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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
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FORM 10-Q/A
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2001
[ ] 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 0-27312
TOLLGRADE COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 25-1537134
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
493 NIXON RD.
CHESWICK, PA 15024
(Address of Principal Executive Offices, including zip code)
412-820-1400
(Registrant's telephone number, including area code)
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 _______
As of April 30, 2001, there were 13,379,310 shares of the Registrant's
Common Stock, $0.20 par value per share, and no shares of the Registrant's
Preferred Stock, $1.00 par value per share, outstanding.
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This report consists of a total of 21 pages. The exhibit index is on page 20.
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TOLLGRADE COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2001 AND DECEMBER 31, 2000 ........ 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 2001 AND APRIL 1, 2000................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 2001 AND APRIL 1, 2000................................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS..................................... 6
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS................................................. 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION................................................................................ 11
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS........................................................................ 18
ITEM 2 CHANGES IN SECURITIES.................................................................... 18
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.......................................................... 18
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................... 18
ITEM 5 OTHER INFORMATION........................................................................ 18
ITEM 6 EXHIBITS AND REPORTS FILED ON FORM 8-K................................................... 18
SIGNATURE.............................................................................................. 19
EXHIBIT INDEX.......................................................................................... 20
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PORTIONS AMENDED
The Registrant hereby amends Part I, Item 1 contained in the Registrant's Report
on Form 10-Q for the quarter ended March 31, 2001 to reclassify certain tax
benefits on the exercise of non-qualified stock options from "Cash Flows
provided by Financing Activities" to "Cash Flows provided by Operating
Activities" section of the Condensed Consolidated Statements of Cash Flows. On
the Condensed Consolidated Statements of Cash Flows, in the section entitled
"Adjustments to reconcile net income to net cash provided by operating
activities", the line item description "Tax benefit from exercise of stock
options" is added and the amount of $0 and $1,186,803 for the three- month
periods ended March 31, 2001 and April 1, 2000, respectively, are reflected. In
addition, the line item description "Refund of income taxes paid" is added and
the amount of $8,150,170 and $0 for the three- month periods ended March 31,
2001 and April 1, 2000, respectively are reflected. The sub-totals "Net Cash
Provided by Operating Activities" are amended to read $13,505,261, and
$4,700,006 for the three-month periods ended March 31, 2001 and April 1, 2000,
respectively. In the section entitled "Cash Flows from Financing Activities",
the line item description "Proceeds from the exercise of stock options,
including related tax benefits", is amended to read "Proceeds from the exercise
of stock options" and the amounts are amended to read $332,731 and $5,855,399
for the three month period ended March 31, 2001 and April 1, 2000, respectively.
In addition, the line item description "Refund of prior year income taxes paid
resulting from the tax benefit of the exercise of stock options" was
reclassified from cash flows from financing activities to the section entitled
"Adjustments to reconcile net income to net cash provided by operating
activities" and amended to read "Refund of income taxes paid", as previously
mentioned. Except as set forth in Part I, Item 1 below, no other changes are
made to the Registrant's Report on Form 10-Q for the quarter ended March 31,
2001.
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TOLLGRADE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended
March 31, 2001 April 1, 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,755,169 $ 5,224,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 581,485 375,036
Tax benefit from exercise of stock options -- 1,186,803
Refund of income taxes paid 8,150,170 --
Deferred income taxes (224,129) --
Provision for losses on inventory 23,218 --
Provision for allowance for doubtful accounts 175,000 --
Changes in assets and liabilities:
Increase in accounts receivable-trade (1,407,256) (668,189)
Decrease (increase) in accounts receivable-other 44,268 (158,468)
Decrease (increase) in inventories 240,018 (2,823,494)
Decrease (increase) in prepaid expenses and other assets 238,279 (63,747)
(Decrease) increase in accounts payable (1,501,390) 1,296,659
Increase in accrued expenses and deferred income 222,613 1,379,729
Decrease in accrued salaries and wages (2,156,672) (1,166,093)
(Decrease) increase in royalties payable (260,014) 150,837
Increase (decrease) in income taxes payable 3,624,502 (33,681)
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Net cash provided by operating activities 13,505,261 4,700,006
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CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption/maturity of investments 7,002,881 2,327,854
Purchase of investments (5,906,520) (9,191,819)
Capital expenditures (1,071,479) (1,181,266)
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Net cash provided by (used in) investing activities 24,882 (8,045,231)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 332,731 5,855,399
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Net cash provided by financing activities 332,731 5,855,399
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Net increase in cash and cash equivalents 13,862,874 2,510,174
Cash and cash equivalents at beginning of period 30,423,783 15,555,810
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Cash and cash equivalents at end of period $44,286,657 $18,065,984
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The accompanying notes are an integral part of the
condensed consolidated financial statements.
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TOLLGRADE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revision to Financial Statements:
The accompanying condensed consolidated statements of cash flows have been
revised to reflect tax benefits arising from the exercise of stock options as an
operating cash flow rather than a financing cash flow. The effect was to
increase cash flows from operations and decrease cash flows from financing for
the three-months ended March 31, 2001 by $8,150,170. The prior period presented
has been reclassified for comparative purposes in accordance with Emerging
Issues Task Force Issue 00-15. The condensed consolidated balance sheets and
condensed consolidated statements of operations were not affected.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Tollgrade Communications, Inc.
and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
Tollgrade Communications, Inc. and its subsidiaries as of March 31, 2001, and
the related condensed consolidated statements of operations and cash flows for
the three-month periods ended March 31, 2001 and April 1, 2000. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 2000, and the related
consolidated statements of operations, shareholders' equity, and of cash flows
for the year then ended (not presented herein), and in our report dated January
19, 2001, except for the last paragraph of Note 1, as to which the date is
August 14, 2001, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2000, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
As indicated in Note 1, the 2001 condensed consolidated statement of cash flows
has been revised.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
April 11, 2001, except for the last paragraph of Note 1, as to which the date is
August 14, 2001
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following exhibits are being filed with this report:
Exhibit
Number Description
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15 Letter re unaudited interim financial information
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SIGNATURE
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.
TOLLGRADE COMMUNICATIONS, INC.
(REGISTRANT)
Dated: August 17, 2001 /S/ CHRISTIAN L. ALLISON
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CHRISTIAN L. ALLISON
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Dated: August 17, 2001 /S/ SAMUEL C. KNOCH
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SAMUEL C. KNOCH
CHIEF FINANCIAL OFFICER AND TREASURER
Dated: August 17, 2001 /S/ BRADLEY N. DINGER
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BRADLEY N. DINGER
CONTROLLER
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EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit
Number Description
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15 Letter re unaudited interim financial information
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