<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period 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 no. 0-6272
DATUM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2512237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9975 TOLEDO WAY, IRVINE, CA 92618-1819
(Address of principal executive offices) (Zip code)
(949) 598-7500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a 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 the
filing requirements for the past 90 days.
YES X NO
--- ---
The registrant had 6,052,426 shares of common stock outstanding as of November
6, 2000.
<PAGE> 2
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 13
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,927 $ 8,271
Accounts receivable, net 31,155 22,927
Inventories
Purchased parts 12,688 8,720
Work-in-process 8,626 8,082
Finished products 4,629 5,009
------- -------
25,943 21,811
Prepaid expenses 684 495
Deferred income taxes 3,359 3,359
Income tax refund receivable 423 463
------- -------
Total current assets 63,491 57,326
Plant and equipment
Land 2,040 2,040
Buildings 5,330 5,210
Equipment 24,321 21,974
Leasehold improvements 1,349 1,185
------- -------
33,040 30,409
Less accumulated depreciation and amortization 18,586 15,650
------- -------
14,454 14,759
------- -------
Excess of purchase price over net assets acquired, net 13,127 14,722
Other assets 387 975
------- -------
$91,459 $87,782
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 4
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,507 $ 6,706
Accrued salaries and wages 5,044 2,269
Accrued warranty 2,134 1,635
Other accrued expenses 1,390 1,144
Income taxes payable 1,772 553
Current portion of long-term debt 3,001 3,002
-------- --------
Total current liabilities 22,848 15,309
-------- --------
Long-term debt 2,501 11,671
-------- --------
Postretirement benefits 1,148 1,034
-------- --------
Other long-term liabilities 374 418
-------- --------
Deferred income taxes 1,030 1,030
-------- --------
Stockholders' equity
Preferred stock, par value $.25 per share
Authorized - 1,000,000 shares
Issued - none -- --
Common stock, par value $.25 per share
Authorized - 10,000,000 shares
Issued - 6,043,835 shares in 2000
5,854,997 shares in 1999 1,511 1,464
Additional paid-in capital 49,647 47,709
Retained earnings 13,617 10,178
Unamortized stock compensation (183) (309)
Accumulated other comprehensive loss (1,034) (722)
-------- --------
Total stockholders' equity 63,558 58,320
-------- --------
$ 91,459 $ 87,782
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 36,197 $ 25,017 $ 98,708 $ 74,334
Operating expenses:
Cost of sales 19,776 14,908 54,185 44,356
Selling 4,285 3,696 12,746 10,678
Product development 4,044 4,298 11,833 11,691
General and administrative 4,546 2,607 12,796 7,367
-------- -------- -------- --------
Operating income (loss) 3,546 (492) 7,148 242
-------- -------- -------- --------
Interest expense 186 473 1,529 1,475
Interest income (20) (97) (159) (416)
-------- -------- -------- --------
Income (loss) before income taxes 3,380 (868) 5,778 (817)
Income tax provision (benefit) 1,333 (248) 2,340 (228)
-------- -------- -------- --------
Net income (loss) $ 2,047 $ (620) $ 3,438 $ (589)
======== ======== ======== ========
Net income (loss) per common share:
Basic $ 0.34 $ (0.11) $ 0.58 $ (0.10)
======== ======== ======== ========
Diluted $ 0.32 $ (0.11) $ 0.55 $ (0.10)
======== ======== ======== ========
Shares used in per share calculation:
Basic 5,977 5,770 5,913 5,615
======== ======== ======== ========
Diluted 6,376 5,770 6,249 5,615
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
2000 1999
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,438 $ (589)
------- --------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 3,526 2,911
Amortization of goodwill 1,595 911
Contribution of shares of common stock to
the Company's 401(k) plan 572 455
Stock based compensation 229 44
Changes in assets and liabilities:
Increase in accounts receivable (8,226) (4,482)
Decrease in income tax refund receivable 40 332
(Increase) decrease in inventories (4,132) 2,011
Increase in prepaid expenses (189) (141)
Increase in other assets 164 137
Increase in accounts payable 2,801 868
Increase in accrued expenses 3,510 205
Increase in income taxes payable 1,219 30
Increase in postretirement benefits 114 162
Decrease in other long-term liabilities (44) (603)
------- --------
Total reconciling items 1,179 2,840
------- --------
Net cash provided by operating activities 4,617 2,251
------- --------
Cash flows from investing activities:
Proceeds from equipment disposals 51 --
Capital expenditures (2,762) (1,744)
Payment for acquisition, net of cash acquired -- (2,204)
Other (310) (226)
------- --------
Net cash used by investing activities (3,021) (4,174)
------- --------
Cash flows from financing activities:
Reduction of line of credit -- (7)
Payments of long-term debt (9,501) (3,018)
Proceeds from exercise of stock options 1,352 86
Proceeds from ESP plan 209 160
------- --------
Net cash used for financing activities (7,940) (2,779)
------- --------
Net decrease in cash and cash equivalents (6,344) (4,702)
Cash and cash equivalents at beginning of period 8,271 10,307
------- --------
Cash and cash equivalents at end of period $ 1,927 $ 5,605
======= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 7
DATUM INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the requirements of Form 10-Q and, therefore, do not
include all information and footnotes which would be presented were such
financial statements prepared in accordance with generally accepted accounting
principles. The condensed consolidated balance sheet at December 31, 1999 was
derived from the audited consolidated balance sheet at that date which is not
presented herein.
In the opinion of management, the accompanying financial statements reflect all
adjustments, which are normal and recurring, necessary to provide a fair
presentation of the results for the interim period presented. These condensed
consolidated financial statements should be read in conjunction with the audited
financial statements presented in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999. Operating results for interim periods are not
necessarily indicative of operating results for an entire year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of sales and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE B - EARNINGS PER SHARE
Net income per share-basic excludes dilution and is computed by dividing net
income by the weighted average number of common shares outstanding during the
reporting period. Net income per share-diluted reflects the potential dilutive
effect, calculated using the treasury stock method, of additional common shares
that are issuable upon exercise of outstanding stock options and stock warrants
as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Basic shares outstanding (weighted average) 5,977 5,770 5,913 5,615
Effect of dilutive securities 399 -- 336 --
----- ----- ----- -----
Diluted shares outstanding 6,376 5,770 6,249 5,615
===== ===== ===== =====
</TABLE>
Options outstanding during the three months ended September 30, 2000 to purchase
approximately 9,000 shares of common stock, and options outstanding during the
nine months ended September 30, 2000 to purchase approximately 46,500 shares of
common stock were not included in the computation of dilutive securities because
the options' exercise price was greater than the average market price of the
common stock during the period and, therefore, the effect would be
anti-dilutive.
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income (loss) was $1,843,000 and $(456,000) for the three
months ended September 30, 2000 and 1999, respectively. For the nine months
ended September 30, 2000 and 1999, total comprehensive income (loss) was
$3,126,000 and $(825,000), respectively. The difference from net income as
reported is the change in cumulative translation adjustment.
-7-
<PAGE> 8
NOTE D - SEGMENT AND RELATED INFORMATION
The Company has six reportable segments: Irvine, CA, Austin, TX, Beverly, MA,
San Jose, CA, Lexington, MA, and Hofolding, Germany. The Irvine, CA segment
produces products primarily for the wireless telecommunications market. At the
Austin, TX segment, products are primarily produced for the wireline
telecommunications market. At the Beverly, MA segment, Cesium standards are
produced for the test and measurement, telecommunications and satellite markets.
The San Jose, CA segment produces products for both the enterprise computing and
test and measurement markets. The Lexington, MA segment produces products for
the e-business market. The Hofolding, Germany segment produces products for the
wireless and wireline telecommunications and test and measurement markets.
The Company evaluates performance of its segments and allocates resources to
them based on segment operating income. Segment operating income does not
include corporate expenses, amortization of goodwill and intersegment profit
elimination. Identifiable assets include accounts receivable, inventories, and
land, building and equipment and do not include cash, income tax refund
receivable and deferred income taxes, prepaid expenses, goodwill and other
long-term corporate assets.
The tables below present information about reported segments for the quarters
ended September 30:
Segment Sales
(in thousands)
<TABLE>
<CAPTION>
Irvine, Austin, San Jose, Beverly, Lexington, Hofolding,
CA TX CA MA MA Germany Total
-------- -------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
2000
Total sales $ 16,070 $ 14,044 $ 3,074 $ 5,532 $ 40 $ 1,888 $ 40,648
Intersegment sales (1,693) (345) (74) (2,197) -- (142) $ (4,451)
-------- -------- ------- ------- ----- ------- --------
Outside sales $ 14,377 $ 13,699 $ 3,000 $ 3,335 $ 40 $ 1,746 $ 36,197
======== ======== ======= ======= ===== ======= ========
1999
Total sales $ 11,326 $ 7,963 $ 3,472 $ 3,818 $ 33 $ 1,541 $ 28,153
Intersegment sales (1,520) (157) (107) (1,336) -- (16) (3,136)
-------- -------- ------- ------- ----- ------- --------
Outside sales $ 9,806 $ 7,806 $ 3,365 $ 2,482 $ 33 $ 1,525 $ 25,017
======== ======== ======= ======= ===== ======= ========
</TABLE>
Segment Operating
Income (Loss)
(in thousands)
<TABLE>
<CAPTION>
Irvine, Austin, San Jose, Beverly, Lexington, Hofolding,
CA TX CA MA MA Germany Total
-------- -------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $ 3,657 $ 2,907 $ (166) $ 915 $(910) $ 102 $ 6,505
1999 $ (904) $ 1,277 $ 36 $ 422 $(273) $ 157 $ 715
</TABLE>
A reconciliation of segment operating income to consolidated amounts as reported
for the quarters ended September 30:
2000 1999
------- -----
(in thousands)
Segment operating income $ 6,505 $ 715
Corporate expenses (2,330) (587)
Amortization of goodwill (717) (649)
Intercompany profit (loss) elimination 88 29
------- -----
Consolidated operating income (loss) $ 3,546 $(492)
======= =====
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<PAGE> 9
The table below presents identifiable segments assets as of September 30, 2000
compared to prior year end:
IDENTIFIABLE SEGMENT ASSETS
(in thousands)
<TABLE>
<CAPTION>
Irvine, Austin, San Jose, Beverly, Lexington, Hofolding,
CA TX CA MA MA Germany Total
------- ------- --------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
September 30, 2000 $22,066 $24,722 $4,237 $14,529 $272 $3,132 $68,958
December 31, 1999 $17,126 $19,436 $4,977 $12,260 $206 $1,920 $55,925
</TABLE>
NOTE E - RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 133 (FAS 133) "Accounting for Derivative Instruments
and Hedging Activities," which defines derivatives, requires all derivatives be
carried at fair value and provides for hedging accounting when certain
conditions are met. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. Although the Company has not fully
assessed the implications of this new statement, the Company does not believe
adoption of this statement will have a material impact on its financial position
and results of operations.
In December 1999, the Securities and Exchange Commission (the "SEC") released
Staff Accounting Bulletin ("SAB") No. 101, which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Company is required to be in conformity with the
provisions of SAB 101 no later than fourth quarter 2000. The Company is
continuing to assess the impact of SAB 101.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" presented in the
Company's Annual Report to Stockholders on Form 10-K for the year ended December
31, 1999.
INTRODUCTORY NOTE
All statements other than statements of historical fact included in this
Quarterly Report on Form 10-Q are forward-looking statements 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 (the "Exchange Act"), and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable at this time, it can
give no assurance that such expectations will prove to have been correct. The
Company makes no undertaking to correct or update any such statements in the
future. Important factors that could cause actual results to differ materially
from the expectations ("Cautionary Statements") are set forth in Management's
Discussion and Analysis of Financial Condition and Results of Operations as well
as in, or incorporated by reference in, the Annual Report on Form 10-K for the
year ended December 31, 1999. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
Overview
Datum designs, manufactures and markets a wide variety of high performance time
and frequency products used to synchronize the flow of information in
telecommunications networks. The Company is also a leading supplier of precise
timing products for enterprise computing networks and a wide variety of space,
scientific and industrial test and measurement applications.
A small number of customers account for a substantial portion of the Company's
net sales and the Company expects that a limited number of customers will
continue to represent a substantial portion of net sales for the foreseeable
future. There can be no assurance that a major customer will not reduce, delay
or eliminate its purchases from the Company. Any such reduction, delay or loss
in orders could have a material adverse effect on the Company's business,
financial condition and results of operations.
Results of Operations
Net sales. Net sales increased $11.2 million, or 44.7%, to $36.2 million for the
quarter ended September 30, 2000 from $25.0 million for the corresponding
quarter in 1999. Net sales in the wireline synchronization business increased
$5.9 million or 75.5%, net sales in the wireless business increased $4.6 million
or 46.6% and net sales in the Cesium standard business increased $0.9 million or
34.3% for the quarter ended September 30, 2000 compared to the corresponding
quarter of 1999. This was offset by net sales decreases of $0.4 million or 10.8%
in the enterprise timing products business for the quarter ended September 30,
2000 compared to the corresponding quarter of 1999. For the nine months ended
September 30, 2000, net sales increased $24.4 million or 32.8% compared to the
first nine months of 1999. Growth in the telecommunications network
infrastructure, the Company's emphasis on lower cost solutions and new products
all contributed to the growth in net sales.
Gross margin. Gross margin increased to 45.4% for the quarter ended September
30, 2000 from 40.4% for the corresponding quarter in 1999. For the nine months
ended September 30, 2000, gross margin increased to 45.1% from 40.3% in the
first nine months of 1999. The increases are primarily a result of enhanced
manufacturing and development efficiencies, improved supply chain management and
efficiencies gained from increases in sales.
Selling expense. Selling expense increased by 15.9% to $4.3 million for the
quarter ended September 30, 2000, from $3.7 million for the corresponding
quarter in 1999. As a percentage of net sales, selling expense decreased to
11.8% for the quarter ended September 30, 2000 from 14.8% for the corresponding
quarter in 1999. For the nine months ended September 30, 2000, selling expense
increased by 19.4% to $12.7 million, from $10.7 million for the corresponding
period in 1999. As a percentage of net sales, selling expense decreased to 12.9%
for the nine months ended September 30, 2000 from 14.4% for the corresponding
period in 1999. The decrease was
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<PAGE> 11
primarily due to the increase in sales and the continued reduction in outside
commissions caused by the replacement of outside sales representatives, where
appropriate, with a direct sales force.
Product development. Product development expense decreased slightly to $4.0
million for the quarter ended September 30, 2000 from $4.3 million in 1999. As a
percentage of net sales, product development expense decreased to 11.2% for the
quarter ended September 30, 2000 from 17.2% for the corresponding quarter of
1999. For the nine months ended September 30, 2000, product development expense
increased 1.2% to $11.8 million from $11.7 million in the corresponding period
in 1999. As a percentage of net sales, product development expense decreased to
12.0% for the nine months ended September 30, 2000 from 15.7% for the
corresponding period of 1999. The spending reflects the continual emphasis on
new product design and enhancement of current products.
General and administrative. General and administrative expense increased 74.4%
to $4.5 million for the quarter ended September 30, 2000, from $2.6 million for
the corresponding quarter of 1999. Goodwill amortization from the July 1999
Digital Delivery acquisition and other Digital Delivery general and
administrative expense is responsible for $379,000 of the increase. The balance
of the change was caused primarily by incentive accruals and a $517,000 charge
related to the relocation of several product lines from San Jose to
Massachusetts. As a percentage of net sales, general and administrative expense
increased to 12.6% for the quarter ended September 30, 2000, from 10.4% for the
corresponding quarter of 1999. For the nine months ended September 30, 2000,
general and administrative expense increased 74.4% to $12.8 million, or 13.0% of
net sales, from $7.4 million, or 9.9% of net sales for the corresponding period
in 1999.
Interest, net. Net interest expense decreased by $210,000 to $166,000 for the
quarter ended September 30, 2000 from $376,000 for the corresponding quarter of
1999. For the nine months ended September 30, 2000, net interest expense
increased $0.3 million to $1.4 million from $1.1 million for the corresponding
period in 1999. The increase in year to date net interest expense is a result of
lower interest income and the write-off of unamortized debt expense in the
quarter ended June 30, 2000 in relation to the Company's refinancing of its
debt.
Shares outstanding. Shares outstanding increased for the quarter ended September
30, 2000 as a result of shares issued through the Company's 401(k), Employee
Stock Purchase Plan and incentive stock option plans.
Liquidity and Capital Resources
On July 6, 2000, the Company refinanced its debt. The balance of the Series A
and Series B notes were paid off in full and replaced with a $6 million term
loan payable in monthly principal installments of $250,000 plus interest
beginning August 1, 2000. The interest rate on the $6 million term loan is fixed
at 9.15%. The Company has a secured credit facility at an amount not to exceed
$10 million, under which no amounts were outstanding as of September 30, 2000.
The facility expires in June 2001. The Company believes that its cash and credit
facilities are adequate to fund the Company's operations for the foreseeable
future.
Cash provided by operations was approximately $4.6 million for the nine months
ended September 30, 2000 compared to cash provided by operations of $2.3 million
for the corresponding period of 1999. Cash flows were positively affected in the
third quarter of 2000 by slight increases in inventory levels and accounts
receivable balances relative to sales, and increases in accounts payable and
accrued expense.
Cash used in investing activities was approximately $3.0 million for the nine
months ended September 30, 2000 compared to $4.2 million for the corresponding
period of 1999.
Cash used in financing activities was approximately $7.9 million for the nine
months ended September 30, 2000 compared to $2.8 million for the corresponding
nine months of 1999. This was the result of refinancing the Company's debt in
the third quarter of 2000.
Accounts receivable increased $8.2 million to $31.2 million at September 30,
2000 from $22.9 million at December 31, 1999 due to increased shipments in the
wireline and wireless businesses during the latter half of the third quarter of
2000 compared to the latter half of the fourth quarter of 1999.
-11-
<PAGE> 12
Inventories increased $4.1 million to $25.9 million at September 30, 2000 from
$21.8 million at December 31, 1999, as a result of the continued increase in
bookings during the third quarter of 2000.
Accounts payable increased $2.8 million to $9.5 million at September 30, 2000
from $6.7 million at December 31, 1999. This was a result of increased inventory
purchases to support increased sales volume during the quarter ended September
30, 2000 in the wireless and wireline businesses compared to the quarter ended
December 31, 1999.
At September 30, 2000, the Company had working capital of $40.7 million and a
current ratio of 2.8:1 compared to working capital of $42.0 million and a
current ratio of 3.7:1 at December 31, 1999. The decrease is primarily due to
the decrease in cash as a result of the debt refinancing.
Information Regarding Potential Fluctuations in Quarterly Operating Results
The Company has experienced, and expects to continue to experience, fluctuations
in sales and operating results from quarter to quarter. As a result, the Company
believes that period-to-period comparisons of its operating results are not
necessarily meaningful, and that such comparisons cannot be relied upon as
indicators of future performance. A significant component of the fluctuations
results from rescheduling of orders by the Company's major customers, in some
cases due in part to the customers' attempts to minimize inventories. Other
factors that could cause the Company's sales and operating results to vary
significantly from period to period include: contractual price reductions on
products sold to certain major customers; the timing, availability and sale of
new products; changes in the mix of products with differing gross margins;
variations in manufacturing capacities, efficiencies and costs; the availability
and cost of components; warranty expenses; and variations in product development
and other operating expenses. In addition, the sales cycles for many of the
products are often lengthy and unpredictable, and can take up to 36 months.
Further, there can be no assurance that the Company will be successful in
closing large transactions on a timely basis or at all. The timing of these
transactions could cause additional variability in the Company's operating
results. The Company's quarterly results of operations are also influenced by
competitive factors, including pricing and availability of the Company's and
competing companies' time and frequency products. Large portions of the
Company's expenses are fixed and difficult to reduce in a short period of time.
If net sales do not meet the Company's expectations, the Company's fixed
expenses would exacerbate the effect of such net sales shortfall. Furthermore,
announcements by the Company or its competitors regarding new products and
technologies could cause customers to defer purchases of the Company's products.
Order deferrals by the Company's customers, purchase policy changes, delays in
the Company's introduction of new products and longer than anticipated sales
cycles for the Company's products have in the past materially adversely affected
the Company's quarterly results of operations. Due to the foregoing factors, as
well as other unanticipated factors, it is likely that in some future quarter
the Company's operating results will be below the expectations of public market
analysts or investors. In such event, the price of the Company's common stock
would be materially adversely affected.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
There has been no material change from the disclosure regarding market risk
contained in the Annual Report on Form 10-K for the fiscal year ended December
31, 1999.
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<PAGE> 13
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted because the related information is either
inapplicable or has been previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.53 Second Amended and Restated Credit Agreement, dated as of
July 7, 2000, by and between the Registrant and Wells
Fargo Bank, National Association.
10.54 Third Amended and Restated Revolving Line of Credit Note,
date July 7, 2000, issued by the Registrant in favor of
Wells Fargo Bank, National Association.
10.55 Term Note, dated July 7, 2000, issued by the Registrant in
favor of Wells Fargo Bank, National Association.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended September 30, 2000
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<PAGE> 14
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.
DATUM INC.
/s/ Erik H. van der Kaay Date November 13, 2000
----------------------------------- -----------------------
Erik H. van der Kaay, President and
Chief Executive Officer
/s/ Robert J. Krist Date November 13, 2000
----------------------------------- -----------------------
Robert J. Krist, Vice President and
Chief Financial Officer
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<PAGE> 15
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
10.53 Second Amended and Restated Credit Agreement, dated as of July 7, 2000,
by and between the Registrant and Wells Fargo Bank, National
Association.
10.54 Third Amended and Restated Revolving Line of Credit Note, date July 7,
2000, issued by the Registrant in favor of Wells Fargo Bank, National
Association.
10.55 Term Note, dated July 7, 2000, issued by the Registrant in favor of
Wells Fargo Bank, National Association.
27 Financial Data Schedule
