EXHBIT 99
DIGI INTERNATIONAL REPORTS FISCAL FIRST
QUARTER 2002 FINANCIAL RESULTS
COMPANY EXPECTS TO COMPLETE ITS PROPOSED STRATEGIC ACQUISITION
OF NETSILICON IN THE SECOND FISCAL QUARTER
MINNEAPOLIS, JANUARY 16, 2002 - Digi International(R) Inc. (Nasdaq: DGII), the
leading provider of Connectware(TM), a category of wired and wireless, hardware
and software connectivity solutions, today announced fiscal first quarter 2002
revenue of $25.2 million, which exceeds Wall Street consensus estimates.
Excluding amortization of intangible assets, net of taxes and restructuring
charges, net income is $0.04 per diluted share, which also exceeds Wall Street
consensus estimates. Digi's net loss for the first fiscal quarter of 2002 was
$0.5 million, or $0.03 per diluted share, compared to a loss of $0.4 million in
the first quarter of fiscal 2001, or $0.03 per diluted share.
Revenues from products addressing growth markets totaled $8.5 million during the
quarter, or 34% of total revenue, compared to $8.0 million or 23% of total
revenue in the first fiscal quarter of 2001. Mature product revenue totaled
$16.7 million during the first fiscal quarter of 2002, which includes $4.4
million in revenue from MiLAN products, Digi's multilayer networking products
business.
DIGI REPORTS FISCAL 2002 FIRST QUARTER RESULTS - PAGE 2
"Digi's employees produced a solid quarter despite a tough market environment,"
Digi's Chairman, President and CEO, Joe Dunsmore, stated. "During the quarter we
continued to enhance our market position in growth markets, successfully managed
our costs, and continued to focus on plans for the successful acquisition and
integration of NetSilicon over the next several quarters."
Gross margin for the first fiscal quarter of 2002 increased to 53.5% compared to
49.3% during the prior quarter, excluding a one-time fiscal fourth quarter
charge of $3.0 million related to the write down of inventories pertaining to
the digital RAS product line, and compared to 52.7% during the first fiscal
quarter of 2001. Operating efficiencies and expanding sales of growth products
contributed to the margin increase.
Operating expenses, excluding amortization and restructuring charges were $13.1
million, down from $14.5 million. This represents a decline of 9.9% from the
prior quarter, and a 14.5% or $2.2 million decrease from the comparable quarter
of fiscal 2001. The Company continues to aggressively pursue a strategy of cost
control and fiscal conservatism, resulting in improvements in working capital
and higher gross margins.
Digi's current cash balance is $60.3 million, an increase of $4.1 million from
the previous quarter. Days sales outstanding (DSOs) decreased 14 days to 43 days
during the first fiscal quarter of 2002 from 57 days during the prior quarter.
As of December 31, 2001, Digi's net cash per share was $3.92, a twenty-five cent
increase over the prior quarter. Digi's tangible book value per share was $5.91,
a seven-cent decrease from the prior quarter, and book value per share was
$7.33, a six-cent decrease from the prior quarter.
REVENUE AND EARNINGS GUIDANCE:
The following guidance excludes the effects of the proposed acquisition of
NetSilicon. Digi expects second fiscal quarter revenue from products addressing
growth markets to total $8.8 million, revenue from products addressing mature
markets, excluding MiLAN, to total $11.2 million, and MiLAN revenue to total
$5.0 million. The Company reiterates its earlier guidance that it expects fiscal
2002 revenue from products addressing growth markets will total $41.0 million
and revenue from products addressing MiLAN and mature markets will total $64.5
million.
DIGI REPORTS FISCAL 2002 FIRST QUARTER RESULTS - PAGE 3
Digi's fiscal second quarter earnings per share before amortization of
intangibles and acquisition-related expenses are expected to be in the range of
$0.01 to $0.03, and in the range of a $0.05 to a $0.07 loss on a reported basis.
For the full fiscal year of 2002, Digi reiterates its earlier guidance of
earnings per share before amortization of intangibles and acquisition-related
expenses to be in the range of $0.22 to $0.31, and in the range of a $0.07 loss
to a $0.01 profit on a reported basis.
DIGI REPORTS FISCAL 2002 FIRST QUARTER RESULTS - PAGE 4
Digi International, Inc.
Consolidated Condensed Statement of Operations
For the three months ended December 31, 2001 and 2000
Three months ended December 31
------------------------------
2001 2000
------------- ------------
Net sales $ 25,150,182 $ 34,958,220
Cost of sales 11,700,323 16,524,152
------------ ------------
Gross margin 13,449,859 18,434,068
Operating expenses:
Sales and marketing 6,697,297 7,272,977
Research and development 3,725,648 4,558,023
General and administrative 4,189,272 4,792,359
Restructuring -- (182,038)
------------ ------------
Total operating expenses 14,612,217 16,441,321
------------ ------------
Operating (loss) income (1,162,358) 1,992,747
Other income, net 345,424 988,627
------------ ------------
(Loss) income before income taxes and cumulative effect of accounting change (816,934) 2,981,374
Income tax (benefit) provision (310,435) 1,490,687
------------ ------------
Net (loss) income before cumulative effect of accounting change $ (506,499) $ 1,490,687
Cumulative effect of accounting change (net of income tax provision
of $1,055,928) -- (1,901,853)
------------ ------------
Net loss $ (506,499) $ (411,166)
============ ============
Net (loss) income per share, before cumulative effect of accounting change:
Basic $ (0.03) $ 0.10
============ ============
Assuming dilution $ (0.03) $ 0.10
============ ============
Net loss per share, cumulative effect of accounting change
Basic $ -- $ (0.13)
============ ============
Assuming dilution $ -- $ (0.13)
============ ============
Net loss per share:
Basic $ (0.03) $ (0.03)
============ ============
Assuming dilution $ (0.03) $ (0.03)
============ ============
Weighted average common shares, basic 15,369,376 15,166,642
============ ============
Weighted average common shares, assuming dilution 15,369,376 15,184,697
============ ============
NET INCOME AND NET INCOME PER COMMON AND DILUTED SHARE
EXCLUDING (1) AMORTIZATION OF INTANGIBLE ASSETS, NET OF TAXES, AND (2) RESTRUCTURING CHARGES
2001 2000
----------- -----------
Net loss for the three months ended December 31 $ (506,499) $ (411,166)
(1) Intangible asset amortization, net of taxes 1,164,244 1,001,471
(2) Restructuring charges -- (182,038)
----------- -----------
Net income excluding (1) amortization of intangible assets,
net of taxes, and (2) restructuring charges $ 657,745 $ 408,267
=========== ============
Net income per common share excluding (1) amortization of
intangible assets, net of taxes, and (2) restructuring charges $ 0.04 $ 0.03
=========== ===========
Net income per diluted share excluding (1) amortization of
intangible assets, net of taxes, and (2) restructuring charges $ 0.04 $ 0.03
=========== ===========
Weighted average common shares, basic 15,369,376 15,166,642
=========== ===========
Weighted average common shares, assuming dilution 15,383,565 15,184,697
=========== ===========
DIGI REPORTS FISCAL 2002 FIRST QUARTER RESULTS - PAGE 5
DIGI INTERNATIONAL INC. CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 2001 September 30, 2001
----------------- ------------------
ASSETS
Current assets:
Cash and marketable securities $ 60,257,382 $ 56,152,200
Accounts receivable, net 12,894,769 16,161,143
Inventories, net 16,371,010 16,791,851
Other 5,655,915 4,602,668
------------ ------------
Total current assets 95,179,076 93,707,862
Property, equipment and improvements, net 21,849,258 22,677,155
Intangible assets, net 21,858,187 21,538,390
Other 1,514,674 1,529,169
------------ ------------
Total assets $140,401,195 $139,452,576
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable, current $ 451,600 $ 938,400
Current portion of long-term debt 244,315 1,584,156
Accounts payable and accrued expenses 19,621,085 15,582,419
Restructuring 290,432 1,369,799
------------ ------------
Total current liabilities 20,607,432 19,474,774
Long-term liabilities 7,084,267 7,060,381
------------ ------------
Total liabilities 27,691,699 26,535,155
------------ ------------
Total stockholders' equity 112,709,496 112,917,421
------------ ------------
Total liabilities and stockholders' equity $140,401,195 $139,452,576
============ ============
DIGI REPORTS FISCAL 2002 FIRST QUARTER RESULTS - PAGE 6
Digi invites all those interested in hearing management's discussion of the
quarter to attend our fiscal first quarter conference call either by phone or on
the Web. Participants can access the call directly at 4:00 p.m. Central Time on
Wednesday, January 16, 2002, by dialing 800-895-1075. A replay will be available
for one week following the call by dialing 800-633-8284 and entering the code
20224049. Participants may also access a live web cast of the conference call
through the investor relations section of Digi's web site, www.digi.com.
ABOUT DIGI INTERNATIONAL
Digi International, based in Minneapolis, is the leader in Connectware(TM) wired
and wireless, hardware and software connectivity solutions. Digi markets its
products through a global network of distributors and resellers, systems
integrators and original equipment manufacturers (OEMs).
For more information, visit Digi's Web site at www.digi.com, or call
800-344-4273 (U.S.) or 952-912-3444 (International). All brand names and product
names are trademarks or registered trademarks of their respective companies.
Digi, Digi International and the Digi logo are trademarks or registered
trademarks of Digi International Inc. in the United States and other countries.
All other brand names and product names are trademarks or registered trademarks
of their respective companies.
This press release contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which generally can be identified by the use of forward-looking terminology such
as "anticipate," "believe," target," "estimate," "may," "will," "expect,"
"plan," "project," "should," or "continue" or the negative thereof or other
variations thereon or similar terminology. Such statements are based on
information available to management as of the time of such statements and relate
to, among other things, the anticipated benefits of the NetSilicon acquisition,
expectations of the business environment in which the Company operates,
projections of future performance, perceived opportunities in the market and
statements regarding the Company's mission and vision. Such statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions, including the possibility that the NetSilicon acquisition will not
be consummated, risks related to the highly competitive market in which the
Company operates, rapid changes in technologies that may displace products sold
by the Company, declining prices of networking products, the Company's reliance
on distributors, delays in the Company's product development efforts,
uncertainty in consumer acceptance of the Company's products, and changes in the
Company's level of revenue or profitability. These and other risks,
uncertainties and assumptions identified from time to time in the Company's
filings with the Securities and Exchange Commission, including without
limitation, its annual reports on Form 10-K and its quarterly reports on Form
10-Q and the Company's definitive proxy statement dated January 9, 2002 with
DIGI REPORTS FISCAL 2002 FIRST QUARTER RESULTS - PAGE 7
respect to the proposed NetSilicon merger, could cause the Company's future
results to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company. Many of such factors are beyond
the Company's ability to control or predict. These forward-looking statements
speak only as of the date for which they are made. The Company disclaims any
intent or obligation to update publicly any forward-looking statements, whether
as a result of new information, future events or otherwise.
Additional information regarding proposed acquisition
Digi has filed a registration statement on Form S-4 in connection with the
proposed acquisition, and Digi and NetSilicon have mailed a joint proxy
statement/prospectus to their respective shareholders in connection with the
transaction. Investors and security-holders of Digi and NetSilicon are urged to
read the joint proxy statement/prospectus because it contains important
information about the companies, the transaction, the persons soliciting proxies
relating to the transaction, their interests in the transaction, and related
matters. Investors and security-holders may obtain a free copy of the joint
proxy statement/prospectus at the SEC's web site at www.sec.gov. A free copy of
the joint proxy statement/prospectus may also be obtained from either of the
companies.
In addition to the registration statement and the joint proxy
statement/prospectus, each company files annual, quarterly, and special reports,
proxy and information statements, and other information with the SEC. Investors
may read and copy any of these reports, statements, and other information at the
SEC's public reference room located at 450 5th Street, N.W., Washington, D.C.,
20549, or any of the SEC's other public reference rooms located in New York and
Chicago. Investors should call the SEC at 1-800-SEC-0330 for further information
on these public reference rooms. These SEC filings are also available for free
at the SEC's web site at www.sec.gov. A free copy of these filings may also be
obtained from either company by request to one of the respected contacts noted
above.
Each of the companies and their respective executive officers and directors may
be deemed to be participants in the solicitation of proxies from their
respective shareholders in favor of the transaction. Information about the
directors and executive officers of Digi may be found in Digi's definitive proxy
statement for its 2002 annual meeting of shareholders and in Digi's annual
report on Form 10-K for the fiscal year ended September 30, 2001. Information
about the directors and executive officers of NetSilicon may be found in
NetSilicon's definitive proxy statement of its 2001 annual meeting of
shareholders. In addition, updated share ownership data of both companies'
directors and executive officers and information regarding the interests of
NetSilicon's officers and directors in the transaction are included in the joint
proxy statement/prospectus.
# # #
Contacts:
S. (Kris) Krishnan, Digi International Inc.
952-912-3125 or s_krishnan@digi.com
Don De Laria, Digi International Inc.
952-912-3126 or don_delaria@digi.com