[CNT LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
CNT REPORTS FIRST QUARTER RESULTS
SIGNIFICANTLY IMPROVED RESULTS VS. PRIOR YEAR;
ACQUISITION OF INRANGE TECHNOLOGIES COMPLETED
MINNEAPOLIS, MAY 12, 2003 -- CNT (Nasdaq: CMNT), the global expert in storage
networking solutions, today reported financial results for the fiscal first
quarter ended April 30, 2003. Revenue totaled $52.3 million, a 16 percent
increase from $45.2 million in the first quarter of 2002. Included in the fiscal
2003 first quarter is approximately $4.9 million of revenue generated from the
June 2002 acquisition of BI-Tech Solutions.
On the basis of generally accepted accounting principles (GAAP), the company
reported a net loss of $2.1 million, or $.08 per share, compared to a net loss
of $13.8 million, or $.45 per share, in the year-ago quarter. On a pro forma
basis, the company reported a net loss of $700,000, or $.03 per share, compared
to a net loss of $3.7 million, or $.12 per share, in the prior-year period. Pro
forma results for the fiscal 2003 first quarter exclude a $312,000 earn-out
payable to the BI-Tech employees, and include income taxes at a 34% effective
rate. Pro forma results for the fiscal 2002 first quarter exclude a $10.1
million cumulative effect of change in accounting principle for the write-down
of goodwill associated with the adoption of SFAS No. 142 "Goodwill and Other
Intangible Assets." A reconciliation of reported and pro forma results is
included in the attached financial statements.
Third-party product revenues for the fiscal 2003 first quarter were $16.1
million, up $8.6 million or 115 percent from the prior year period. Consulting
fee revenues increased to $7.1 million, up 57% from $4.5 million in the fiscal
2002 first quarter.
CNT product revenues were $18.3 million for the fiscal first quarter, down $4.0
million or 18 percent from the first quarter last year. Maintenance revenues
decreased slightly to $10.8 million in the fiscal first quarter from $10.9
million last year.
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CNT Announces First Quarter Results - Page 2
"On May 5, 2003, we completed our strategic acquisition of Inrange Technologies
for $190 million in cash. The acquisition makes CNT/Inrange one of the world's
largest providers of complete storage networking products, solutions and
services, with combined 2002 pro forma annual GAAP revenues of $435 million,
global leadership positions in our markets and operations worldwide," said Tom
Hudson, CNT's chairman, president and chief executive officer. "The acquisition
significantly broadens and strengthens our portfolio of storage networking
products and solutions, increases our global size and scope, expands our
customer base and provides us with significant scale and cost reduction
opportunities. Inrange's Fibre Channel director switches, storage networking
products and wave division multiplexing products are a strong fit with CNT's
storage networking solutions offerings, which include wide area network
products, consulting, design, implementation, third party storage product
integration and network monitoring services."
"Our combined company will be a global leader in SAN services, with a recurring
maintenance revenue stream of nearly $90 million and a $60 million consulting
and professional services division, one of the largest in the industry dedicated
to storage networking," Hudson added. "Together we have more than 4,000 customer
establishments world-wide, including many of the Fortune 500 corporations and
Global 1000 businesses in the United States, Canada, United Kingdom, France,
Germany, Italy, Switzerland, China, Japan and Australia. With our combined
product offerings and extensive suite of service offerings, we are in a unique
position to partner with enterprise customers to implement and manage their
complex, large scale, multi-vendor storage networking solutions."
"Our senior management team is preparing a detailed integration plan and will
work to realize substantial revenue and cost synergies at the combined company,
including eliminating duplicative costs for personnel and facilities,
integrating product and service offerings, achieving operating efficiencies, and
enhancing productivity," Hudson continued. "We anticipate that the integration
of all functional disciplines, geographies and business systems will be complete
by the end of our second fiscal quarter ending July 31, 2003. The integration of
product and service offerings and manufacturing operations will be substantially
underway by this time."
"We anticipate the acquisition will be accretive to earnings per share by at
least 10 percent in 2003, and to achieve annual cost savings of between $10 and
$15 million to be fully phased in by early 2004," commented Greg Barnum, CNT's
chief financial officer. "We are committed to retaining the best employees from
our combined companies and to creating the most efficient organization possible.
We expect to record an integration charge in our fiscal second quarter ending
July 31, 2003 for
CNT Announces First Quarter Results - Page 3
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severance costs related to termination of CNT employees, professional fees and
travel costs related to the integration. Other possible integration charges
include inventory and asset write-downs related to discontinued product lines.
We may also record a charge for in-process research and development pending
completion of the purchase price allocation analysis. The size and scope of any
charges will not be known until our integration planning is complete."
CNT ended the quarter with a strong balance sheet and positive cash flow. Cash
and investments were up $12 million to $221 million. Cash flow from operations
was a positive $13.9 million, including a $10.4 million reduction in
receivables, due in part to improved DSO and collections, and a $6.2 million
reduction in inventory due to better inventory turns and management. The
combined CNT/Inrange has about $70 million of cash on-hand, prior to payment of
transaction fees and integration costs.
OUTLOOK
We are planning our integration and re-sizing of the combined CNT/Inrange
organization. Due to the early stage of the integration, we will not be
publishing guidance at this time. We expect to have an accurate estimate of
revenue and profitability prior to the start of our fiscal third quarter.
CONFERENCE CALL AND WEBCAST INFORMATION
CNT will hold a conference call and Webcast this afternoon at 4:30 pm Central
Daylight Time, 5:30 pm Eastern Daylight Time, Monday, May 12, 2003, to discuss
fiscal first quarter financial results. The Webcast is available through CNT's
web site at http://www.cnt.com/financials. To participate via telephone, dial
212-346-6446 and ask for the CNT Earnings Call. A one-week webcast replay will
be available at http://www.cnt.com/financials. A two-day telephone replay will
be available at 800-633-8284 or 402-977-9140; enter 21144210# at the reservation
number prompt.
ABOUT CNT
CNT is one of the world's largest providers of comprehensive storage networking
solutions, products, and services. For 20 years, businesses around the world
have depended on us to deliver business continuity solutions that drive business
efficiencies, lowering costs and reducing IT risks across the enterprise. CNT
applies its expertise in storage architecture to help companies build end-to-end
solutions that include analysis, planning and design, multi-vendor integration,
connectivity,
CNT Announces First Quarter Results - Page 4
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implementation and ongoing remote management of the SAN or storage
infrastructure. For more information, visit CNT's web site at
http://www.cnt.com or call 763-268-6000. All brand names and product names are
trademarks or registered trademarks of their respective companies.
FOR ADDITIONAL INFORMATION, CONTACT:
Greg Barnum, VP of Finance & CFO Jennifer Weidauer, Public Relations
763-268-6110; greg_barnum@cnt.com 763-268-8367; jennifer_weidauer@cnt.com
Certain statements in this press release and in documents we have filed with the
Securities and Exchange Commission, and oral statements made by or with the
approval of our executive officers contain "forward-looking statements" under
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements may include statements about our anticipated receipt of orders and
their impact on quarterly sales, business strategy, expectations regarding
future revenue levels, gross margins, expenses, operating margins and earnings
per share, timing of and plans for the introduction or phase-out of products or
services, enhancements of existing products or services, plans for hiring
additional personnel, entering into strategic partnerships, activities related
to the integration of Inrange into our business and other plans, objectives,
expectations and intentions that are not historical fact.
The words "may," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "intend," "potential" or "continue" and similar
expressions are generally intended to identify forward-looking statements,
although not all CNT forward-looking statements contain these identifying words.
These forward-looking statements involve risks and uncertainties. Actual results
could differ materially from those expressed or implied by these forward-looking
statements as a result of certain risk factors, including but not limited to (i)
competitive factors, including pricing pressures, (ii) variability in quarterly
sales, (iii) economic trends generally and in various geographic markets; (iv)
relationships with our strategic partners; (v) unanticipated risks associated
with introducing new services, products and features; (vi) technological change
affecting our products; (vii) whether any delayed orders will be received;
(viii) whether we will be able to successfully and efficiently integrate
Inrange; and (ix) other events and other important factors disclosed previously
and from time to time in our filings with the U.S. Securities and Exchange
Commission. These statements are only predictions. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements.
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CNT Announces First Quarter Results - Page 5
CNT
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three months ended
--------------------------------------
APRIL 30,
2003 2002
---------------- -----------------
REVENUE:
Product sales $ 34,404 $ 29,754
Service fees 17,926 15,458
---------------- -----------------
Total revenue 52,330 45,212
---------------- -----------------
COST OF REVENUE:
Cost of product sales 21,634 17,368
Cost of service fees 9,955 9,760
---------------- -----------------
Total cost of revenue 31,589 27,128
---------------- -----------------
GROSS PROFIT 20,741 18,084
---------------- -----------------
OPERATING EXPENSES:
Sales and marketing 14,048 15,577
Engineering and development 5,920 6,668
General and administrative 2,533 2,513
---------------- -----------------
Total operating expenses 22,501 24,758
---------------- -----------------
INCOME LOSS FROM OPERATIONS (1,760) (6,674)
---------------- -----------------
OTHER INCOME (EXPENSE), NET 700 1,056
---------------- -----------------
LOSS BEFORE INCOME TAXES (1,060) (5,618)
BENEFIT FOR INCOME TAXES (360) (1,921)
---------------- -----------------
NET LOSS $ (700) $ (3,697)
================ =================
BASIC & DILUTED LOSS PER SHARE:
NET LOSS $ (.03) $ (.12)
================ =================
SHARES 26,960 30,441
================ =================
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CNT Announces First Quarter Results - Page 6
CNT
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
APRIL 30,
2003 January 31,
(UNAUDITED) 2003
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 219,878 $ 98,341
Marketable securities 1,277 111,143
Receivables, net 45,665 56,040
Inventories 17,856 24,091
Other current assets 2,616 2,118
------------------ ------------------
Total current assets 287,292 291,733
------------------ ------------------
Property and equipment, net 20,831 22,566
Field support spares, net 5,812 6,009
Goodwill, net 14,844 14,113
Other intangibles, net 1,597 1,669
Other assets 3,007 3,079
------------------ ------------------
$ 333,383 $ 339,169
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,908 $ 16,889
Accrued liabilities 23,094 25,060
Deferred revenue 20,897 19,340
Current installments of capital lease 482 708
------------------ ------------------
Total current liabilities 59,381 61,997
------------------ ------------------
Convertible subordinated debt 125,000 125,000
Deferred tax liability 490 541
------------------ ------------------
Total liabilities 184,871 187,538
------------------ ------------------
Shareholders equity:
Preferred stock -- --
Common stock, $.01 par value; authorized
100,000 shares, issued and outstanding
26,988 at April 30, 2003 and
26,921 at January 31, 2003 270 269
Additional paid-in capital 174,154 173,955
Unearned compensation (631) (675)
Accumulated deficit (25,028) (22,946)
Accumulated other comprehensive income (loss) (253) 1,028
------------------ ------------------
Total shareholders' equity 148,512 151,631
------------------ ------------------
$ 333,383 $ 339,169
================== ==================
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CNT Announces First Quarter Results - Page 7
CNT
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three months ended
--------------------------------------
APRIL 30,
2003 2002
---------------- -----------------
REVENUE:
Product sales $ 34,404 $ 29,754
Service fees 17,926 15,458
---------------- -----------------
Total revenue 52,330 45,212
---------------- -----------------
COST OF REVENUE:
Cost of product sales 21,634 17,368
Cost of service fees 10,086 9,760
---------------- -----------------
Total cost of revenue 31,720 27,128
---------------- -----------------
GROSS PROFIT 20,610 18,084
---------------- -----------------
OPERATING EXPENSES:
Sales and marketing 14,206 15,577
Engineering and development 5,920 6,668
General and administrative 2,556 2,513
---------------- -----------------
Total operating expenses 22,682 24,758
---------------- -----------------
LOSS FROM OPERATIONS (2,072) (6,674)
---------------- -----------------
OTHER INCOME (EXPENSE):
Net gain on sale of marketable securities 747 --
Other, net (47) 1,056
---------------- -----------------
OTHER INCOME (EXPENSE), NET 700 1,056
---------------- -----------------
LOSS BEFORE INCOME TAXES (1,372) (5,618)
PROVISION (BENEFIT) FOR INCOME TAXES 710 (1,921)
---------------- -----------------
NET LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (2,082) (3,697)
---------------- -----------------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- (10,068)
---------------- -----------------
NET LOSS $ (2,082) $ (13,765)
================ =================
BASIC & DILUTED LOSS PER SHARE:
OPERATIONS $ (.08) $ (.12)
================ =================
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ -- $ (.33)
================ =================
NET LOSS $ (.08) $ (.45)
================ =================
SHARES 26,960 30,441
================ =================
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CNT Announces First Quarter Results - Page 8
CNT
CONSOLIDATED PRO FORMA PRODUCT AND SERVICE GROSS MARGINS
(in thousands, except per share data)
(unaudited)
Three months ended Three months ended
APRIL 30, 2003 April 30, 2002
----------------------------------------------- -------------------------------------------
PROFORMA ProForma
AS REPORTED ADJUSTMENTS PROFORMA As Reported Adjustments Proforma
------------- --------------- ------------- -------------- ------------- ------------
REVENUE:
CNT product sales $ 18,294 $ -- $ 18,294 $ 22,252 $ -- 22,252
Third party product sales 16,110 -- 16,110 7,502 -- 7,502
Maintenance fees 10,838 -- 10,838 10,949 -- 10,949
Consulting fees 7,088 -- 7,088 4,509 -- 4,509
------------- -------------- ------------- -------------- ------------ ---------------
Total revenue 52,330 -- 52,330 45,212 -- 45,212
------------- -------------- ------------- -------------- ------------ ---------------
COST OF REVENUE:
Cost of CNT product sales 8,314 -- 8,314 10,964 -- 10,964
Cost of third party product sales 13,320 -- 13,320 6,404 -- 6,404
Cost of maintenance fees 5,402 -- 5,402 6,011 -- 6,011
Cost of consulting fees 4,684 (1) (131) 4,553 3,749 -- 3,749
------------- -------------- ------------- -------------- ------------ ---------------
Total cost of revenue 31,720 (131) 31,589 27,128 -- 27,128
------------- -------------- ------------- -------------- ------------ ---------------
GROSS PROFIT 20,610 (131) 20,741 18,084 -- 18,084
------------- -------------- ------------- -------------- ------------ ---------------
(1) - REPRESENTS THE EXPENSE RELATED TO THE EARN-OUT PAYABLE TO THE BI-TECH
EMPLOYEES
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CNT Announces First Quarter Results - Page 9
CNT
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three months ended Three months ended
APRIL 30, 2003 April 30, 2002
--------------------------------------------- ---------------------------------------------
PROFORMA ProForma
AS REPORTED ADJUSTMENTS PROFORMA As Reported Adjustments Proforma
--------------- ------------- ------------- ------------ -------------- ------------
REVENUE:
Product sales $ 34,404 $ -- $ 34,404 $ 29,754 $ -- 29,754
Service fees 17,926 -- 17,926 15,458 -- 15,458
------------- ----------- ------------- ------------ ------------ -------------
Total revenue 52,330 -- 52,330 45,212 -- 45,212
------------- ----------- ------------- ------------ ------------ -------------
COST OF REVENUE:
Cost of product sales 21,634 -- 21,634 17,368 -- 17,368
Cost of service fees 10,086 (1) (131) 9,955 9,760 -- 9,760
------------- ----------- ------------- ------------ ------------ -------------
Total cost of revenue 31,720 (131) 31,589 27,128 -- 27,128
------------- ----------- ------------- ------------ ------------ -------------
GROSS PROFIT 20,610 (131) 20,741 18,084 -- 18,084
------------- ----------- ------------- ------------ ------------ -------------
OPERATING EXPENSES:
Sales and marketing 14,206 (1) (158) 14,048 15,577 -- 15,577
Engineering and development 5,920 -- 5,920 6,668 -- 6,668
General and administrative 2,556 (1) (23) 2,533 2,513 -- 2,513
------------- ----------- ------------- ------------ ------------ -------------
Total operating expenses 22,682 (181) 22,501 24,758 -- 24,758
------------- ----------- ------------- ------------ ------------ -------------
INCOME (LOSS) FROM OPERATIONS (2,072) 312 (1,760) (6,674) -- (6,674)
------------- ----------- ------------- ------------ ------------ -------------
OTHER INCOME (EXPENSE), NET 700 -- 700 1,056 -- 1,056
------------- ----------- ------------- ------------ ------------ -------------
INCOME (LOSS) BEFORE INCOME TAXES (1,372) 312 (1,060) (5,618) -- (5,618)
PROVISION (BENEFIT) FOR INCOME TAXES 710 (2) (1,070) (360) (1,921) -- (1,921)
------------- ----------- ------------- ------------ ------------ -------------
NET LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (2,082) 1,382 (700) (3,697) -- (3,697)
------------- ----------- ------------- ------------ ------------ -------------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- (10,068(3) 10,068 --
------------- ----------- ------------- ------------ ------------ -------------
NET INCOME (LOSS) $ (2,082) $ 1,382 $ (700) $ (13,765) $ 10,068 (3,697)
============= =========== ============= ============ ============ =============
BASIC & DILUTED LOSS PER SHARE:
OPERATIONS $ (.08) $ .05 $ (.03) $ (.12) $ -- (.12)
============= =========== ============= ============ ============ =============
CUMULATIVE EFFECT OF CHANGE IN -- -- -- (.33) .33 --
ACCOUNTING PRINCIPLE
============= =========== ============= ============ ============ =============
NET LOSS (.08) .05 (.03) (.45) .33 (.12)
============= =========== ============= ============ ============ =============
SHARES 26,960 26,960 26,960 30,441 30,441 30,441
============= =========== ============= ============ ============ =============
(1) - REPRESENTS THE EXPENSE RELATED TO THE EARN-OUT PAYABLE TO THE
BI-TECH EMPLOYEE
(2) - TAX EXPENSE CALCULATED AT AN EFFECTIVE TAX RATE OF 34%
(3) - CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR GOODWILL
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