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Natural
MicroSystems Corporation
Year
Ended December 31, 1999 Compared to Year Ended December 31,
1998
REVENUES
Revenues
increased to $79.5 million for the year ended December 31,
1999 from $76.5 million for the year ended December 31, 1998,
representing an increase of 3.9%. The increase is attributable
to the growth of our services sector, increased revenues in
Europe and increased revenues from our strategic accounts,
partially offset by lower revenues in Latin America. Revenues
from sales to customers located outside North America were
27.4%, or $21.8 million, and 26.9%, or $20.6 million, in 1999
and 1998, respectively. No single customer accounted for more
than 10% of revenues in 1999 or 1998.
GROSS
PROFIT
Gross
profit decreased to $48.0 million for 1999 from $48.4 million
for 1998, representing a decrease of 0.9%. The decrease in
gross profit was related to increased expenses incurred for
investment in the services and manufacturing departments.
SELLING,
GENERAL AND ADMINISTRATIVE
Selling,
general and administrative expense increased to $40.0 million
for 1999 from $34.0 million for 1998, representing an increase
of 17.6%. The increase in expenses was due to costs associated
with increased selling activity and increased expenditures
for marketing, international expansion and customer support.
In 1999, we added a sales office in Italy. These increased
expenses were in anticipation of increased revenues and aided
in our repositioning.
RESEARCH
AND DEVELOPMENT
Research
and development expense increased to $24.7 million for 1999
from $21.5 million in 1998, representing an increase of 15.1%.
The increase in expense was primarily due to increased personnel
and project development costs associated with the Convergence
Generation and Alliance Generation product lines and associated
software, and development of PolicyPoint. We expect that our
research and development expense will continue to increase.
OTHER
INCOME, NET
Other
income and expense, reflecting net interest income and foreign
exchange gains and losses, decreased to $181,000 for 1999
from $1.1 million (exclusive of merger costs) for 1998, representing
a decrease of 83.5%. The decrease is primarily due to lower
average cash balances for the period, foreign exchange losses
and an increase in interest expense associated with the debt
assumed in the QWES acquisition.
MERGER-RELATED
EXPENSES
We incurred
a charge of $1.2 million in the fourth quarter of 1999 consisting
of investment banking, accounting and legal fees connected
with closing the QWES acquisition.
INCOME
TAX EXPENSE (BENEFIT)
Income
tax expense (benefit) was $1.0 million and ($2.9 million)
for 1999 and 1998, respectively. During the quarter ended
December 31, 1999, we concluded that a full valuation allowance
against our net deferred tax asset was required, under applicable
accounting standards, due to uncertainties surrounding its
realization. Accordingly, we established a full valuation
allowance for the net deferred tax asset of $4.8 million as
of the beginning of the year. This was partially offset by
1999 operating loss carrybacks and a reduction in the income
tax reserve for probable loss contingencies.
Year
Ended December 31, 1998 Compared to Year Ended December 31,
1997
REVENUES
Revenues
increased to $76.5 million for 1998 from $75.4 million for
1997, representing a 1.5% increase. The increase is attributable
to the growth of our services department, which was added
in 1998, as well as increased revenues in North America and
Asia, partially offset by decreased revenues in Europe and
Latin America. Revenues from sales to customers located outside
North America were 26.9%, or $20.6 million, for 1998 and 27.9%,
or $21.0 million, for 1997. No single customer accounted for
more than 10% of revenues in 1998 or 1997.
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