expects revenue from this
category to continue to decline from 1999 revenue levels.
Analysis of Revenue: The following table sets forth the Company's revenue,
excluding the revenue from the Lockheed Martin contract, for the nine months
ended September 30, 1999 and 2000:
Nine months ended
September 30,
2000 1999
---- ----
(in millions)
Total revenue $28.9 $31.6
Less: Lockheed Martin contract (1.0) (9.2)
----- -----
Telecom revenue $27.9 $22.4
===== =====
Gross profit. Gross profit consists of sales, less cost of goods sold including
material costs, manufacturing expenses and amortization of software development
costs. Gross margin for the third quarter 2000 improved to 67.8% of sales,
compared to 65.6% for the third quarter 1999. Gross margin for the nine months
ending September 30, 2000 improved to 67.2% of sales, compared to 65.3% for the
same period in 1999. The improvement in gross margin during 2000 is primarily
attributable to greater revenue from higher margin Signaling System 7 (SS7)
Gateway products, communications software sales and manufacturing efficiencies.
Operating expenses. Total operating expenses were $4.3 million, or 46.6% of
sales for the third quarter 2000, compared to $5.1 million, or 39.9% of sales
for the comparable 1999 quarter. For the first nine months of 2000, total
operating expenses were $12.8 million, or 44.1% of sales, compared to $13.5
million, or 42.8% of sales for the comparable 1999 period.
Selling and marketing expenses were $1.5 million, or 16.0% of sales for the
third quarter 2000, compared to $1.6 million, or 12.8% of sales for the same
quarter in 1999. Selling and marketing expenses amounted to $4.0 million, or
13.7% of sales for the first nine months of 2000, compared to $4.2 million, or
13.3% for the same period in 1999. In September 2000, a new advertising program
was launched to promote the IPnexus architecture and family of products.
Management expects selling and marketing expenses to increase as a percentage of
sales during the remainder of 2000 and into 2001 as a result of hiring
additional sales people and aggressively marketing its IPnexus products
including the cPCI Signaling System 7 Gateway, carrier-grade IP switching
products and network access products.
Research and development expenses were $2.3 million, or 24.9% of sales for the
third quarter 2000, compared to $2.3 million, or 17.7% of sales for the
comparable 1999 quarter. Research and development expenses were $6.7 million, or
23.2% of sales for the nine months ended September 30, 2000, compared to $6.3
million, or 19.8% of sales for the respective period in 1999. The Company
expects to continue to invest heavily in research and development and is
actively recruiting for several newly approved engineering positions to meet
development plans.
General and administrative expenses were $526,000, or 5.7% of sales for the
third quarter 2000, compared to $1.2 million, or 9.5% of sales for the third
quarter 1999. Third quarter 1999 expenses included certain one-time charges.
General and administrative expenses were $2.1 million, or 7.2% of sales for the
nine months ended September 30, 2000, compared to $3.1 million, or 9.7% of sales
for the first nine months of 1999. General and administrative expenses are
significantly lower in 2000 than in 1999 because contributions to the Company's
formula-based, performance bonus plan are substantially below 1999 levels.
Other income, net. Other income consists primarily of interest income from
marketable securities and cash equivalents. The funds are primarily invested in
high quality Municipal and U.S. Treasury securities with maturities of less than
one year.
Income taxes. The provision for income taxes for the third quarter 2000 is based
on the combined federal, state and foreign effective tax rate of 38.0%, compared
to 38.7% for the third quarter 1999 and the effective tax rate for the nine
months ending September 30, 2000 was 38.0%, compared to 42.3% for the same
period in 1999. The Company derives approximately a 1% benefit in its net
effective corporate income tax rate from the foreign sales tax credit provision
of the Internal Revenue Code (the "Code"). Any changes in this section of the
Code could affect the Company's tax rate in future periods.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company's primary source of liquidity included cash
and cash equivalents of $17.6 million, marketable securities with a maturity of
less than one year of $14.0 million and available borrowings of $5.0 million
under a revolving credit facility with a bank. No amounts were outstanding under
this credit facility as of September 30, 2000. The Company had working capital
of $41.0 million at September 30, 2000, compared to $39.0 million at December
31, 1999.
Cash provided by operating activities for the nine months ended September 30,
2000 was $3.8 million, compared to $5.2 million for the same period in 1999. The
difference in cash provided by operating activities for the nine months ended
September 30, 2000, over the comparable 1999 period, is primarily attributable
to changes in the components of working capital. (See the Consolidated
Statements of Cash Flows appearing in the Financial Statements included in this
report).
Capitalization of certain software development costs amounted to $639,000 for
the nine months ended September 30, 2000, compared to $159,000 for the same
period in 1999.
On August 14, 2000, the Board of Directors authorized the repurchase of up to
one million shares of the Company's common stock over the next twelve months. As
of September 30, 2000, the Company has repurchased a total of 211,400 shares at
a total cost of $2,828,000.
The Company is presently negotiating an extension to its existing credit
facility that expired on October 31, 2000. Assuming there is no significant
change in the Company's business, management believes that its current cash,
cash equivalents, and marketable securities together with cash generated from
operations and available borrowings under the Company's loan agreement, when
approved, will be sufficient to meet the Company's anticipated needs, including
working capital and capital expenditure requirements, for at least the next
twelve months. However, an unfavorable determination in the outstanding class
action litigation could have a material adverse effect on the Company's working
capital. Furthermore, management is continuing its strategic acquisition program
to further accelerate new product and market penetration efforts. This program
could have an impact on the Company's working capital, liquidity or capital
resources.
Impact of the Year 2000 Issue
The Company has not experienced any material Year 2000 issues internally, nor
with key suppliers or customers and it appears that such organizations have
successfully transitioned to the Year 2000. However, there can be no assurance
that problems will not arise for the Company, its suppliers, its customers or
others with whom the Company does business later in 2000, or with systems that
have not yet been fully tested. The Company intends to continue to monitor its
compliance, as well as the compliance of others whose operations are material to
the Company's business.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. This Quarterly Report on Form 10-Q
contains forward-looking statements, which reflect the Company's current views
with respect to future events and financial performance, within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe harbor
provisions of those Sections.
These forward-looking statements, including the guidance for the fourth quarter
2000 and for the calendar year 2001, are subject to certain risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from historical results or those anticipated. The
words "believes," "anticipates," "plans," "may," "intend," "estimate," "will,"
"should," "could," and other expressions which indicate future events and trends
also identify forward-looking statements. However, the absence of such words
does not mean that a statement is not forward-looking.
The Company's future operating results are subject to various risks and
uncertainties and could differ materially from those discussed in the
forward-looking statements and may be affected by various trends and factors
which are beyond the Company's control. These include, among other factors,
general business and economic conditions, rapid or unexpected changes in
technologies, cancellation or delay of customer orders including those relating
to the SS7 and communication access design wins referenced above, changes in the
product or customer mix of sales, delays in new product development, delays or
lack of availability of electronic components, customer acceptance of new
products and customer delays in qualification of products. Furthermore, an
unfavorable determination in the outstanding class action litigation could have
a material adverse effect on the Company's working capital. This report on Form
10-Q should be read in conjunction with the Consolidated Financial Statements,
the notes thereto, Management's Discussion and Analysis of Financial Condition
and Results of Operations as of December 31, 1999 and "Risk Factors" as reported
in the Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission.
<PAGE>
Performance Technologies, Incorporated and Subsidiaries
Part II. Other Information
Item 1. Legal Proceedings
On and after May 24, 2000, five class action lawsuits were filed against the
Company, as well as several of its officers and directors, alleging violations
of federal securities laws and seeking recovery of unspecified damages. The
lawsuits were filed in United States District Court for the Western District of
New York. During the third quarter, plaintiffs filed a petition with the court
to consolidate the lawsuits into one class action and designated lead counsel.
Performance Technologies continues to believe that these cases are without merit
and intends to vigorously defend against these allegations.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None.
B. Reports on Form 8-K. There were no reports filed on Form 8-K
during the three month period ended September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERFORMANCE TECHNOLOGIES, INCORPORATED
November 13, 2000 By: /s/ Donald L. Turrell
-------------------------------
Donald L. Turrell
President and
Chief Executive Officer
November 13, 2000 By: /s/ Dorrance W. Lamb
------------------------------
Dorrance W. Lamb
Chief Financial Officer and
Vice President, Finance
