Contact:
Bill Smith
Verilink Corporation
256.327.2204
bsmith@verilink.com
Verilink Reports Third Quarter Results
MADISON, Ala. April 23, 2003Verilink Corporation (NasdaqSC: VRLK) today reported its financial results for the third quarter ended March 28, 2003.
Net sales for the quarter were $5.4 million, up 47% from net sales of $3.7 million in the third quarter of fiscal 2002. Sequentially, third quarter sales decreased 11% from net sales of $6.1 million in the second quarter of fiscal 2003.
“The highlight of the quarter was the completion of the acquisition of the network access products division of Polycom, which includes the industry leading NetEngine family of IADs (integrated access devices) and routers that enable enterprise customers to access broadband and voice over broadband services, including VoIP and VoDSL,” said Leigh S. Belden, president and chief executive officer of Verilink Corporation.
Net loss for the quarter was $252,000, including a charge of $316,000 for in process research & development related to the NetEngine acquisition. This compares to a net loss of $9.4 million in the third quarter of fiscal 2002, which included a $4.8 million charge for the impairment of long-lived assets. Loss per share for the quarter was $(0.02) on a primary and diluted basis compared to a loss per share of $(0.59) for the third quarter of fiscal 2002. Net income in the second quarter of fiscal 2003 was $605,000, or $0.04 per share.
Gross margins were 42.9% during the quarter compared to 11.7% in the third quarter of fiscal 2002, which included additional inventory reserves and severance costs in the year ago quarter that totaled $929,000. Compared to the prior sequential quarter, gross margins declined, as we forecasted in January 2003, from 51.9% to 42.9% due to the product sales mix, lower volume and transition costs related to the NetEngine product line acquisition.
As a result of management actions enacted during calendar 2002, research & development, selling, general and administrative expenses for the third quarter of fiscal 2003 declined $2.6 million to $2.5 million from $5.1 million in the third quarter of fiscal 2002. Operating expenses in the third quarter of fiscal 2003 were reduced in total by $443,000 for adjustments to reserves and accruals to reflect collection of notes receivable and other quarterly adjustments. Operating
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expenses in the third quarter of fiscal 2002 included $1.8 million for the accrual of severance costs, relocation expenses and other reserves recorded in that quarter.
Verilink has entered into a letter of intent (“LOI”) to sell its facility located in Cummings Research Park West at 950 Explorer Blvd., Huntsville, Alabama. The sale of this facility, which is leased to The Boeing Company, will not affect Company operations since the Company moved to the Madison facility in July 2002. This sale is expected to increase cash, retire all long-term debt, provide a net gain on the sale, and have a nominal impact on future operating results. The LOI is subject to a number of conditions, including among others, the purchaser’s ability to obtain appropriate financing and the execution of a binding Purchase and Sale Contract.
A live Webcast of the conference call discussing Verilink’s third quarter results and outlook is scheduled for April 23, 2003 at 4:00 p.m. CDT and is available on the Internet by visiting
http://www.firstcallevents.com/service/ajwz378837495gf12.html
Instructions for listening to this call are contained in the Company’s press release dated April 16, 2003 and may be found on the Company’s website. A replay of the conference call will be available through the PR Newswire website and in the “News and Events” section of the Company’s website athttp://www.verilink.com.
About Verilink Corporation
Verilink provides voice and data access solutions at the network edge over T1/E1, DDS, T3, ISDN and xDSL. Verilink offers a wide range of VoATM, VoDSL, VoIP, TDM, inverse multiplexing and cross connection solutions, as well as converged solutions for access to Frame Relay, ATM and IP-based networks for Service Providers and the enterprise. The Company’s headquarters are located at 127 Jetplex Circle, Madison, AL 35758. Verilink stock trades on the NASDAQ SmallCap Market under the symbol VRLK. To learn more about Verilink, visit the website athttp://www.verilink.com.
Note: Statements regarding prospects and contributions from recent acquisition and all other statements in this press release that are not historical facts are forward looking and actual results could differ materially. Among the factors that could cause actual results to differ are the ability to reduce costs and increase sales of acquired product lines, impact of customer concentration and the financial strength of customers, the impact to revenue from future sales opportunities, technological change, and changes in demand for the Company’s products. A detailed discussion of other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the Company’s most recent filings with the Securities and Exchange Commission, including its most recent Form 10-K and Form 10-Q. The Company disclaims any duty to update the forward -looking statements contained herein, except as may be required by law.
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Verilink and the Verilink logo are registered trademarks of Verilink Corporation. All other trademarks or registered trademarks are the property of the respective owners.
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VERILINK CORPORATION
Condensed Consolidated Financial Statements (thousands except per share amounts)
Three months ended | Nine months ended | |||||||||||
March 28, | March 29, | March 28, | March 29, | |||||||||
CONSOLIDATED STATEMENTS | 2003 | 2002 | 2003 | 2002 | ||||||||
OF OPERATIONS | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||
Net sales | $ | 5,447 | $ | 3,704 | $ | 20,305 | $ | 15,412 | ||||
Cost of sales | 3,109 | 3,271 | 10,260 | 11,208 | ||||||||
Gross profit | 2,338 | 433 | 10,045 | 4,204 | ||||||||
Research and development | 1,029 | 904 | 2,583 | 4,632 | ||||||||
Selling, general and administrative | 1,460 | 4,147 | 5,649 | 11,824 | ||||||||
In process research and develoment write-off | 316 | — | 316 | — | ||||||||
Impairment of long-lived assets | — | 4,815 | — | 5,365 | ||||||||
Operating income (loss) | (467 | ) | (9,433 | ) | 1,497 | (17,617 | ) | |||||
Interest and other income, net | 257 | 136 | 481 | 440 | ||||||||
Interest expense | (42 | ) | (58 | ) | (142 | ) | (215 | ) | ||||
Income (loss) before provision for | ||||||||||||
income taxes | (252 | ) | (9,355 | ) | 1,836 | (17,392 | ) | |||||
Provision for income taxes | — | — | — | — | ||||||||
Net income (loss) before accounting | ||||||||||||
change | (252 | ) | (9,355 | ) | 1,836 | (17,392 | ) | |||||
Cumulative effect of change in accountng | ||||||||||||
principle, relating to goodwill | — | — | (1,233 | ) | — | |||||||
Net income (loss) | $ | (252 | ) | $ | (9,355 | ) | $ | 603 | $ | (17,392 | ) | |
Net income (loss) per share: | ||||||||||||
Basic and Diluted | $ | (0.02 | ) | $ | (0.59 | ) | $ | 0.04 | $ | (1.10 | ) | |
Cumultaive effect of change in | ||||||||||||
accounting principle, relating to goodwill | $ | — | $ | — | $ | (0.08 | ) | $ | — | |||
Shares used to compute net income (loss) | ||||||||||||
per share - Basic | 14,856 | 15,945 | 14,940 | 15,878 | ||||||||
Shares used to compute net income (loss) | ||||||||||||
per share - Diluted | 14,856 | 15,945 | 15,340 | 15,878 | ||||||||
March 28, | ||||||||||||
2003 | June 28, | |||||||||||
CONSOLIDATED BALANCE SHEETS | (Unaudited) | 2002 | ||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 7,264 | $ | 5,630 | ||||||||
Short-term investments | 101 | 598 | ||||||||||
Accounts receivable, net | 3,582 | 4,045 | ||||||||||
Inventories, net | 2,481 | 1,246 | ||||||||||
Other current assets | 211 | 354 | ||||||||||
Total current assets | 13,639 | 11,873 | ||||||||||
Property held for lease, net | 6,510 | 6,456 | ||||||||||
Property, plant, and equipment, net | 1,470 | 832 | ||||||||||
Restricted cash | 1,000 | 1,000 | ||||||||||
Other assets | 2,754 | 2,019 | ||||||||||
Total assets | $ | 25,373 | $ | 22,180 | ||||||||
Current liabilities | $ | 8,226 | $ | 5,583 | ||||||||
Long-term debt and other long-term liabilities | 3,931 | 4,480 | ||||||||||
Stockholders’ equity | 13,216 | 12,117 | ||||||||||
Total liabilities and stockholders’ equity | $ | 25,373 | $ | 22,180 | ||||||||