The quarter’s results include a $400,000, or $.02 per share after-tax charge for severance and related costs, which the company previously announced as part of cost-cutting efforts to generate an estimated $4,300,000 in annual pre-tax savings. Excluding this charge, earnings per share for the current quarter were $.30. Revenue for the second quarter of 2000 was $29,666,710, or $.54 per share.

Tollgrade’s sales incentive programs led to increased sales from Verizon as they work toward improving their regional testability rates. Sales to SBC decreased due to a slow-down of that company’s DSL rollout, called Project Pronto. Likewise, sales to Qwest decreased as they evaluate various testability improvement programs. Additionally, sales of OEM-related MCU products decreased with cutbacks in some next-generation Digital Loop Carrier (DLC) systems. Sales of MCU technology represented 68.9% of total revenue for the quarter.

Sales of Tollgrade’s DigiTest system products to Sprint USA and to Nortel Networks for deployments within the Competitive Local Exchange Carrier (CLEC) market also decreased. Overall sales of DigiTest Products represented 18.9% of total revenue for the quarter.

Sales of the company’s new DigiTest Access Unit (DAU) continue to experience success at Sprint USA. Overall sales of test access products represented 7.4% of total revenue for the quarter.

Lighthouse product sales decreased between second quarter periods primarily because of AT&T Broadband’s decision to delay purchases of cable related equipment, as well as a slow-down by RCN Corporation in deploying cable status monitoring systems. Sales of Tollgrade’s Lighthouse Cable Status Monitoring system represented 1.9% of second quarter revenue.

Gross profit decreased 33.1% to $12,210,617 from $18,253,328 in the second quarter of 2000. As a percentage of sales, gross profit was 56.1% versus 61.5% a year ago, primarily due to an increase in allocated unit costs arising from lower production volume as well as the product mix of sales. Income from operations decreased 48.2% to $5,506,870 from $10,632,438 in the second quarter of 2000.

A charge of $400,000, or $.02 per share after-tax, was recorded during the second quarter of 2001 for severance, outplacement and related costs. The realignment reduced Tollgrade’s work force by approximately 80 positions in general, administrative, research and development and support areas. The expected annual pre-tax savings of approximately $4,300,000 equates to a savings of approximately $.20 per share annually.

Selling and marketing expenses decreased 17.7% to $2,492,496, reflecting reduced discretionary spending on general advertising, promotion and related marketing activities, as well as reduced salaries and related costs as a result of the realignment.

General and administrative expenses decreased 29.0% to $1,062,146, also associated primarily with decreased salaries and personnel costs as a result of the recent realignment.

Research and development expenses decreased 11.3% to $2,749,105, due to cost reductions related to the recent realignment and reductions in certain project-related costs for materials and supplies.

Order backlog firm customer purchase orders was $4,340,747 as of June 30, 2001, which represents a $1,264,602, or 22.6%, decrease from the backlog of $5,605,349 reported as of March 31, 2001. Approximately 61% of current backlog is scheduled for shipment in the third quarter of 2001.

SOURCE: COMPANY PRESS RELEASE