Exhibit 99.1
Norstan Reports First Quarter Fiscal 2005 Results; Operating Income
Totaled $2.4 Million EPS of $0.09 Per Share
MINNEAPOLIS--(BUSINESS WIRE)--Sept. 7, 2004--Norstan, Inc.
(Nasdaq:NRRD), a leading provider of communications solutions and
services, today reported revenues of $54.4 million for the first
quarter ended July 31, 2004, versus $56.9 million reported in the
first quarter of fiscal 2004. First quarter operating income totaled
$2.4 million compared with an operating loss of $2.9 million in the
first quarter of fiscal 2004. The company reported first quarter net
income of $1.2 million, or $0.09 per share, versus a first quarter net
loss of $1.9 million, or $0.15 per share. Gross margin of 29.6 percent
improved from 28.1 percent one year ago.
During the quarter, Norstan sold the assets and intellectual
property related to Norstan CDG to IPcelerate, Inc., a privately held
developer of Voice over IP (VoIP) applications, for $2.5 million in
cash and promissory notes, and the assumption by the purchaser of
approximately $400,000 in liabilities. Pursuant to the terms of the
purchase agreement, the company received $1.25 million at closing and
$1.25 million evidenced by non-interest promissory notes in favor of
Norstan ($1.05 million due January 30, 2005 and $200,000 due February
28, 2005). Norstan recorded a pre-tax gain of $88,000 from the sale in
the first quarter of fiscal 2005. The company believes it can continue
to offer its customers access to VoIP applications without the
development expenses associated with the on-going operations of the
CDG business.
"We are pleased with our first quarter performance," said Scott G.
Christian, Norstan's president and CEO. "While our revenues were down
modestly over last year, the quality of our revenues has improved, as
reflected in higher gross margins. Our efforts to properly size our
business have continued to improve results; our operating
profitability has strengthened and cash flow has improved steadily."
The company's expense structure continued to improve in the first
quarter of fiscal 2005. SG&A expenses decreased 3.1 percent
sequentially and 27.2 percent year-over-year as a result of the
company's fiscal 2004 restructuring initiatives. This significant
reduction in spending was somewhat offset by the recording of $1.5
million in incentive compensation costs accrued during the first
quarter of fiscal 2005.
EBITDA (earnings before interest, taxes, depreciation and
amortization) from continuing operations for the first quarter of
fiscal 2005 totaled $4.3 million, an improvement from negative EBITDA
of $691,000 reported in the first quarter of last year. Sequentially,
EBITDA remained steady as compared to the $4.4 million reported in the
fourth quarter of fiscal 2004, excluding restructuring and other
charges.
Sequential Results
First quarter fiscal 2005 revenues declined modestly from the
$57.5 million reported in the fourth quarter of fiscal 2004. Gross
margin totaled 29.6 percent compared to the 29.2 percent reported last
quarter. Operating income of $2.4 million showed significant
improvement from the $6.8 million operating loss reported last
quarter. Net income also improved from the $4.6 million loss, or $0.35
per share, reported last quarter. Norstan recorded $9.4 million in
pre-tax restructuring and other charges during the fourth quarter of
fiscal 2004.
Fiscal 2005 Outlook
Norstan's management believes it prudent not to provide
forward-looking financial guidance for fiscal 2005. However, as the
company's strategic focus has changed from one of higher revenue
through aggressive growth, Norstan is focusing in fiscal 2005 on
profitability through several initiatives, such as improving gross
margins, delivering advanced business applications, driving additional
sales to its existing customer base, selectively developing new
business in certain technologies and continued development of our
Resale Services business. This change in strategic focus may result in
lower revenues but deliver higher profitability and cash flow in
fiscal 2005 than in fiscal 2004.
Conference Call and Webcast
Norstan will discuss its first quarter fiscal year results on a
conference call scheduled today, September 7, at 5 p.m. Eastern time.
The conference call can be accessed toll-free by callers at (888)
333-4519 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 15, by dialing (866)
518-1010 (ID number P516079N) or on the Internet at www.norstan.com.
2004 Annual Shareholders' Meeting
Norstan will hold its 2004 Annual Shareholders' Meeting on
Wednesday, September 15, 2004, at 2:00 p.m. central time, at the
Minneapolis Marriott Southwest, 5801 Opus Parkway in Minnetonka,
Minnesota.
About Norstan, Inc.
Norstan, Inc. (Nasdaq:NRRD) is a full-service communications
solutions company that delivers voice and data technologies and
services, and remanufactured equipment to corporate end-users and
public sector companies. Norstan offers a full range of integrated
technologies for converged solutions, customer contact solutions and
ProtectNet(R) Life Cycle services. The company has offices located
throughout the U.S. 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.
Form 8-K
Concurrent with this news release, Norstan filed a Form 8-K with
the SEC as required by Item 2.02 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 may contain 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 and margins, labor costs, industry regulation,
management of growth, integration of acquisitions, funding and
sourcing of adequate inventory, 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 Quarter Ended
---------------------
July 31, August 2,
2004 2003
---------- ----------
Revenues
Communications Solutions and Services $46,023 $49,618
Resale Services 8,378 7,266
---------- ----------
Total revenues 54,401 56,884
---------- ----------
Cost of sales 38,305 40,918
---------- ----------
Gross margin
Communications Solutions and Services 13,211 13,558
Resale Services 2,885 2,408
---------- ----------
Total gross margin 16,096 15,966
---------- ----------
SG and A expenses 13,725 18,847
---------- ----------
Operating income (loss) 2,371 (2,881)
Interest expense (621) (448)
Other income, net 120 7
---------- ----------
Net income (loss) from continuing operations
before taxes 1,870 (3,322)
Income tax provision (benefit) 710 (1,296)
---------- ----------
Net income (loss) from continuing operations 1,160 (2,026)
Discontinued operations (net of tax):
Gain from disposal of discontinued
operations, net of tax 87 154
---------- ----------
Net income (loss) $1,247 $(1,872)
========== ==========
Net income (loss) per diluted share:
Continuing operations $0.08 $(0.16)
Discontinued operations 0.01 0.01
---------- ----------
Net income (loss) per diluted share $0.09 $(0.15)
========== ==========
Weighted average diluted shares outstanding 13,662 12,856
========== ==========
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
July 31, April 30,
2004 2004
-------- ---------
ASSETS
------
CURRENT ASSETS
Cash $4,520 $2,724
Accounts receivable, net 33,864 32,795
Current lease receivables 3,273 4,603
Inventories 8,941 8,999
Costs and estimated earnings in excess of billings 4,992 4,786
Deferred income taxes 5,985 5,985
Prepaid expenses, deposits and other 6,157 5,770
Net current assets of discontinued operations 737 627
-------- ---------
Total current assets 68,469 66,289
-------- ---------
PROPERTY AND EQUIPMENT
Furniture, fixtures and equipment 77,165 84,423
Less accumulated depreciation and amortization (65,227) (71,242)
-------- ---------
Net property and equipment 11,938 13,181
-------- ---------
OTHER ASSETS
Lease receivables, net 1,280 1,020
Deferred income taxes 12,216 12,979
Goodwill 4,123 4,477
Other 1,591 2,498
-------- ---------
Total other assets 19,210 20,974
-------- ---------
$99,617 $100,444
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $4,000 $4,400
Current maturities of discounted lease rentals 2,290 2,802
Accounts payable 11,687 11,990
Deferred revenue 23,254 21,769
Accrued liabilities 15,525 14,951
Billings in excess of costs and estimated earnings 6,711 8,291
-------- ---------
- -
Total current liabilities 63,467 64,203
-------- ---------
LONG-TERM DEBT, NET 16,000 16,833
DISCOUNTED LEASE RENTALS, NET 412 750
NET NON-CURRENT LIABILITIES OF DISCONTINUED
OPERATIONS 80 100
OTHER LIABILITIES 2,535 3,003
-------- ---------
Total liabilities 82,494 84,889
-------- ---------
SHAREHOLDERS' EQUITY
Common stock - $0.10 par value: 40,000,000
authorized shares: 13,554,237 and 13,365,326
shares issued and outstanding 1,355 1,337
Capital in excess of par value 58,906 58,474
Accumulated deficit (40,669) (41,916)
Unamortized cost of stock (552) (372)
Accumulated other comprehensive loss (1,917) (1,968)
-------- ---------
Total shareholders' equity 17,123 15,555
-------- ---------
$99,617 $100,444
======== =========
NORSTAN, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(In thousands)
Earnings before interest, taxes, depreciation and amortization
(EBITDA) - continuing operations
- ----------------------------------------------------------------------
For the Quarter Ended
----------------------------
July 31, April 30, August 2,
2004 2004 2003
-------- --------- ---------
Net Income - Continuing Operations 1,160 (4,652) (2,026)
Interest 621 618 448
Taxes 710 (2,717) (1,296)
Depreciation/Amortization 1,834 1,807 2,183
-------- --------- ---------
EBITDA - Continuing Operations 4,325 (4,944) (691)
Restructuring and other charges - 9,368 -
-------- --------- ---------
EBITDA - Continuing Operations before
restructuring and other charges 4,325 4,424 (691)
======== ========= =========
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