Datalink Corporation Reports 2003 Second Quarter Operating Results; Results Exceed Previous Guidance; Revenues up 25% from Prior Year.Business Editors/High-Tech Writers MINNEAPOLIS--(BUSINESS WIRE)--July 16, 2003 Live Webcast of Conference Call at 9:30 AM Central Time today, July July: see month. 16, 2003 Datalink Corporation Datalink Corporation (NASDAQ: DTLK) is an American data storage corporation with operations throughout the United States. The company engages in the design, installation, and support of data storage infrastructures that store, protect, and provide continuous access to (Nasdaq:DTLK), a leading independent information storage architect, reported revenue of $26.4 million for the quarter ended June June: see month. 30, 2003, a 25 percent increase from $21.0 million generated in the prior year period. The company's net loss was $186,000, or $.02 per share, in the second quarter, versus a net loss of $1.2 million, or $.13 per share, for the year-ago second quarter. Datalink's revenues and per share loss for the quarter were better than guidance given on April 16, 2003. The Company previously forecasted revenues of $21.5 million to $25.5 million with a per share loss $.06 to $.15 per share. For the six months ending June 30, 2003, revenues increased 17 percent to $50.1 million, versus $42.8 million generated in the same 2002 period. Datalink's net loss improved to $1.0 million, or $.10 per share, from a net loss of $2.5 million or $.28 per share, in the year-ago six month period. Net losses in 2003 do not include any tax benefit of the operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. . Beginning in 2003, Datalink ceased recording tax benefit on operating losses. The tax benefit of the company's operating losses may be realized in the future when Datalink has taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . Included in the current quarter results is a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $218,000 related to the sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. of one of Datalink's regional offices for an amount less than the lease rates that the company is committed to pay. Greg GREG Great Egg Harbor National Scenic and Recreational River (US National Park Service) Meland Meland is a municipality in the county of Hordaland, Norway. Meland was separated from Alversund October 15, 1923. The northern part of Holsnøyni was transferred from Herdla to Meland January 1, 1964. , Datalink's president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , commented, "We significantly improved our operating results during the second quarter. We increased revenues 25 percent from the prior year and 11 percent sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen from our first quarter. Our operating losses narrowed significantly and we continued to build Datalink's position in the marketplace as a leader in networked storage expertise." Meland continued, "Many corporations continue to wait for better business conditions before investing in information technology. Even in this difficult environment, Datalink was able to grow its business significantly. We were successful in providing a broader array of services and solutions integrating new data storage technologies into customers' storage environments. We also expanded the capabilities of Datalink's customer support area, offering enhanced services Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; that deliver broader access to Datalink's networked storage expertise and help stretched information system staffs better meet their organizational needs." The improvement in Datalink's operating losses from the prior year period reflects revenue growth, higher margins on professional and customer support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services and fixed cost reductions. Datalink's balance sheet remains strong. The company has no funded debt Funded Debt Long-term debt that matures after more than one year. Notes: This is usually issued as a bond or a long-term note. See also: Bond, Debt, Maturity, Note Funded debt Debt maturing after more than one year. and the capital strength and flexibility to fund planned growth. Concluded Meland, "Datalink remains the national leader in independent data storage architecture. We are focused on emerging technologies that generate high value returns for customers while differentiating Datalink from its competition. Solutions including disk based (1) Refers to devices that use magnetic hard disks for storage. It often refers to portable devices such as digital music players that have hard disks rather than flash memory. All desktop and laptop computers are presumed to have hard disks, and most servers have hard disks. protection, modular disk, the movement of storage intelligence to the network and enhanced storage management software, provide customers with compelling opportunities to lower their costs while achieving better protection and availability of critical data. Also, the increasing need by manufacturers to reduce their own costs and rely on channel partners, as compared to dedicating personnel for direct sales efforts, affirms Datalink's place in the market and further enhances its opportunity." Outlook: Datalink believes that the outlook for improved capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. remains uncertain. The company's third quarter operating results can be impacted by seasonal factors and the company does not expect a significant increase in third-quarter revenue over the second. For the third quarter ending September September: see month. 30, 2003, Datalink expects revenues to range from $23.5 to $27.5 million, with a net result of breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations to a loss of $.09 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. The net loss guidance does not include operating tax benefit. Webcast A live Webcast of the Datalink conference call to discuss operating results is scheduled for today, July 16, 2003 at 9:30 a.m. Central Time and can be heard via Datalink's Website, www.datalink.com. Datalink Corporation is an information storage architect. The company analyzes, designs, implements, and supports information storage infrastructures that store, protect, and provide continuous access to information. Datalink's specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. capabilities and solutions span storage area networks, network-attached storage See NAS. , direct-attached storage Direct-attached storage (DAS) refers to a digital storage system directly attached to a server or workstation, without a storage network in between. It is a retronym, mainly used to differentiate non-networked storage from SAN and NAS. , and IP-based storage, using industry-leading hardware, software, and technical services. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . This press release contains forward-looking statements, including our internal projections of anticipated third quarter 2003 operating results, which reflect our views regarding future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "aim," "believe," "expect," "anticipate," "intend," "estimate" and other expressions which indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, including, but not limited to: the level of continuing demand for storage, including the effects of current economic conditions; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; fixed employment costs that may impact profitability if we suffer revenue shortfalls; revenue recognition policies that may unpredictably defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. reporting of our revenues; our ability to hire and retain key technical and sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; risks associated with possible future acquisitions; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in our stock price.
DATALINK CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Net sales:
Products $18,601 $13,910 $34,868 $28,881
Services 7,770 7,109 15,245 13,922
-------------------------------------
Total net sales 26,371 21,019 50,113 42,803
-------------------------------------
Cost of sales:
Cost of product sales 14,786 10,863 27,105 22,212
Cost of service sales 4,765 5,113 9,862 10,045
-------------------------------------
Total cost of sales 19,550 15,976 36,966 32,257
-------------------------------------
Gross profit 6,821 5,043 13,147 10,546
-------------------------------------
Operating expenses:
Sales and marketing 2,902 2,827 6,058 6,042
General and administrative 2,942 2,606 5,750 5,240
Engineering 972 1,357 1,998 2,874
Amortization of intangibles 215 231 430 462
-------------------------------------
7,031 7,021 14,236 14,618
-------------------------------------
Loss from operations (211) (1,978) (1,090) (4,072)
Interest income, net 24 39 43 57
-------------------------------------
Loss before income taxes (186) (1,939) (1,046) (4,015)
Income tax benefit - (710) - (1,486)
-------------------------------------
Net loss $(186) $(1,229) $(1,046) $(2,529)
=====================================
Net loss per share:
Basic $(0.02) $(0.13) $(0.10) $(0.28)
Diluted $(0.02) $(0.13) $(0.10) $(0.28)
Weighted average shares
outstanding:
Basic 10,220 9,374 10,217 9,168
Diluted 10,220 9,374 10,217 9,168
DATALINK CORPORATION
BALANCE SHEETS
(In thousands)
June 30, December 31,
2003 2002
---- ----
(Unaudited)
Assets
Current assets
Cash and cash equivalents $8,961 $10,334
Accounts receivable, net 15,932 12,419
Inventories 1,990 2,410
Inventories shipped but not installed 1,652 4,059
Income tax receivable 1,958 1,952
Other current assets 289 401
----------- ------------
Total current assets 30,780 31,575
----------- ------------
Property and equipment, net 4,952 5,506
Goodwill 5,500 5,500
Intangibles, net 1,705 2,135
Other assets 64 69
----------- ------------
Total assets $43,001 $44,785
=========== ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $11,491 $13,667
Accrued commissions 672 818
Accrued sales and use tax 739 496
Accrued expenses, other 1,118 683
Deferred profit 3,004 2,434
----------- ------------
Total current liabilities 17,024 18,098
Deferred rent 515 341
----------- ------------
Total liabilities 17,539 18,439
----------- ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 50,000,000
shares authorized, 10,222,921 and
10,206,699 shares issued and outstanding as
of June 30, 2003 and December 31, 2002,
respectively 10.223 10
Additional paid-in capital 26,014 25,854
Retained earnings (accumulated deficit) (563) 482
----------- ------------
Total stockholders' equity 25,462 26,346
----------- ------------
Total liabilities and stockholders' equity $43,001 $44,785
=========== ============
DATALINK CORPORATION
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2003 2002
---- ----
Cash flows from operating activities:
Net loss $(1,046) $(2,529)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for bad debts 30 57
Depreciation and amortization 1,003 1,086
Amortization of intangibles 430 462
Deferred income taxes - (4)
Deferred rent 174 91
Loss on sale of assets 5 -
Changes in operating assets and liabilities:
Accounts receivable (3,542) 4,497
Inventories 2,828 966
Other current assets 107 (67)
Other assets 73 178
Accounts payable (2,176) (4,734)
Accrued expenses 532 (473)
Income taxes - (177)
Deferred profit 570 45
-----------------
Net cash used in operating activities (1,012) (602)
-----------------
Cash flows from investing activities:
Purchase of property and equipment (454) (538)
-----------------
Net cash provided by (used in) investing activities (454) (538)
-----------------
Cash flows from financing activities:
Proceeds from issuance of common stock 93 5,437
Payments on note payable to former stockholder - (704)
-----------------
Net cash provided by financing activities 93 4,733
-----------------
Increase (decrease) in cash and cash equivalents (1,373) 3,593
Cash and cash equivalents, beginning of period 10,334 5,846
-----------------
Cash and cash equivalents, end of period $8,961 $9,439
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