UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 17, 2006
Digi International Inc.
(Exact name of Registrant as specified in its charter)
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| Delaware | | 0-17972 | | 41-1532464 |
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(State or other jurisdiction
of incorporation) | | (Commission File Number) | | (IRS Employer
Identification No.) |
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11001 Bren Road East
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Minnetonka, Minnesota
| | 55343 |
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(Address of principal executive offices)
| | (Zip Code) |
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Registrant’s telephone number, including area code(952) 912-3444
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (seeGeneral Instruction A.2. below):
| | | o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| | | o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| | | o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| | | o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
TABLE OF CONTENTS
Item 2.02.Results of Operations and Financial Condition.
On January 17, 2006, Digi International Inc. (the “Company”) reported its financial results for the first quarter of fiscal 2006. See the Company’s press release dated January 17, 2006, which is furnished as Exhibit 99 and incorporated by reference in this Current Report on Form 8-K.
NON-GAAP FINANCIAL MEASURES
The press release furnished as Exhibit 99 and certain information the Company intends to disclose on the conference call scheduled for 5:00 p.m. eastern time on January 17, 2006 include certain non-GAAP financial measures. These measures include (i) earnings per diluted share excluding the impact of stock-based compensation expense, (ii) operating income excluding intangibles amortization and stock-based compensation expense, (iii) earnings before taxes, depreciation, amortization and stock-based compensation expense and (iv) guidance disclosed by the Company related to earnings per diluted share excluding the impact of stock-based compensation expense. The reconciliations of these measures to the most directly comparable GAAP financial measures are included below.
With respect to operating income that excludes intangibles amortization, management believes that this measure more accurately focuses on the costs that can be meaningfully controlled by the Company, and therefore permits a more meaningful comparison from period to period. Similarly, management believes that earnings before taxes, depreciation and amortization helps investors compare operating results and corporate performance exclusive of the impact of the Company’s capital structure and the method by which assets were acquired. Management believes that providing earnings and earnings per diluted share exclusive of the impact of stock-based compensation expense, both on a historical basis and with respect to the Company’s guidance, allows investors to compare results and expected results with results for prior periods that did not include stock-based compensation expense. Management uses these various non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of the comparative operating performance of the Company.
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Reconciliation of Reported Earnings Per Diluted Share to Earnings Per Diluted Share
Excluding Stock-Based Compensation Expense
(in thousands, except per share amounts)
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| | | Three months ended | |
| | | December 31, 2005 | | | December 31, 2004 | |
| Gross profit, before stock-based compensation expense | | $ | 19,386 | | | $ | 18,311 | |
| Stock-based compensation expense | | | 20 | | | | — | |
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| Gross profit | | $ | 19,366 | | | $ | 18,311 | |
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| Total operating expenses, before stock-based compensation expense | | | 15,977 | | | | 14,210 | |
| Stock-based compensation expense | | | 511 | | | | — | |
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| Total operating expenses | | | 16,488 | | | | 14,210 | |
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| Operating income | | $ | 2,878 | | | $ | 4,101 | |
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| Income before income taxes | | $ | 3,211 | | | $ | 4,291 | |
| Income taxes impact of stock-based compensation expense | | | 175 | | | | — | |
| Income tax provision | | | 853 | | | | 1,330 | |
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| Net income | | $ | 2,183 | | | $ | 2,961 | |
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| Net income per common share, basic | | $ | 0.10 | | | $ | 0.13 | |
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| Net income per common share, diluted | | $ | 0.09 | | | $ | 0.13 | |
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| Impact of stock-based compensation expense, basic | | $ | 0.02 | | | $ | — | |
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| Impact of stock-based compensation expense, diluted | | $ | 0.02 | | | $ | — | |
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| Net income per common share, basic, excluding stock-based compensation expense | | $ | 0.11 | | | $ | 0.13 | |
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| Net income per common share, diluted, excluding stock-based compensation expense | | $ | 0.11 | | | $ | 0.13 | |
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| Weighted average common shares, basic | | | 22,781 | | | | 22,082 | |
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| Weighted average common shares, diluted | | | 23,486 | | | | 23,309 | |
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3
Reconciliation of Operating Income to Operating Income Excluding Intangibles Amortization
and Stock-Based Compensation Expense
(In thousands of dollars and as a percent of Net Sales)
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| | | Three months ended | | | | |
| | | December 31, 2005 | | | % of net sales | |
| Net sales | | $ | 33,376 | | | | 100.0 | % |
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| Operating income | | | 2,878 | | | | 8.6 | % |
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| Intangibles amortization | | | 1,679 | | | | 5.0 | % |
| Stock-based compensation expense | | | 513 | | | | 1.5 | % |
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| Operating income excluding intangibles amortization and stock-based compensation expense | | $ | 5,070 | | | | 15.2 | % |
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Reconciliation of Reported Diluted Earnings per Share Guidance for Fiscal 2006 to
Diluted Earnings per Share, Excluding the Impact of Stock-Based Compensation Expense
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| | | Q2 2006 - Estimated Range | | | Fiscal 2006 - Estimated Range | |
| | | for EPS Guidance | | | for EPS Guidance | |
| | | Low | | | High | | | Low | | | High | |
| Reported diluted earnings per share anticipated for Q2 2006 and fiscal 2006 | | $ | 0.08 | | | $ | 0.14 | | | $ | 0.40 | | | $ | 0.50 | |
| Estimated impact of stock-based compensation expense in Q2 2006 and fiscal 2006 | | | 0.02 | | | | 0.02 | | | | 0.08 | | | | 0.08 | |
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| Diluted earnings per share anticipated for fiscal 2006, excluding the impact of estimated stock-based compensation expense | | $ | 0.10 | | | $ | 0.16 | | | $ | 0.48 | | | $ | 0.58 | |
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Reconciliation of Income before Income Taxes to Earnings before Taxes, Depreciation, Amortization and Stock-Based Compensation
(In thousands of dollars and as a percent of Net Sales)
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| | | For the three months
ended December 31,
2005 | | | % of net sales | |
| Net sales | | $ | 33,376 | | | | 100.0 | % |
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| Income before income taxes | | $ | 3,211 | | | | | |
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| Depreciation and amortization | | | 2,523 | | | | | |
| Stock-based compensation expense | | | 531 | | | | | |
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| Earnings before taxes, depreciation, amortization and stock-based compensation expense | | $ | 6,265 | | | | 18.8 | % |
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Item 9.01. Financial Statements and Exhibits.
The following Exhibit is furnished herewith:
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| 99 | | Press Release dated January 17, 2006 announcing financial results for the first quarter of fiscal 2006. |
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SIGNATURES
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.
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| | DIGI INTERNATIONAL INC.
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| Date: January 17, 2006 | By /s/ Subramanian Krishnan | |
| | Subramanian Krishnan | |
| | Senior Vice President, Chief Financial Officer and Treasurer | |
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EXHIBIT INDEX
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| No. | | Exhibit | | Manner of Filing |
| 99 | | Press Release dated January 17, 2006 announcing financial results for the first quarter of fiscal 2006. | | Filed
Electronically |
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