<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0 - 20666
MICROTEST, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 86-0485884
(State or other jurisdiction of (IRS employer
incorporation) identification number)
4747 NORTH 22ND STREET
PHOENIX, ARIZONA 85016
(602) 952-6400
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
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 THE
FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.
YES X NO
AT MAY 2, 2000, THERE WERE 8,675,342 SHARES OF COMMON STOCK OUTSTANDING,
EXCLUSIVE OF TREASURY SHARES HELD BY THE REGISTRANT.
<PAGE> 2
MICROTEST, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets-
April 1, 2000 and December 31, 1999 3
Consolidated Statements of Operations-
Three Months Ended
April 1, 2000 and March 27, 1999 4
Consolidated Statements of Cash Flows-
Three Months Ended
April 1, 2000 and March 27, 1999 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
</TABLE>
2
<PAGE> 3
MICROTEST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
April 1, December 31,
2000 1999
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,719 $ 10,431
Restricted investments 296 293
Accounts receivable, net of allowances for doubtful accounts of $228
and $171, and sales returns of $456 and $422, respectively 8,544 7,828
Inventories, net 3,895 4,289
Prepaid expenses 865 864
Income taxes receivable 2,198 2,777
Deferred income taxes 1,030 1,030
-------- --------
Total current assets 28,547 27,512
-------- --------
PROPERTY AND EQUIPMENT, NET 2,079 2,238
-------- --------
OTHER ASSETS:
Capitalized software, net of accumulated amortization of $1,703
and $1,510, respectively 1,067 1,260
Deferred income taxes 1,783 1,783
Other 980 1,263
-------- --------
Total other assets 3,830 4,306
-------- --------
$ 34,456 $ 34,056
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,326 $ 2,939
Accrued liabilities 2,095 2,204
Accrued payroll and employee benefits 1,260 1,160
Accrued deferred compensation 296 293
-------- --------
Total current liabilities 5,977 6,596
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 15,000,000 shares authorized; 8,675,342
shares and 8,555,137 shares outstanding, respectively 9 9
Additional paid-in capital 35,106 34,521
Accumulated deficit (5,418) (5,852)
-------- --------
29,697 28,678
Less: treasury stock, at cost, 232,520 shares (1,218) (1,218)
-------- --------
Total stockholders' equity 28,479 27,460
-------- --------
$ 34,456 $ 34,056
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE> 4
MICROTEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 2000 AND MARCH 27, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
April 1, March 27,
2000 1999
-------- --------
(unaudited)
<S> <C> <C>
NET REVENUE $ 11,601 $ 9,001
COST OF REVENUE 4,945 3,951
-------- --------
Gross profit 6,656 5,050
-------- --------
OPERATING EXPENSES:
Sales and marketing 2,975 3,177
Research and development 1,993 1,701
General and administrative 1,368 1,402
Special charge -- 524
-------- --------
Total operating expenses 6,336 6,804
-------- --------
INCOME (LOSS) FROM OPERATIONS 320 (1,754)
OTHER INCOME, NET 134 63
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 454 (1,691)
INCOME TAX (PROVISION) BENEFIT (20) 306
-------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 434 (1,385)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX -- (117)
-------- --------
NET INCOME (LOSS) $ 434 $ (1,502)
======== ========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) before change in accounting principle $ .05 $ (.17)
Cumulative effect of change in accounting principle -- (.02)
-------- --------
Net income (loss) $ .05 $ (.19)
======== ========
Weighted average common shares outstanding - basic 8,383 8,049
======== ========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) before change in accounting principle $ .05 $ (.17)
Cumulative effect of change in accounting principle -- (.02)
-------- --------
Net income (loss) $ .05 $ (.19)
======== ========
Weighted average common shares outstanding - diluted 9,133 8,049
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
MICROTEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED APRIL 1, 2000 AND MARCH 27, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
April 1, March 27,
2000 1999
-------- --------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 434 $ (1,502)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 377 494
Change in accounts receivable allowances 91 (554)
(Increase) decrease in accounts receivable (807) 1,586
(Increase) decrease in income taxes receivable 579 (46)
Decrease in inventories 394 91
(Increase) decrease in prepaid expenses and other assets 282 (146)
Increase in deferred income taxes -- (332)
Decrease in accounts payable (613) (945)
Increase (decrease) in accrued liabilities (109) 272
Increase in accrued payroll and employee benefits 100 69
-------- --------
Net cash provided by (used in) operating activities 728 (1,013)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25) (211)
Capitalized software -- (78)
-------- --------
Net cash used in investing activities (25) (289)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 585 83
-------- --------
Net cash provided by financing activities 585 83
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,288 (1,219)
CASH AND CASH EQUIVALENTS, beginning of period 10,431 9,618
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 11,719 $ 8,399
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
MICROTEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION:
The accompanying consolidated financial statements include the accounts
of Microtest, Inc. and its wholly owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10Q. Accordingly, they do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
accompanying consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments which are necessary for a fair
statement of the results of operations and consolidated financial position for
the interim periods presented. Certain information and footnote disclosures
normally included in full year financial statements have been condensed or
omitted pursuant to interim reporting rules and regulations. Although the
Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1999 Annual Report to shareholders and report
on Form 10-K. The results of operations for the three months ended April 1, 2000
are not necessarily indicative of the results to be expected for a full fiscal
year.
(2) INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
April 1, December 31,
2000 1999
------- ---------
(unaudited)
<S> <C> <C>
Raw materials $ 1,031 $ 1,154
Work-in-process 64 99
Finished goods 3,136 3,738
------- -------
4,231 4,991
Less: Allowance for excess and
obsolete inventory (336) (702)
------- -------
$ 3,895 $ 4,289
======= =======
</TABLE>
6
<PAGE> 7
(3) EARNINGS (LOSS) PER SHARE:
The following table sets forth the computation of basic and diluted net
income (loss) per share:
<TABLE>
<CAPTION>
April 1, March 27,
2000 1999
------------- -------------
<S> <C> <C>
Net income (loss) $ 434 $ (1,502)
============= ==============
Weighted average common shares
outstanding 8,383 8,049
Effect of stock options 750 --
------------- -------------
Weighted average common and common
equivalent shares outstanding 9,133 8,049
============= ==============
Basic net income (loss) per share $ .05 $ (.19)
============= ==============
Diluted net income (loss) per share $ .05 $ (.19)
============= ==============
</TABLE>
(4) SEGMENT REPORTING:
The Company is organized into two reportable business segments: Network
Test and Measurement ("NTM") and Network Appliance and Storage ("NAS").
The NTM business segment includes hand held products used as network
certification and troubleshooting tools in the installation and operation of
computerized networks. The NTM segment consists of devices for testing fiber
optic and copper networks, as well as, active operational LANs. The NTM business
segment consists of products that are used by service providers and system
integrators to perform critical cabling certification and network diagnostics.
The NAS business segment consists of a family of server appliances and
server products. Server appliances are network infrastructure devices designed
to facilitate the exchange of information over a computing network. The
Company's server appliances use Linux as an open source operating system and
encompass hard disk storage devices, as well as, optical (CD-ROM and DVD-ROM)
storage devices. NAS products are designed to enable organizations to easily
develop, store, manage, and access information and knowledge bases. The NAS
reportable business segment includes the Company's H+H subsidiary that develops
and sells several software products, CD-ROM networking systems and service
maintenance contracts in Europe.
7
<PAGE> 8
Information related to the operations of the Company in different
business segments for the first quarter ended April 1, 2000 and March 27, 1999
is set forth below.
<TABLE>
<CAPTION>
NAS NTM Total
--------- --------- ---------
<S> <C> <C> <C> <C>
Net revenue: 2000 $ 2,807 $ 8,794 $11,601
1999 (1) 3,111 5,890 9,001
Gross profit: 2000 1,868 4,788 6,656
1999 (1) 1,755 3,295 5,050
</TABLE>
<TABLE>
<CAPTION>
April 1, March 27,
2000 1999
------- --------
<S> <C> <C>
Gross profit for reportable segments $ 6,656 $ 5,050
Unallocated amounts:
Operating expenses (6,336) (6,804)
Other income, net 134 63
------- -------
Income (loss) before income taxes $ 454 $(1,691)
======= =======
</TABLE>
(1) Includes $1.5 million and $0.9 million of net revenue and gross profit,
respectively, from the NAS enterprise systems market which we exited in the
third quarter of 1999.
Net revenues to unaffiliated customers by principal geographic area for the
first quarter ended April 1, 2000 and March 27, 1999, follows:
<TABLE>
<CAPTION>
April 1, March 27,
2000 1999
------- -------
<S> <C> <C>
North America $ 6,133 $ 4,893
International 5,468 4,108
------- -------
Net revenues $11,601 $ 9,001
======= =======
</TABLE>
(5) MAJOR CUSTOMERS:
Graybar Electric Company, Inc. accounted for 10% and 12% of total
revenues for the quarter ended April 1, 2000 and March 27, 1999, respectively.
8
<PAGE> 9
(6) COMMITMENTS AND CONTINGENCIES:
The Company is subject to legal claims in the ordinary course of
business. Management believes that the Company's liability, if any, with respect
to such matters will not have a material adverse effect on the Company's
financial condition and results of operations.
On March 8, 1999 and April 7, 1999, the Company was named as a
defendant in two purported class action lawsuits filed in the United States
District Court for the District of Arizona. The two lawsuits contain
substantially the same allegations and were brought on behalf of a class of
persons who purchased Microtest common stock between April 14, 1998 and March 2,
1999. The complaints allege claims under Section 10(b) and SEC Rule 10b-5 of the
Securities and Exchange Act of 1934. The claims further allege that the Company
made misrepresentations or omissions concerning its financial statements that
artificially inflated the price of the Company's common stock. On November 29,
1999, a motion to dismiss the lawsuit was filed. On January 10, 2000, the Court
heard arguments on the motion to dismiss. This motion is currently pending. The
Company intends to defend the actions vigorously. The Company is unable to
predict the ultimate outcome of this litigation. If the lawsuits were ultimately
determined adversely to the Company, it could have a material effect on our
results of operations and financial condition.
The Securities and Exchange Commission ("SEC") is engaged in an
investigation relating primarily to accounting matters of the Company. They have
requested and received documents from us and taken testimony from certain former
employees. The SEC has not indicated whether they intend to formally expand the
scope of the investigation, or take any other measures. They have not, to date,
asserted any specific claims, or remedy. The Company is unable to predict the
effect, if any, of this inquiry.
9
<PAGE> 10
MICROTEST, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT RESULTS
Except for the historical information contained herein, this Report
contains forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. Words such as "believe," "expect," "intend,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements, which speak only as of the date the statement was
made. Such statements may include, but not be limited to, projections of
revenues, income or loss, capital expenditures, plans for future operations,
financing needs or plans, the impact of inflation, and plans relating to our
products or services, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking statements. Additional risk factors that
could cause actual results to differ materially from those expressed in such
forward-looking statements are set forth in Exhibit 99 which is attached hereto
and incorporated by reference into this Quarterly Report on Form 10-Q. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. This Report should be read in conjunction with our Report
on Form 10-K for the fiscal year ended December 31, 1999.
All references to "we," "our," "us," or "Microtest" refer to Microtest,
Inc. and its subsidiaries.
RESULTS OF OPERATIONS
REVENUE. Net revenue for the quarter ended April 1, 2000 was $11.6
million, an increase of 29% from revenue of $9.0 million for the corresponding
quarter last year. Revenue increased primarily due to increased NTM and NAS
demand for our OMNIScanner, OMNIFiber, Microscanner and Virtual CD products,
offset by the effect of our closure of the Nashua, New Hampshire facility in the
third quarter of 1999 and the discontinuance of its NAS enterprise product
sales. Revenue growth, exclusive of the prior year effect of discontinued NAS
enterprise product sales, was 55% compared to the corresponding quarter last
year.
We distribute products in both the United States and international
markets. United States net revenues were $6.1 million and $4.9 million,
representing 53% and 54% of net revenue, for the first quarters of 2000 and
1999, respectively. The 25% increase in United States net revenue in the first
quarter of 2000 from the first quarter of 1999 was primarily due to increased
domestic demand for the OMNIScanner products.
International sales were $5.5 million and $4.1 million, representing
47% and 46% of net revenue, for the first quarters of 2000 and 1999,
respectively. The 34% increase in international sales in the first quarter of
2000 from the first quarter of 1999 was primarily due to increased sales of our
OMNIScanner and Virtual CD software product worldwide as a result of expanding
our sales and marketing presence in Europe, Latin America, and the Asia Pacific
region during the latter half of 1999.
10
<PAGE> 11
GROSS PROFIT. Gross profit was $6.7 million, or 57.4%, and $5.1
million, or 56.1%, for the three months ended April 1, 2000 and March 27, 1999,
respectively. Gross margin increased due to the absence of lower margin CD-ROM
enterprise system sales and an increase in higher margin product sales,
including our Virtual CD software product. Gross margins may fluctuate on a
quarterly basis because of product mix, pricing actions and changes in sales and
inventory allowances.
SALES AND MARKETING. Sales and marketing expenses were $3.0 million, or
26% of net revenue, and $3.2 million, or 35% of net revenue, for the three
months ended April 1, 2000 and March 27, 1999, respectively. The decrease in
marketing and sales expenses was primarily related to reduced expenses as a
result of our exiting the enterprise optical NAS business during 1999, offset by
additional sales and marketing investments in our Asia Pacific and Latin America
regions.
RESEARCH AND DEVELOPMENT. Research and development expenses were $2.0
million, or 17% of net revenue, and $1.7 million, or 19% of net revenue, for the
three months ended April 1, 2000 and March 27, 1999, respectively. This increase
was the result of additional investments into research and development
activities in connection with the recently introduced FileZerver product and the
effect of software development costs now being expensed, whereas in prior year
these costs were capitalized. Beginning July 1999, we changed our development
process and believe that new product development is essentially complete with
the establishment of technological feasibility. Accordingly, software costs are
currently expensed as incurred.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$1.4 million in both quarters ended April 1, 2000 and March 27, 1999. General
and administrative expenses were 12% and 16% of net revenue for the first
quarters of 2000 and 1999, respectively, as revenue increased at a significantly
greater rate than these expenses.
SPECIAL CHARGE. The special charge recorded in the first quarter of
1999 represents severance expenses taken to recognize the restructuring of our
management organization.
EFFECTIVE TAX RATE. Income taxes provided for the first quarter ended
April 1, 2000 consisted of foreign income taxes. United States taxes were not
provided due to our existing net operating loss carryforwards, as well as, the
reversal of valuation allowances provided for in 1999 that offset a provision
for taxes.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. The cumulative
effect of a change in accounting principle, recorded in the first quarter of
1999, reflects the write-off of international product translation costs that had
previously been capitalized. The write-off is in accordance with AICPA Statement
of Position 98-5, "Reporting on the Costs of Start-up Activities."
LIQUIDITY AND CAPITAL RESOURCES
We held cash and cash equivalents of $11.7 million at April 1, 2000
compared to $10.4 million at December 31, 1999. Working capital was $22.6
million at April 1, 2000 compared to $20.9 million at December 31, 1999. During
the quarter ended April 1, 2000, cash flows provided by operations were $0.7
million, resulting primarily from net income of $0.4 million, noncash
depreciation and amortization of $0.4 million, decreases in inventory of $0.4
million, income tax receivables of $0.6 million and other assets of $0.3
million; offset by increases in net trade receivables of $0.7 million and
decreases in accounts payable and accrued liabilities of $0.7 million. Cash
flows provided by financing activities was
11
<PAGE> 12
$0.6 million for the quarter ended April 1, 2000 primarily due to the exercise
of common stock options and issuance of common stock in connection with our
employee stock purchase plan.
Historically, we have financed our cash requirements principally
through cash flow from operating activities, the sale of common stock through an
initial public offering in October 1992 and the exercise of stock options. We
have no long-term obligations and expect that our existing working capital,
together with cash flows from operations will be sufficient to meet our
operating and capital needs for at least the next year.
12
<PAGE> 13
MICROTEST, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are subject to litigation in the ordinary course
of business. Our insurance coverage may not be adequate to cover all liabilities
arising out of such claims. We are not engaged in any legal proceedings in the
ordinary course of business that are expected to have a material adverse affect
on our financial condition or results of operations.
We, Richard G. Meise, our former Chief Executive Officer, Charles
Mihaylo, our former Chief Operating Officer and John O'Block, our former Chief
Financial Officer have been named as defendants in two purported class action
lawsuits: Great Neck Capital Appreciation Investment Partnership, L.P., et. al.
v. Microtest, Inc., et. al., CIV 99-0438 PHX EHC filed on March 8, 1999, in
United States District Court for the District of Arizona and Banks v. Microtest,
Inc., et. al., CIV 99-672 PHX EHC filed on April 7, 1999 in United States
District Court for the District of Arizona. The two lawsuits contain
substantially the same allegations and were brought on behalf of a class of
persons who purchased our common stock between April 14, 1998 and March 2, 1999.
The complaints allege claims under Section 10(b) and SEC Rule 10b-5 of the
Securities and Exchange Act of 1934. The claims further allege that we made
misrepresentations or omissions concerning our financial statements and public
disclosures that artificially inflated the price of our common stock. The
plaintiffs seek an unspecified amount of actual damages, attorney's fees and
costs. On November 29, 1999, a motion to dismiss the lawsuit was filed. On
January 10, 2000, the Court heard arguments on the motion to dismiss. This
motion is currently pending. We intend to defend the actions vigorously. We are
unable to predict the ultimate outcome of this litigation. If the lawsuits were
ultimately determined adversely to us, it could have a material effect on our
results of operations and financial condition.
The Securities and Exchange Commission ("SEC") is engaged in an
investigation relating primarily to our accounting matters. They have requested
and received documents from us and taken testimony from certain former
employees. The SEC has not indicated whether they intend to formally expand the
scope of the investigation, or take any other measures. They have not, to date,
asserted any specific claims, or remedy. We are unable to predict the effect, if
any, of this inquiry.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Page or
Number Description Method of Filing
- ------ ----------- ----------------
<S> <C> <C>
27 Financial Data Schedule (for electronic submission only) Filed herewith
99 Private Securities Litigation Reform Act of 1995 Safe Harbor Filed herewith
Compliance Statement for Forward-Looking Statements
</TABLE>
(b) Reports on Form 8-K
None.
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 hereunto duly authorized.
MICROTEST, INC.
May 15, 2000 /s/ Vincent C. Hren
------------------------------------------
Vincent C. Hren
President and Chief Executive Officer
May 15, 2000 /s/ William R. Crowell
------------------------------------------
William R. Crowell
Vice President, Secretary and Chief Financial
Officer
(Principal Financial Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-01-2000
<EXCHANGE-RATE> 1
<CASH> 11,719
<SECURITIES> 0
<RECEIVABLES> 9,228
<ALLOWANCES> 684
<INVENTORY> 3,895
<CURRENT-ASSETS> 28,547
<PP&E> 10,954
<DEPRECIATION> 8,875
<TOTAL-ASSETS> 34,456
<CURRENT-LIABILITIES> 5,977
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 28,470
<TOTAL-LIABILITY-AND-EQUITY> 34,456
<SALES> 11,601
<TOTAL-REVENUES> 11,601
<CGS> 4,945
<TOTAL-COSTS> 11,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (134)
<INCOME-PRETAX> 454
<INCOME-TAX> 20
<INCOME-CONTINUING> 434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
<PAGE> 1
MICROTEST, INC.
EXHIBIT 99
Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
In passing the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"), Congress encouraged public companies to make "forward-looking
statements"(1) by creating a safe-harbor to protect companies from securities
law liability in connection with forward-looking statements. Microtest, Inc.
(the "Company" or "Microtest") intends to qualify both its written and oral
forward-looking statements for protection under the PSLRA.
To qualify oral forward-looking statements for protection under the
PSLRA, a readily available written document must identify important factors that
could cause actual results to differ materially from those in the
forward-looking statements. Microtest provides the following information in
connection with its continuing effort to qualify forward-looking statements for
the safe harbor protection of the PSLRA.
Important factors currently known to management that could cause actual
results to differ materially from those in forward-looking statements include,
but are not limited to, the following: (i) changes in our product and customer
mix; (ii) introduction of new products by us or our competitors; (iii) pricing
pressures and economic conditions in the United States, Europe, Latin America
and the Asia Pacific; (iv) the economic condition of the computer industry; (v)
our failure to continue to enhance our current product line and to continue to
develop and introduce new products that keep pace with competitive product
introductions and technological advances, satisfy diverse and evolving customer
requirements, or otherwise achieve market acceptance; (vi) loss of or reduction
in purchases by certain of our distributors and VARs; (viii) any reduction in
sales of the OMNIScanner, PentaScanner and Zerver products from which we derive
substantially all of our revenue; (ix) our inability to accurately monitor end
user demand for our products; (x) unanticipated product returns to the extent
such returns exceed our reserves; (xi) the cost, quality and availability of
third-party components used in our systems; (xii) the loss of any of our
third-party suppliers; (xiii) any disruption or reduction in the future supply
of key components currently obtained from limited sources; (xiv) defects in our
products that could cause delays in product introductions and shipments, cause
loss of or delays in market acceptance, result in increased costs, require
design modifications or impair customer satisfaction; (xv) inventory writedowns,
product returns or price protection credits that exceed our estimates; (xvi) our
inability to expand our international operations in a timely and cost effective
manner, as well as other risks in conducting business internationally, including
potential effects of fluctuating currencies; (xvii) our ability to recruit, hire
and retain the services of key engineering, sales and marketing, management and
manufacturing personnel; and (xviii) failure to protect our proprietary
information and technology.
Forward-looking statements express expectations of future events. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to these
inherent uncertainties, the investment community is urged not to place undue
reliance on forward-looking statements. In addition, Microtest undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to projections
over time.
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(1) "Forward-looking statements" can be identified by use of words such as
"expect," "believe," "estimate," "project," "forecast," "anticipate," "plan,"
and similar expressions.
