Exhibit 99.1
Norstan Reports Second Quarter Fiscal 2005 Results; Operating Income Totaled
$2.9 Million EPS of $0.10 Per Share
MINNEAPOLIS--(BUSINESS WIRE)--Dec. 2, 2004--Norstan, Inc.
(NASDAQ:NRRD), a leading provider of communications solutions and
services, today reported revenues of $56.7 million for the second
quarter ended October 30, 2004, relatively flat from the $56.4 million
reported in the second quarter of fiscal 2004. Second quarter
operating income totaled $2.9 million compared with an operating loss
of $5.0 million in the second quarter of fiscal 2004. Second quarter
net income totaled $1.4 million, or $0.10 per share, versus a net loss
of $3.4 million, or $0.26 per share, in the second quarter of fiscal
2004. Gross margin of 31.2% improved from 29.4% reported one year ago.
Norstan reported pre-tax restructuring and other charges of $4.2
million in the second quarter of fiscal 2004.
Second quarter selling, general and administrative expenses
totaled $14.7 million in fiscal 2005, down approximately 16.0% from
$17.5 million reported in the same period one year ago, primarily as a
result of benefits of the restructuring efforts in fiscal 2004.
"Fiscal 2005 is a year of stabilizing revenues and improving
profitability," said Scott G. Christian, Norstan's president and chief
executive officer. "We are pleased with our second quarter results as
we continue to benefit from the organizational changes made last
fiscal year. As spending by the enterprise market shows signs of
modest improvement, we will continue to work closely with our
customers and prospects to offer them the communications solutions and
services they need to improve the way they communicate."
Sequential Results
Second quarter fiscal 2005 revenues increased 4.1% from the $54.4
million reported in the first quarter of fiscal 2005. These increases
resulted partially from a change in organizational structure in the
Resale Services business segment, effective August 1, 2004, as a
result of the termination of our Siemens resale alliance. Our Norstan
Resale Services Group (NRSG) now records revenues based on shipments
to our customers as compared to our previous method of recording
revenues which included reimbursement of marketing and refurbishing
fees as well as our portion of the former alliance's profits. Gross
margin was 31.2% compared to the 29.6% reported last quarter,
primarily as a result of improved product margins and operational
efficiencies.
Second quarter fiscal 2005 operating income of $2.9 million
improved 22.9% from the $2.4 million operating income reported last
quarter, as a result of increases in Communications Solutions and
Services business unit product margins offset by decreases in the
Resale Services business and the elimination of the costs associated
with the Norstan Convergence Development Group, which was sold on July
30, 2004. Net income also improved to $1.4 million, or $0.10 per
share, from the $1.2 million, or $0.09 per share, reported last
quarter.
EBITDA (earnings before interest, taxes, depreciation and
amortization) from continuing operations for the second quarter of
fiscal 2005 totaled $4.5 million, an improvement from EBITDA of $1.4
million reported in the second quarter of last fiscal year, excluding
restructuring and other charges. Sequentially, EBITDA improved 4.0%
compared to $4.3 million reported in the first quarter of fiscal 2005.
2005 Year-to-Date Results
For the six-month period ending October 30, 2004, Norstan reported
revenues totaling $111.1 million, down 2.0% from $113.3 million
reported for the same period in fiscal 2004. Gross margin of 30.4%
improved from the 28.7% in the comparable period of fiscal 2004,
primarily as a result of improved product margins in our
Communications Solutions and Services business unit, improved
operational efficiencies and the restructuring efforts in last fiscal
year. Norstan reported $5.3 million in operating income compared to an
operating loss of $7.9 million for the prior year's six-month period.
Net income totaled $2.7 million, or $0.19 per share, as compared to
the net loss of $5.3 million, or $0.41 per share, in the comparable
period of fiscal 2004. Norstan reported pre-tax restructuring and
other charges of $4.2 million in the second quarter of fiscal 2004.
Fiscal 2005 Outlook
Norstan's management believes it prudent not to provide
forward-looking financial guidance for fiscal 2005. As the company's
strategic focus has changed from one of higher revenue through
aggressive growth, Norstan continues to focus 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 its
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. In addition, while NRSG operating
margins have been impacted in the short-term by the termination of our
Siemens resale alliance on July 30, 2004, we are still unable to
assess whether these factors will have a material adverse impact on
the long-term results of operations or financial condition.
Conference Call and Webcast
Norstan will discuss its second quarter fiscal year results on a
conference call scheduled today, December 2, at 5 p.m. Eastern time.
The conference call can be accessed toll-free by callers at (888)
789-0156 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, December 15, by dialing (888)
509-0082 (ID number P528935N) or on the Internet at www.norstan.com.
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
ProtecNet(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.
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
Quarters Ended Six Months Ended
----------------- -----------------
Oct. 30, Nov. 1, Oct. 30, Nov. 1,
2004 2003 2004 2003
-------- -------- -------- --------
Revenues
Communications Solutions and
Services $47,575 $48,548 $93,598 $98,166
Resale Services 9,080 7,898 17,458 15,164
-------- -------- -------- --------
Total revenues 56,655 56,446 111,056 113,330
-------- -------- -------- --------
Cost of sales 39,000 39,826 77,305 80,744
-------- -------- -------- --------
Gross margin
Communications Solutions and
Services 14,273 13,694 27,484 27,252
Resale Services 3,382 2,926 6,267 5,334
-------- -------- -------- --------
Total gross margin 17,655 16,620 33,751 32,586
-------- -------- -------- --------
SG and A expenses 14,741 17,469 28,466 36,316
Restructuring and other
charges - 4,180 - 4,180
-------- -------- -------- --------
Operating income (loss) 2,914 (5,029) 5,285 (7,910)
Interest expense (616) (553) (1,237) (1,001)
Other income, net 6 18 126 24
-------- -------- -------- --------
Net income (loss) from continuing
operations before taxes 2,304 (5,564) 4,174 (8,887)
Income tax provision (benefit) 876 (2,169) 1,586 (3,466)
-------- -------- -------- --------
Net income (loss) from continuing
operations 1,428 (3,395) 2,588 (5,421)
Discontinued operations (net of
tax):
Gain (loss) from disposal of
discontinued operations, net of
tax (11) (5) 76 150
-------- -------- -------- --------
Net income (loss) $1,417 $(3,400) $2,664 $(5,271)
======== ======== ======== ========
Net income (loss) per diluted
share: Continuing operations $0.10 $(0.26) $0.19 $(0.42)
Discontinued operations (0.00) (0.00) 0.00 0.01
-------- -------- -------- --------
Net income (loss) per diluted
share $0.10 $(0.26) $0.19 $(0.41)
======== ======== ======== ========
Weighted average diluted shares
outstanding 13,807 12,984 13,729 12,939
======== ======== ======== ========
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
Oct. 30, April 30,
2004 2004
-------- ---------
ASSETS
------
CURRENT ASSETS
Cash $5,872 $2,724
Accounts receivable, net 29,898 32,795
Current lease receivables 2,348 4,603
Inventories 12,002 8,999
Costs and estimated earnings in excess of billings 5,978 4,786
Deferred income taxes 4,834 5,985
Prepaid expenses, deposits and other 5,909 5,770
Net current assets of discontinued operations 731 627
-------- ---------
Total current assets 67,572 66,289
-------- ---------
PROPERTY AND EQUIPMENT
Furniture, fixtures and equipment 77,671 84,423
Less accumulated depreciation and amortization (66,783) (71,242)
-------- ---------
Net property and equipment 10,888 13,181
-------- ---------
OTHER ASSETS
Lease receivables, net 1,293 1,020
Deferred income taxes 13,488 12,979
Goodwill 4,241 4,477
Other 1,996 2,498
-------- ---------
Total other assets 21,018 20,974
-------- ---------
$99,478 $100,444
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $3,667 $4,400
Current maturities of discounted lease rentals 1,707 2,802
Accounts payable 13,579 11,990
Deferred revenue 20,655 21,769
Accrued liabilities 17,427 14,951
Billings in excess of costs and estimated earnings 6,176 8,291
-------- ---------
Total current liabilities 63,211 64,203
-------- ---------
LONG-TERM DEBT, NET 14,667 16,833
DISCOUNTED LEASE RENTALS, NET 178 750
NET NON-CURRENT LIABILITIES OF DISCONTINUED
OPERATIONS 80 100
OTHER LIABILITIES 1,963 3,003
-------- ---------
Total liabilities 80,099 84,889
-------- ---------
SHAREHOLDERS' EQUITY
Common stock - $0.10 par value: 40,000,000
authorized shares: 13,810,719 and 13,365,326 shares
issued and outstanding 1,381 1,337
Capital in excess of par value 59,479 58,474
Accumulated deficit (39,252) (41,916)
Unamortized cost of stock (501) (372)
Accumulated other comprehensive loss (1,728) (1,968)
-------- ---------
Total shareholders' equity 19,379 15,555
-------- ---------
$99,478 $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 Quarters Ended
-----------------------------------
Oct. 30, July 31, April 30, Nov. 1,
2004 2004 2004 2003
-------- -------- --------- -------
Net Income - Continuing Operations 1,428 1,160 (4,652) (3,395)
Interest 616 621 618 553
Taxes 876 710 (2,717) (2,169)
Depreciation/Amortization 1,582 1,834 1,807 2,208
-------- -------- --------- -------
EBITDA - Continuing Operations 4,502 4,325 (4,944) (2,803)
Restructuring and other charges - - 9,368 4,180
-------- -------- --------- -------
EBITDA - Continuing Operations
before restructuring and other
charges 4,502 4,325 4,424 1,377
======== ======== ========= =======
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