Exhibit 99
Norstan Reports Fourth Quarter and Full-Year Fiscal 2004 Results
MINNEAPOLIS--(BUSINESS WIRE)--June 17, 2004--Norstan, Inc.
(Nasdaq:NRRD), a leading provider of communications solutions and
services, today reported revenues of $57.5 million for the fourth
quarter ended April 30, 2004, up sequentially from the $55.0 million
reported in the third quarter of fiscal 2004. Gross margin of 29.2%
remained flat from the 29.1% reported one quarter ago. The company
reported a fourth quarter net loss of $4.6 million, or $0.35 per
share, versus third quarter net income of $520,000, or $0.04 per
diluted share.
During the fourth quarter of fiscal 2004, Norstan recorded pre-tax
restructuring and other charges of $9.4 million. Approximately $7.2
million of this amount was for previously announced reorganization
efforts including costs associated with employee and severance costs,
facilities exit and other contractual costs, and other asset
impairment charges. Also included in the charge is $2.2 million
pertaining to a disputed funding claim with the Universal Services
Administrative Company regarding a specific E-rate project (see news
release dated June 1, 2004).
Excluding these charges, Norstan reported pre-tax operating income
of $2.6 million in the fourth quarter of fiscal 2004, continuing the
company's trend of improved quarter-over-quarter operating
profitability throughout fiscal 2004, as the company reported a loss
of $2.9 million in the first fiscal quarter, a loss of $849,000 in the
second fiscal quarter (excluding restructuring and other charges) and
a gain of $1.2 million in the third fiscal quarter of 2004.
Additional fourth quarter fiscal 2004 highlights:
-- Revenue improved 4.0% sequentially and was the highest
reported quarter in fiscal 2004
-- SG&A expenses decreased 4.5% sequentially and 20.5%
year-over-year as a result of the company's fiscal 2004
restructuring initiatives
-- Excluding restructuring and other charges, EBITDA (earnings
before interest, taxes, depreciation and amortization) totaled
$4.4 million, up from $3.3 million reported in the third
quarter of fiscal 2004 and $1.3 million in the fourth quarter
of fiscal 2003
"We have set Norstan on a strategic direction aimed at improving
the company's operating profitability," said Scott G. Christian,
Norstan's president and chief executive officer. "We are highly
focused on our core business, committed to our strongest markets,
dedicated to our customers, and organizationally aligned with our
technology partners. We see fiscal 2005 as the year of stability in
the business that will create a platform for growth."
Fourth Quarter Year-Over-Year Comparison
Fourth quarter fiscal 2004 revenues declined modestly from the
$59.0 million reported in the same period last fiscal year. Gross
margin showed improvement from the 28.4% reported in the fourth
quarter of fiscal 2003. The fourth quarter net loss increased from net
income of $1.7 million in the same period last fiscal year. Excluding
restructuring and other charges, pre-tax operating income improved
from a $1.1 million operating loss in the fourth quarter of fiscal
2003.
Full-Year Fiscal 2004 Results
Revenues for the fiscal year ended April 30, 2004 were $225.8
million, down slightly from $226.9 million reported in fiscal 2003.
Fiscal 2004 gross margin of 28.9% declined from 30.1% in fiscal 2003.
Including the restructuring and other charges of $13.5 million
incurred in fiscal 2004, Norstan reported a pre-tax operating loss of
$13.5 million compared to a pre-tax operating income of $1.5 million
for the prior fiscal year. During fiscal 2004, Norstan reported a net
gain on the disposal of discontinued operations of $0.4 million,
compared to a net gain of $5.3 million reported in fiscal 2003. For
fiscal 2004, the net loss totaled $9.4 million, or $0.72 per share,
versus net income of $4.9 million, or $0.39 per diluted share,
reported in fiscal 2003.
Excluding fiscal 2004 restructuring and other charges, the net
loss for fiscal 2004 totaled $1.0 million, or $0.08 per share.
As of April 30, 2004, Norstan is in compliance with all banking
covenants specific to the company's secured credit agreement.
Fiscal 2005 Outlook
As Norstan continues to build traction with the company's new
strategic direction, combined with economic, geopolitical and other
uncertainties, Norstan's management believes it prudent to not provide
forward-looking financial guidance for fiscal 2005. The company will,
however, reiterate outlook statements made at the end of its third
quarter of fiscal 2004: 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 to its existing
customer 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 fourth quarter and full-year fiscal 2004
results on a conference call scheduled today, June 17, at 5 p.m.
Eastern time. The conference call can be accessed toll-free by callers
at (877) 323-2093 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, June 24, by dialing (888)
509-0081 (conference ID number is P499055N) or on the Internet at
www.norstan.com.
About Norstan, Inc.
Norstan, Inc. (Nasdaq:NRRD) is a full-service communications
solutions and services company delivering voice and data technologies
and services, and remanufactured equipment to corporate end-users,
channel partners and public sector companies. 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.
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)
reconciliations of differences between non-GAAP and GAAP financial
information that may be required in connection with issuing the
company's quarterly and full-year financial results.
In addition to GAAP income statement results, Norstan has provided
pro forma income statement highlights prepared with certain
adjustments relating to restructuring and other charges specific to
the company's fourth quarter and full-year fiscal 2004 financial
results. Due to the significance of Norstan's restructuring efforts
during fiscal 2004, management believes that a more meaningful
comparison of fourth quarter and full-year fiscal 2004 results would
exclude restructuring and other charges and results of discontinued
operations. Additionally, Norstan has provided fourth quarter and
fiscal year-end 2004 EBITDA (earnings before interest, tax,
depreciation and amortization) results due to the significance this
financial measurement has on the company's ability to comply with
certain covenants of the company's banking agreement.
Financial Statements
As shown in the attached statement of operations for the fourth
quarter and fiscal year ended April 30, 2004, Norstan has now
incorporated the Financial Services segment results into the
Communications Solutions and Services segment. Financial Services,
which provides customers with customized financial alternatives, has
experienced declining revenues attributed to Norstan's strategic
decision in fiscal year 2002 to not offer financing directly to its
customers. Revenue from Financial Services will continue to decline
over the next few fiscal years as its operations completely wind down.
This fact, coupled with Norstan's restructuring efforts in fiscal
2004, and realignment of the company's management structure and
business operations, make it no longer necessary to provide these
results as a separate business segment.
Norstan will provide a balance sheet as of April 30, 2004 and
statement of cash flows for fiscal 2004 with the filing of the
company's Form 10-K, which will be filed with the Securities and
Exchange Commission (SEC) on or about July 29, 2004.
Form 8-K
Concurrent with this news release, Norstan filed a Form 8-K with
the SEC as required by Item 12 of the instructions to Form 8-K. This
Form 8-K is available on Norstan's Investor Relations web site
(www.norstan.com) and on the SEC's web site (www.sec.gov).
Cautionary Statement Under the Private Securities Litigation
Reform Act of 1995
This news 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
Annual Report on Form 10-K and other documents as filed with the
Securities and Exchange Commission from time to time. 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.
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 For the Twelve
Quarter Ended Months Ended
------------------- -------------------
April 30, April 30, April 30, April 30,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues
Communications Solutions and
Services $49,276 $51,402 $195,509 $197,688
Resale Services 8,198 7,576 30,340 29,208
--------- --------- --------- ---------
Total revenues 57,474 58,978 225,849 226,896
--------- --------- --------- ---------
Cost of sales 40,709 42,248 160,486 158,653
--------- --------- --------- ---------
Gross margin
Communications Solutions and
Services 13,904 14,310 54,719 58,146
Resale Services 2,861 2,420 10,644 10,097
--------- --------- --------- ---------
Total gross margin 16,765 16,730 65,363 68,243
--------- --------- --------- ---------
Selling, general, and
administrative expenses 14,172 17,829 65,319 66,781
Restructuring and other
charges 9,368 - 13,548 -
--------- --------- --------- ---------
Operating income (loss) (6,775) (1,099) (13,504) 1,462
Interest expense (618) (496) (2,346) (2,185)
Other income (expense),
net 24 (28) 105 (4)
--------- --------- --------- ---------
Net loss from continuing
operations before taxes (7,369) (1,623) (15,745) (727)
Income tax provision
(benefit) (2,717) (664) (5,983) (323)
--------- --------- --------- ---------
Net loss from continuing
operations (4,652) (959) (9,762) (404)
Discontinued operations (net
of tax):
Income from operations of
discontinued operations - - - 20
Gain from disposal of
discontinued operations 9 2,658 366 5,276
--------- --------- --------- ---------
Net income (loss) $(4,643) $1,699 $(9,396) $4,892
========= ========= ========= =========
Net income (loss) per share -
Continuing operations $(0.35) $(0.08) $(0.75) $(0.03)
Net income (loss) per share -
Discontinued operations 0.00 0.21 0.03 0.42
--------- --------- --------- ---------
Net income (loss) per share $(0.35) $0.13 $(0.72) $0.39
========= ========= ========= =========
Weighted average shares
outstanding 13,200 12,614 13,056 12,492
========= ========= ========= =========
Norstan, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
(In Thousands)
Statement of operations - selected financial data
- -------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal Fiscal Fiscal Fiscal
2004 2004 2004 2004
-------- -------- -------- --------
Aug. 2, Nov. 1, Jan. 31, Apr. 30,
2003 2003 2004 2004
-------- -------- -------- --------
Revenues $56,884 $56,446 $55,045 $57,474
Cost of Sales 40,918 39,826 39,033 40,709
-------- -------- -------- --------
Gross Margin 15,966 16,620 16,012 16,765
Selling, general, and
administrative
expenses 18,847 17,469 14,832 14,172
Restructuring and other
charges - 4,180 - 9,368
-------- -------- -------- --------
Operating income (loss) (2,881) (5,029) 1,180 (6,775)
Add - Restructuring and
other charges - 4,180 - 9,368
-------- -------- -------- --------
Operating income (loss) -
before restructuring
and other charges $(2,881) $(849) $1,180 $2,593
======== ======== ======== ========
Net loss - before restructuring and other charges
- -------------------------------------------------
For the
12 Months
Ended
----------
Apr. 30,
2004
--------
Net loss $(9,396)
Restructuring and other
charges 13,548
Change in income tax
(provision) benefit (5,148)
--------
Net loss - before
restructuring and other
charges $(996)
========
Earnings per share before restructuring and other charges
- ---------------------------------------------------------
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
Fiscal Fiscal Fiscal Fiscal Fiscal
2004 2004 2004 2004 2004
-------- -------- -------- -------- --------
Aug. 2, Nov. 1, Jan. 31, Apr. 30, Apr. 30,
2003 2003 2004 2004 2004
-------- -------- -------- -------- --------
Earnings per share $(0.15) $(0.26) $0.04 $(0.35) $(0.72)
Impact on EPS from
restructuring and
other charges - 0.20 - 0.44 0.64
-------- -------- -------- -------- --------
Earnings per share -
before restructuring and
other charges $(0.15) $(0.06) $0.04 $0.09 $(0.08)
======== ======== ======== ======== ========
Earnings before interest, taxes, depreciation and amortization
(EBITDA) - continuing operations
- --------------------------------------------------------------
For the Quarter For the Twelve
Ended Months Ended
----------------- -----------------
Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2004 2003 2004 2003
-------- -------- -------- --------
Net income (loss) -
continuing operations $(4,652) $(959) $(9,762) $(404)
Interest expense 618 496 2,346 2,185
Income tax (provision)
benefit (2,717) (664) (5,983) (323)
Depreciation and
amortization 1,807 2,382 8,252 9,480
-------- -------- -------- --------
EBITDA - continuing
operations (4,944) 1,255 (5,147) 10,938
Restructuring and other
charges 9,368 - 13,548 -
-------- -------- -------- --------
EBITDA - continuing
operations before
restructuring and other
charges $4,424 $1,255 $8,401 $10,938
======== ======== ======== ========
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