Exhibit 99
Norstan Reports Third Quarter Fiscal 2004 Results;
Company Reports Operating Profitability and Positive Earnings
MINNEAPOLIS--(BUSINESS WIRE)--March 16, 2004--Norstan, Inc.
(Nasdaq:NRRD), a leading provider of communications solutions and
services, today reported revenues of $55.0 million for the third
quarter ended January 31, 2004, relatively flat from the $56.4 million
reported in the second fiscal quarter of the same year. Gross margin
of 29.1% also remained flat from the 29.4% reported one quarter ago.
The company reported third quarter net income of $520,000, or $0.04
per share, versus a reported second quarter loss of $3.4 million, or
$0.26 per share.
During the third fiscal quarter of 2004, Norstan recorded a net
gain of $208,000 on the sale of real property received as part of an
arbitration settlement in fiscal 2003. In the second fiscal quarter,
the company recorded restructuring and other charges (pretax) of $4.2
million. Excluding these charges, Norstan's operating profitability
has improved each quarter during fiscal 2004.
"We are encouraged by Norstan's third quarter operating
performance and improved earnings results," said Scott G. Christian,
Norstan president and chief executive officer. "We have begun to
implement and will continue to look for ways to improve our
profitability as we complete fiscal 2004 and plan for fiscal 2005. Our
goal is to return Norstan to sustained profitability and deliver a
positive return to our shareholders."
Year-Over-Year Comparison
Third quarter fiscal 2004 revenues declined approximately six
percent from the $58.8 million reported in the same period last year.
Gross margin was relatively flat from the 29.0% reported in the third
quarter of fiscal 2003. Operating income improved dramatically from
$612,000 in the third quarter of fiscal 2003 to $1.2 million this
fiscal year. Third quarter net income was up from the net income of
$416,000 in the same period last fiscal year.
2004 Year-To-Date Results
For the nine-month period ending January 31, 2004, Norstan
recorded revenues of $168.4 million, flat from the same nine-month
period of fiscal 2003. Gross margin of 28.9% declined from the 30.7%
in the comparable period of fiscal 2003, primarily as a result of our
changing product mix. Including the restructuring and other charges of
$4.2 million incurred in the second quarter of fiscal 2004, Norstan
reported operating losses of $6.7 million compared to operating income
of $2.6 million for the prior year's nine-month period. Net loss from
continuing operations totaled $5.1 million, or $0.39 per share, as
compared to net income from continuing operations of $556,000, or
$0.04 per share, in the comparable period of fiscal 2003. For the
nine-month period, net losses totaled $4.8 million, or $0.36 per
share, versus net income of $3.2 million, or $0.24 per share, reported
in fiscal 2003. During the first nine months of fiscal 2003, Norstan
reported a $2.6 million net gain on the disposal of discontinued
operations versus $357,000 in the similar period of fiscal 2004.
Excluding the second quarter fiscal 2004 restructuring and other
charges, net loss from continuing operations for the nine-month period
of fiscal 2004 totaled $2.6 million, or $0.20 per share.
Fiscal 2004 - 2005 Outlook
Norstan will take a charge in the fourth fiscal quarter of 2004
relating to reorganization activities and projects being below the
minimum level of EBITDA required under the company's new secured
credit agreement. Norstan continues to finalize the details and total
costs associated with the reorganization plan announced in February
2004. As such, the total amount of this charge is not yet determined.
Norstan has had proactive discussions regarding this projected EBITDA
shortfall with their lender, Wells Fargo Foothill, Inc., who has
agreed to work with the company relative to specific covenants
governing its credit facility.
While the company has provided no specific earnings guidance for
fiscal 2004, Norstan will continue to receive the benefit in fiscal
2004 of restructuring actions taken during its second fiscal quarter.
As the company's strategic focus changes from one of higher revenue
through aggressive growth, Norstan is now focusing on profitability
through several initiatives such as, improving gross margins, driving
additional sales from its existing current base and selectively
developing new business in certain technologies. This change in
strategic focus may result in lower revenues but deliver higher
profitability in fiscal 2005 than in fiscal 2004.
Conference Call and Webcast
Norstan will discuss its third quarter fiscal 2004 results on a
conference call scheduled today, March 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, March 23, by dialing (800) 642-1687
(conference ID number is 5490678) or on the Internet at
www.norstan.com.
About Norstan, Inc.
Norstan, Inc. (Nasdaq:NRRD) - A full-service communications
solutions and services company delivering voice and data technologies
and services, and remanufactured equipment to corporate end-users and
the public sector. Norstan also offers a full range of technologies
for customer contact solutions, voice and convergence, messaging,
infrastructure, conferencing and mobility. Norstan has offices
throughout the United States and Canada. To learn more, visit the
Norstan website 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, labor costs, industry regulation, management of
growth, integration of acquisitions, access to adequate financing 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. Disclosure of revenue dollars are not intended to reflect
materiality, and are subject to confidentiality provisions and
customer consent.
GAAP to Non-GAAP Reconciliation
To comply with Regulation G promulgated pursuant to the
Sarbanes-Oxley Act, Norstan has attached to this news release and will
post to the company's investor relations web site
(www.norstan.com/investorrelations) any reconciliations of differences
between non-GAAP and GAAP financial information that may be required
in connection with issuing the company's quarterly financial results.
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 For the Nine Months
Ended Ended
------------------- -------------------
Jan. 31, Jan. 25, Jan. 31, Jan. 25,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues
Communications Solutions
and Services $ 47,555 $ 51,242 $144,776 $143,801
Resale Services 6,978 6,804 22,142 21,632
Financial Services 512 712 1,457 2,485
--------- --------- --------- ---------
Total revenues 55,045 58,758 168,375 167,918
--------- --------- --------- ---------
Cost of sales 39,033 41,749 119,776 116,405
--------- --------- --------- ---------
Gross margin
Communications Solutions
and Services 12,901 13,913 38,993 41,481
Resale Services 2,449 2,365 7,783 7,677
Financial Services 662 731 1,822 2,355
--------- --------- --------- ---------
Total gross margin 16,012 17,009 48,598 51,513
--------- --------- --------- ---------
Selling, general, and
administrative expenses 14,832 16,397 51,148 48,952
Restructuring and other
charges - - 4,180 -
--------- --------- --------- ---------
Operating income (loss) 1,180 612 (6,730) 2,561
Interest expense (727) (510) (1,728) (1,689)
Other income (expense),
net 59 32 83 25
--------- --------- --------- ---------
Net income (loss) from
continuing operations
before taxes 512 134 (8,375) 897
Income tax provision
(benefit) 200 51 (3,266) 341
--------- --------- --------- ---------
Net income (loss) from
continuing operations 312 83 (5,109) 556
Discontinued operations (net
of tax):
Income from operations of
discontinued operations - - - 20
Gain from disposal of
discontinued operations 208 333 357 2,617
--------- --------- --------- ---------
Net income (loss) $ 520 $ 416 $ (4,752) $ 3,193
========= ========= ========= =========
Net income (loss) per share -
Continuing operations $ 0.02 $ 0.01 $ (0.39) $ 0.04
Net income (loss) per share -
Discontinued operations 0.02 0.02 0.03 0.20
--------- --------- --------- ---------
Net income (loss) per share $ 0.04 $ 0.03 $ (0.36) $ 0.24
========= ========= ========= =========
Weighted average shares
outstanding 13,518 13,131 13,004 13,079
========= ========= ========= =========
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
January 31, April 30,
2004 2003
----------- -----------
ASSETS
------
CURRENT ASSETS
Cash $ 1,160 $ 1,185
Accounts receivable, net 35,776 33,523
Current lease receivables 5,183 6,846
Inventories 8,543 7,248
Costs and estimated earnings in excess of
billings 5,633 5,746
Prepaid expenses, deposits and other 5,664 5,216
----------- -----------
Total current assets 61,959 59,764
----------- -----------
PROPERTY AND EQUIPMENT
Furniture, fixtures and equipment 92,660 89,988
Less accumulated depreciation and
amortization (77,833) (72,304)
----------- -----------
Net property and equipment 14,827 17,684
----------- -----------
OTHER ASSETS
Lease receivables, net 1,514 5,503
Deferred income taxes 15,831 12,564
Net non-current assets of discontinued
operations 580 693
Goodwill 4,527 4,379
Intangible and other assets 2,697 2,735
----------- -----------
Total other assets 25,149 25,874
----------- -----------
$101,935 $103,322
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $ 4,382 $ 1,641
Current maturities of discounted lease
rentals 3,329 4,897
Accounts payable 13,549 14,465
Deferred revenue 21,963 21,521
Accrued liabilities 10,560 11,031
Net current liabilities of discontinued
operations 24 150
Billings in excess of costs and estimated
earnings 8,045 6,827
----------- -----------
- -
Total current liabilities 61,852 60,532
----------- -----------
LONG-TERM DEBT, NET 18,900 15,600
DISCOUNTED LEASE RENTALS, NET 1,243 3,600
----------- -----------
Total liabilities 81,995 79,732
----------- -----------
SHAREHOLDERS' EQUITY
Common stock - $0.10 par value: 40,000,000
authorized shares: 13,204,438 and 12,784,122
shares issued and outstanding 1,320 1,278
Capital in excess of par value 57,815 56,891
Accumulated deficit (37,271) (32,520)
Unamortized cost of stock (90) (134)
Accumulated other comprehensive loss (1,834) (1,925)
----------- -----------
Total shareholders' equity 19,940 23,590
----------- -----------
$101,935 $103,322
=========== ===========
Norstan, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
(In Thousands)
Operating income (loss) - before restructuring and other charges
- ----------------------------------------------------------------
First Quarter Second Quarter Third Quarter
Fiscal 2004 Fiscal 2004 Fiscal 2004
------------- -------------- -------------
August 2, November 1, January 31,
2003 2003 2004
------------- -------------- -------------
Operating income
(loss) $ (2,881) $ (5,029) $ 1,180
Restructuring and
other charges - 4,180 -
------------- -------------- -------------
Operating income (loss)-
before restructuring
and other charges $ (2,881) $ (849) $ 1,180
============= ============== =============
Net income (loss) from continuing operations - before restructuring
and other charges
- -------------------------------------------------------------------
For the
First Quarter Second Quarter Third Quarter Nine Months
Fiscal 2004 Fiscal 2004 Fiscal 2004 Ended
------------- -------------- ------------- -----------
August 2, November 1, January 31, January 31,
2003 2003 2004 2004
------------- -------------- ------------- -----------
Net income
(loss) from
continuing
operations $ (2,026) $ (3,395) $ 312 $ (5,109)
Restructuring
and other
charges - 4,180 - 4,180
Change in
income tax
(provision)
benefit - (1,630) - (1,630)
------------- -------------- ------------- -----------
Net income
(loss) from
continuing
operations -
before
restructuring
and other
charges $ (2,026) $ (845) $ 312 $ (2,559)
============= ============== ============= ===========
Weighted average shares outstanding 13,004
-----------
Net loss per share from continuing
operations - before restructuring and other
charges $ (0.20)
===========
Earnings before interest, taxes, depreciation and amortization -
continuing operations
- ----------------------------------------------------------------
For the Quarter Ended For the Nine Months Ended
----------------------------- -------------------------
January 31, January 25, January 31, January 25,
2004 2003 2004 2003
------------- -------------- ------------- -----------
Net income
(loss) -
continuing
operations 312 83 (5,109) 556
Interest
expense 727 510 1,728 1,689
Income tax
(provision)
benefit 200 51 (3,266) 341
Depreciation
and
amortization 2,054 2,032 6,445 7,098
------------- -------------- ------------- -----------
EBITDA -
continuing
operations 3,293 2,676 (202) 9,684
============= ============== ============= ===========
Earnings per share before restructuring and other charges
- ---------------------------------------------------------
Second Quarter Third Quarter Nine Months
Fiscal 2004 Fiscal 2004 Fiscal 2004
------------- -------------- -----------
November 1, January 31, January 31,
2003 2004 2004
------------- -------------- -----------
Earnings per
share $ (0.26) $ 0.04 $ (0.36)
Impact on EPS
from
restructuring
and other
charges 0.19 - 0.19
------------- -------------- -----------
Earnings per
share -
before
restructuring
and other
charges $ (0.07) $ 0.04 $ (0.17)
============= ============== ===========
CONTACT: Norstan, Inc., Minneapolis
Jan W. Drymon, 952-352-4292
jan.drymon@norstan.com
or
The Carideo Group
Tony Carideo, 612-317-2880
tony@carideogroup.com