Net income for the quarter was $2,547,000, or $0.16 per diluted share, compared to pro forma net income of $2,739,000, or $0.17 per diluted share, excluding a one-time reversal of third-party sales expenses, net of tax effects, in fourth quarter 1998. Including this item, the Company reported $3,526,000, or $0.22 per diluted share, in fourth quarter 1998.
Net sales for the year ended December 31, 1999 were $49,524,000, a decrease of 8% from 1998 net sales of $53,628,000. Net income for 1999 was $7,005,000, representing an all-time high of $0.45 diluted earnings per share. Net income increased 203% over 1998 net income of $2,310,000, or $0.14 diluted earnings per share. Net income for 1998 includes R&D expenses and a non-recurring charge related to the Company’s Access Products Group, which was terminated in September 1998.
The Company had $3.6 million of backlog at December 31, 1999, an all-time high, comprising orders for the recently introduced AIscout product, a large order from a new competitive local exchange carrier customer for the Company’s AIMÔ product, other product orders, and work to be performed under service agreements. Backlog increased 20% over prior year backlog of $3.0 million.
Gross profit for the year ended December 31, 1999 was $28,606,000, or 58% of net sales, compared to $31,391,000, or 59% of net sales for the year ended December 31, 1998. Gross profit for the fourth quarter of 1999 was $7,780,000, or 54% of net sales, compared to $8,044,000, or 60% of net sales for the same period last year. The decreased gross profit percentage for the 1999 fourth quarter and year was largely a result of the introduction of new products that began shipping in the fourth quarter of 1999. The relatively low volumes for such products early in the production cycle contribute to higher per unit production costs. Additionally, the Company continues to face competitive pricing pressure.
Research and development expenses for the year ended December 31, 1999 were $7,479,000, or 15% of net sales. R&D expenses for 1998 were $11,980,000, of which $6,263,000 was related to the terminated Access Products Group. R&D expenses for the fourth quarter ended December 31, 1999 were $2,036,000, or 14% of net sales, compared to $1,509,000, or 11% of net sales for the corresponding quarter last year.
Selling, general and administrative expenses for the year ended December 31, 1999 were $11,965,000, or 24% of net sales, compared to $14,428,000, or 27% of net sales, for the same period of the prior year. SG&A expenses for the 1999 fourth quarter were $2,880,000, or 20% of net sales, compared to $3,035,000, or 23% of net sales, for fourth quarter 1998.
The effective income tax rate for the year ended December 31, 1999 was 31% compared to 19% for the prior year. The increase in the effective rate is primarily due to the relative impact of research and experimentation tax credits in each of the years.
On October 21, 1999, the Board of Directors approved a one-year extension of the Company’s 1,000,000 share stock repurchase program originally adopted in October 1998. Under this program, the Company has repurchased 448,000 shares through December 31, 1999, at an average per share price of $3.72.
