Comdial reports second quarter, six month results.

CHARLOTTESVILLE, Va.--(BUSINESS WIRE)--Aug. 1, 1996--Comdial Corp. (NASDAQ/NM:CMDL) Thursday announced that revenues for the second quarter ended June 30, 1996, were $23.6 million with a net loss of $1.63 million or 19 cents loss per share.

The results were in line with expectations, based on the company's statement made June 13 and disseminated broadly. For the second quarter of 1995, revenues were $25.4 million with net income applicable to common stock of $1.7 million, or 23 cents per share. In the second quarter of 1995, Comdial also recognized a one-time tax benefit of $4.5 million or 62 cents per share.

Revenues for the six months ended June 30, 1996, were $45.6 million, compared with $47.8 million for the first half of 1995. However, Comdial product sales, excluding custom manufacturing sales, are up marginally from the first half of 1995.

Excluding one-time tax benefits, Comdial incurred a first half 1996 net loss of $1.2 million or 14 cents per share compared with net income, after payment of preferred dividends, of $2.8 million or 38 cents per share in 1995.

Comdials financial statements for the second quarter and first half reflected the March acquisitions of Key Voice Technologies and Aurora Systems. The evaluation of the Aurora acquisition is complete and there will be no one-time write-off of certain assets as referenced in the company's June 13, 1996 press release.

President and Chief Executive Officer, William G. Mustain commented: "Our second quarter loss is a result of lower than expected revenues, coupled with planned expenditures for our expanded sales and engineering organizations. The revenue shortfall is primarily due to two factors -- declining market acceptance of our older analog telephone systems and continued weakness in sales to the federal government.

"In the first half of this year, sales of analog telephone systems declined by 34 percent compared with last year and federal government sales were down by 53 percent. We will be introducing new products and system enhancements in the second half, including a new family of modern digital systems which dealers can sell in place of analog systems.

"In addition, some of our major supply house customers implemented inventory reduction programs, as part of their own efforts to operate more efficiently. We believe that these supply house inventory reductions have now been completed, and will not continue into the second half of the year.

"We consider it very significant that although our sales to supply houses are lower year-to-year by four percent, actual supply house sales of our products to dealers, or street sales, are up nine percent over 1995.

"Although overall results were disappointing, the first half showed some positive trends. Sales of our more advanced products including digital systems, CTI (computer telephony integration), and supporting products are up 19 percent over the first half of 1995.

"We are very pleased that street sales for our Preferred Dealers, who are the primary marketing channel for our more advanced and higher margin products, are above plan for the year.

"This validates our view that market demand for our flagship products is continuing on a strong upward trend. Finally, we are encouraged by the performance of our new subsidiary companies. Aurora Systems is introducing new products and strengthening their alliances with major OEM customers. Key Voice Technologies is posting record sales with consistently attractive margins."

Mustain added: "We remain convinced that the investments made to strengthen our sales and engineering organizations were prudent. Our focus now is to end the year in the black. We plan to accomplish this through the introduction of new products, the expansion into new international and domestic markets, and aggressive expense control."

Comdial is a leading designer, manufacturer and supplier of a broad range of telecommunications products and systems solutions based on computer telephony integration. -0-

                       COMDIAL CORPORATION
                     Selected Financial Data
      Consolidated Condensed Statements of Operations - Unaudited

(In thousands, except per share amount)

                               Three Months Ended:   Six Months Ended:

                               June 30,   July 2,    June 30,   July 2,
                                1996       1995       1996       1995
Net sales                      $23,562    $25,442    $45,610    $47,758
Cost and expenses:
 Cost of goods sold             15,415     17,188     29,980     32,380
 Selling, general
  and administrative             6,432      4,836     11,746      9,180
 Engineering,
  research and
  development                    1,704      1,016      2,922      2,059
 Operating income                   11      2,402        962      4,139
 Interest expense                  499        282        726        555
 Goodwill                          868         --        959         23
 Miscellaneous expense             200        197        362        368
Income before income taxes      (1,556)     1,923     (1,085)     3,193
Income tax expense                  72         77         94        117
Income before tax benefit       (1,628)     1,846     (1,179)     3,076
Dividends on preferred stock        --        142         --        285
 Net income applicable
  to common stock
  before tax benefit            (1,628)     1,704     (1,179)     2,791
Income tax benefit                  --      4,503        736      4,503
 Net income applicable
  to common stock              ($1,628)    $6,207      ($443)    $7,294
Earnings per common share and common
 equivalent share: (1)
  Income before  tax benefit    ($0.19)     $0.23     ($0.14)     $0.38
  Income tax benefit                --       0.62       0.09       0.62
Net income per common share:
 1996 anti-dilutive;
  1995 Primary                  ($0.19)     $0.85     ($0.05)     $1.00
  1995 Fully Diluted                --      $0.77         --      $0.92
Weighted average common shares outstanding:
 1996 anti-dilutive;
  1995 Primary                   8,565      7,292      8,378      7,264
  1995 Fully Diluted                --      8,201         --      8,200

(1) 1995 restated for the 1 for 3 reverse stock split.

                   Consolidated Condensed Balance Sheets

                                             June 30,     December 31,
(In thousands)                                1996         1995
Assets
 Cash and cash equivalents                     $455         $4,144
 Accounts receivable - net                    9,142          8,976
 Inventory                                   19,246         17,925
 Other current assets                         1,998          2,695
  Total current assets                       30,841         33,740
 Property - net                              14,625         13,943
 Deferred tax asset - net                     7,425          6,694
 Goodwill                                    18,359            210
 Other assets                                 2,207          2,105
  Total assets                              $73,457        $56,692
Liabilities and Stockholders' Equity
 Accounts payable                            $7,213         $7,988
 Other accrued liabilities                    5,088          5,578
 Current maturities on debt                   7,770          1,903
  Total current liabilities                  20,071         15,469
 Long-term debt                              12,799          2,844
 Deferred tax liability                       2,187          2,191
 Other long-term liabilities                  2,069          1,894
  Total liabilities                          37,126         22,398
 Stockholders' equity - common stock
   & other                                   36,331         34,294
  Total liabilities and stockholders'
   equity                                   $73,457        $56,692

CONTACT: Allen & Caron/South Coast Communications

Marty Tullio (investors) or

Owen Daley (media), 714/252-8440

or

Comdial Corporation

Dick Bucci, 804/978-2200