Exhibit 99
Norstan Reports First Quarter Fiscal 2004 Results
MINNEAPOLIS--(BUSINESS WIRE)--Sept. 16, 2003--Norstan, Inc.
(Nasdaq:NRRD), a leading provider of communications technology
solutions and services, today reported revenues of $56.9 million for
the first quarter of fiscal 2004 ended August 2, 2003, a 9.2% increase
over the $52.1 million reported in the same period last year.
Gross margin of 28.1% for the first quarter of fiscal 2004 was
down from 31.7% recorded a year ago as a result of a changing product
mix and lower utilization rates during the quarter. Norstan recorded
an operating loss of $2.9 million for the first quarter of fiscal 2004
versus net income of $769,000 in the same period last year, which was
attributable to the company's ongoing investment in expansion into
tier one markets and continued gross margin pressure.
Norstan recorded a first quarter net loss from continuing
operations of $2.0 million, or $0.16 per share, as compared to net
income of $43,000 ($0.00 per share) in the same period for fiscal
2003. During the quarter, Norstan recorded a net gain on the disposal
of real estate received as part of the Vadini arbitration settlement
of $155,000. Net loss for the first quarter of fiscal 2004 totaled
$1.9 million, or $0.15 per share, compared to net income of $2.2
million, or $0.17 per share, in the first quarter of fiscal 2003.
"While our revenue growth improved as compared to last year in
spite of continued market softness in IT spending, the operating loss
was larger than we had anticipated," said James C. (Jim) Granger,
president and chief executive officer at Norstan. "We will continue to
adjust our cost model with a view toward achieving long term
profitability. We believe our strategy of expansion into cities, such
as New York, San Francisco, Atlanta and Chicago, is the right one to
position Norstan for the future."
Revenues decreased 3.6% from the $59.0 million generated in the
fourth quarter of fiscal 2003. Gross margin remained relatively flat
from the 28.4% reported last quarter. Net loss from continuing
operations increased quarter over quarter from the net loss of
$959,000, or $0.08 per share, reported in the fourth quarter of fiscal
2003. Net income declined sequentially from the $1.7 million net
income, or $0.13 per diluted share, reported in the fourth quarter.
Norstan recorded a net gain on discontinued operations of $2.7 million
in the fourth quarter of fiscal 2003 as a result of the accelerated
payment from NetWolves in connection with the sale of Norstan Network
Services in the first quarter of fiscal 2003.
As part of Norstan's continued focus on right-sizing the cost
model to ensure long term profitability, the Company anticipates
recording a restructuring charge in the second quarter of fiscal 2004
ranging from $1.5 - $2.0 million, related to a reduction in work force
of approximately 75-100 people. The execution of this action is
anticipated to be completed by the end of Norstan's second quarter. At
the same time Norstan will continue to build its workforce in
technology expertise and geographies of opportunity to augment the
company's growth. The company will continue to manage expenses to
better align resources with market demand.
Norstan's first quarter results placed the company out of
compliance with one specific covenant contained in the agreement
governing the company's primary credit facility. Norstan's lenders
have waived this covenant violation. The anticipated restructuring
charge and a continuation of the factors contributing to Norstan's
first quarter loss will cause the company to be out of compliance with
its lending agreement in the second fiscal quarter of 2004. Norstan's
management is engaged in discussions with the company's current
lenders regarding these matters. Additionally, the company is
conducting discussions with other financial institutions concerning
Norstan's long-term credit financing needs.
Quarterly Highlights:
-- Mercedes Benz Canada selected Norstan Canada, Ltd., to supply
an Internet Protocol (IP) voice and data system for the
company's new Toronto headquarters facility, lowering the
company's maintenance costs and streamlining the management of
its voice and data communications.
-- Norstan Communications was chosen by the City of Coquitlam,
one of North America's leading high-tech cities, to install a
new Nortel Network's IP telephony system, including 700 phones
and a new, advanced, data infrastructure that links 15 sites
throughout the city, providing a savings to Coquitlam's
taxpayers.
-- Rice Memorial Hospital selected Norstan Communications to
deploy a wireless voice over IP network on a Distributed
Antenna System (DAS), improving communications for hospital
staff and patient care.
-- Norstan Communications entered a distribution agreement with
Ascendent Telecommunications, a leading developer of mobility
and disaster recovery technology solutions for voice
communications.
Fiscal 2004 Outlook
While Norstan's management remains optimistic the Company will be
profitable over the longer term, the Company believes it is unwise to
provide detailed guidance on near term revenues and earnings per
share.
Conference Call and Webcast
Norstan will discuss its first quarter fiscal 2004 results on a
conference call scheduled today, September 16, at 5 p.m. Eastern time.
The conference call can be accessed toll-free by callers at (888)
443-9986 or on the Internet at www.norstan.com. Starting today at
approximately 7:00 p.m. Eastern time, the replay of the call can be
accessed toll-free until midnight, September 23, by dialing (800)
642-1687 (conference ID number is 1944559) or on the Internet at
www.norstan.com.
Cautionary Statement Under the Private Securities Litigation
Reform Act of 1995
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Acts of 1995. A number of
factors should be considered in conjunction with the above
forward-looking statements, including changes in economic and market
conditions, factors related to the development of new technologies,
product pricing, industry regulation, management of growth,
integration of acquisitions, and other factors set forth in cautionary
statements included in Norstan's Form 10-K and other documents as
filed with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on forward-looking statements,
which reflect management's analysis only as of the date of this
release. The company undertakes no obligation to update these
forward-looking statements to reflect events and circumstances that
may arise after the date of this release.
Regulation G Compliance
To comply with Regulation G, Norstan will post to its investor
relations web site at www.norstan.com any reconciliations of
differences between Non-GAAP and GAAP financial information disclosed
in connection with today's earnings releases.
About Norstan, Inc.
Norstan, Inc. (Nasdaq:NRRD) - ...the technology services people
who improve the way their customers communicate. A full-service
telecommunications solutions company that delivers voice and data
technologies and services, and remanufactured equipment to select
corporate end-users and channel partners. Norstan also offers a full
range of technologies for call center design, messaging,
infrastructure, conferencing and mobility. Norstan has offices
throughout North America. To learn more, visit the Norstan website at
www.norstan.com.
Norstan and associated product names are trademarks or registered
trademarks of Norstan, Inc. in the United States and/or other
countries. All other products and services mentioned in this document
may be trademarks of the companies with which they are associated.
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Quarter Ended
----------------------
August 2, July 27,
2003 2002
------------ ---------
Revenues
Communications Technology Solutions and
Services $49,054 $43,827
Resale Services 7,266 7,399
Financial Services 564 857
------------ ---------
Total revenues 56,884 52,083
------------ ---------
Cost of sales 40,918 35,575
------------ ---------
Gross margin
Communications Technology Solutions and
Services 12,913 13,240
Resale Services 2,408 2,505
Financial Services 645 763
------------ ---------
Total gross margin 15,966 16,508
------------ ---------
SG and A expenses 18,847 15,739
------------ ---------
Operating income (loss) (2,881) 769
Interest expense (448) (692)
Other income (expense), net 7 (7)
------------ ---------
Net income (loss) from continuing operations
before taxes (3,322) 70
Income tax provision (benefit) (1,296) 27
------------ ---------
Net income (loss) from continuing operations (2,026) 43
Discontinued operations (net of tax):
Income from operations of discontinued
operations - 20
Gain from disposal of discontinued
operations, net of tax 154 2,129
------------ ---------
Net income (loss) $(1,872) $2,192
============ =========
Net income (loss) per share - continuing
operations $(0.16) $0.00
Net income (loss) per share - discontinued
operations 0.01 0.17
------------ ---------
Net income (loss) per share - diluted $(0.15) $0.17
============ =========
Weighted average shares outstanding - diluted 12,856 13,024
============ =========
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
August 2, April 30,
2003 2003
--------- ---------
ASSETS
------
CURRENT ASSETS
Cash $1,708 $1,185
Accounts receivable, net 32,548 33,523
Current lease receivables 6,076 6,846
Inventories 7,822 7,248
Costs and estimated earnings in excess of billings 6,825 5,746
Prepaid expenses, deposits and other 6,016 5,216
--------- ---------
Total current assets 60,995 59,764
--------- ---------
PROPERTY AND EQUIPMENT
Property and equipment 91,820 89,988
Less accumulated depreciation and amortization (74,345) (72,304)
--------- ---------
Net property and equipment 17,475 17,684
--------- ---------
OTHER ASSETS
Lease receivables, net 3,973 5,503
Goodwill 4,425 4,379
Deferred income taxes 14,093 12,564
Other assets, net 2,613 2,735
Net non-current assets of discontinued operations 623 693
--------- ---------
Total other assets 25,727 25,874
--------- ---------
$104,197 $103,322
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $18,826 $1,641
Current maturities of discounted lease rentals 4,245 4,897
Accounts payable 17,652 14,465
Deferred revenue 21,931 21,521
Accrued liabilities 9,839 11,181
Billings in excess of costs and estimated earnings 6,302 6,827
--------- ---------
Total current liabilities 78,795 60,532
--------- ---------
LONG-TERM DEBT, NET 400 15,600
DISCOUNTED LEASE RENTALS, NET 2,683 3,600
--------- ---------
Total liabilities 81,878 79,732
--------- ---------
SHAREHOLDERS' EQUITY
Common stock - $0.10 par value: 40,000,000
authorized shares: 12,982,991 and 12,784,122
shares issued and outstanding 1,298 1,278
Capital in excess of par value 57,392 56,891
Accumulated deficit (34,391) (32,520)
Unamortized cost of stock (62) (134)
Accumulated other comprehensive loss (1,918) (1,925)
--------- ---------
Total shareholders' equity 22,319 23,590
--------- ---------
$104,197 $103,322
========= =========
CONTACT: Norstan, Inc., Minneapolis
Jan W. Drymon, 952-352-4292
jan.drymon@norstan.com
or
The Carideo Group, Minneapolis
Tony Carideo, 612-317-2880
tony@carideogroup.com