Datalink Reports 2005 First Quarter Operating Results; Revenues Increase 5 Percent Over Prior Year; Operating Loss Includes Previously Announced One-Time Charge.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- Live Webcast of Conference Call at 9:30 AM Central Time Today, April 13, 2005 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 that revenues for the quarter ended March 31, 2005, rose 5 percent to $21.2 million from $20.2 million for the same period in the prior year. The company reported a net loss of $4.7 million, or $.46 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 compared to a net loss of $1.8 million, or $.18 per diluted share in the year-ago first quarter. The 2005 net loss includes a previously announced one time 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 $3.5 million, or $.34 per diluted share related to subleasing a portion of the Company's corporate headquarters facility. The one time charge primarily represents the difference between the company's original lease payment commitment for the portion of its corporate office facility which is being sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. and the amount it will receive from the sub lessee One who rents real property or Personal Property from another. A lessee of land is a tenant. Cross-references Landlord and Tenant. lessee n. the person renting property under a written lease from the owner (lessor). over the remaining lease term. As a result of this 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. , the Company expects to reduce its facility expense by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $950,000 per year. Excluding the sublease charge, Datalink's net loss for the first quarter was $1.2 million or $.12 per diluted share which is consistent with previously issued guidance. 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 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, "Although first-quarter revenues were lower than we had expected, we made important progress in improving and strengthening Datalink's operations on several fronts." The company's accomplishments include: --Generating an overall gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. of 27.1%, an increase of 230 basis points from the same period in the prior year. The gross margin improvement reflects our success in selling and delivering higher value-add storage solutions to our customers. --Revenues from professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. increased significantly over the same period in the prior year. More than ever, customers look to Datalink storage experts to help them with the design, implementation and support of their mission critical storage projects. --An 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. (excluding the sublease charge) decrease from the same quarter a year ago of $641,000 or 35 percent. A portion of the first-quarter operating loss is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to public reporting costs, accounting services, employee benefits and taxes and Sarbanes-Oxley compliance costs. We expect these costs to decline as the year progresses. The company has effectively positioned its storage solutions to take advantage of the best technologies in the industry, particularly around opportunities with Enhanced Data Recovery (EDR (Enhanced Data Rate) An acronym occasionally used to reflect an advancement in transmission or transfer speed. For example, Bluetooth 2.0 + EDR provides a dramatic increase in speed over the previous version. See Bluetooth. ). Datalink's customers are realizing the benefits of having the company's professional services teams deploy disk-based recovery innovations, including tape emulation (architecture) emulation - When one system performs in exactly the same way as another, though perhaps not at the same speed. A typical example would be emulation of one computer by (a program running on) another. , disk-to-disk-to-tape, point-in-time copy and replication In database management, the ability to keep distributed databases synchronized by routinely copying the entire database or subsets of the database to other servers in the network. There are various replication methods. , to enhance their EDR capabilities. Meland continued, "We were pleased to see the continued strength in our gross profit margins. We are encouraged by our solid backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. for the second quarter which currently stands at over $16 million. This is $3 million or 25 percent higher than our backlog was at the same point in our second quarter of last year. We are focused on continuing to improve our company and deliver better financial performance. To this end, in 2005, we plan to: --Further increase employee productivity and improve market share in our key geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. locations; --Grow our revenue base and increase market share in key opportunity areas, like EDR and information life cycle management; --Expand our customer support and professional services business capabilities and financial results; and --Work toward sustained profitable growth during the year." Outlook: For the second quarter ending June June: see month. 30, 2005, Datalink expects revenues to be between $23 million and $27 million, with earnings ranging from a net loss of $.08 per diluted share to net earnings of $.02 per diluted share. The net amounts do not reflect any income tax benefit or expense. Webcast A live Webcast of the Datalink conference call to discuss the first-quarter results is scheduled for today, April 13 at 9:30 a.m. Central Time and can be heard via Datalink's Website at 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 second quarter 2005 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 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. Further, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably.
DATALINK CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2005 2004
----------- ----------
Net sales:
Products $13,655 $13,229
Services 7,586 6,975
----------------------
Total net sales 21,241 20,204
----------------------
Cost of sales:
Cost of product sales 10,368 10,442
Cost of service sales 5,114 4,754
----------------------
Total cost of sales 15,482 15,196
----------------------
Gross profit 5,759 5,008
----------------------
Operating expenses:
Sales and marketing 3,293 3,069
General and administrative 2,546 2,866
Engineering 1,128 868
Charge for sublease reserve 3,502 -
Amortization of intangibles 65 65
----------------------
10,534 6,868
----------------------
Loss from operations (4,775) (1,860)
Interest income, net 74 20
----------------------
Loss before income taxes (4,701) (1,840)
Income tax benefit - -
----------------------
Net loss $(4,701) $(1,840)
======================
Net loss per share:
----------------------
Basic and diluted $(0.46) $(0.18)
======================
Weighted average shares outstanding:
Basic and diluted 10,293 10,253
DATALINK CORPORATION
BALANCE SHEETS
(In thousands)
March 31, December 31,
2005 2004
----------- ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $11,791 $12,663
Accounts receivable, net 11,410 11,485
Inventories 1,776 627
Deferred customer support contract costs 12,437 10,770
Inventories shipped but not installed 2,738 2,343
Other current assets 376 284
----------- ------------
Total current assets 40,528 38,172
----------- ------------
Property and equipment, net 2,598 3,134
Goodwill 5,500 5,500
Intangibles, net 159 225
Other assets 434 38
----------- ------------
Total assets $49,219 $47,069
=========== ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $12,915 $11,031
Accrued commissions 1,136 1,227
Accrued income taxes 92 109
Accrued sales and use tax 438 510
Accrued expenses, other 952 1,276
Sublease reserve current 787 -
Deferred revenue from customer support
contracts 16,669 14,012
----------- ------------
Total current liabilities 32,989 28,165
Deferred rent 355 392
Sublease reserve non-current 2,025 -
----------- ------------
Total liabilities 35,369 28,557
----------- ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 50,000,000
shares authorized, 10,295,113 and
10,282,545 shares issued and outstanding
as of March 31, 2005 and December 31,
2004, respectively 10 10
Additional paid-in capital 26,646 26,624
Deferred compensation (290) (307)
Accumulated deficit (12,516) (7,815)
----------- ------------
Total stockholders' equity 13,850 18,512
----------- ------------
Total liabilities and stockholders'
equity $49,219 $47,069
=========== ============
DATALINK CORPORATION
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2005 2004
---------- --------
Cash flows from operating activities:
Net loss $(4,701) $(1,840)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for bad debts 6 9
Depreciation and amortization 362 509
Amortization of intangibles 66 65
Deferred rent (37) (61)
Loss on disposal of assets 427 15
Charge for sublease reserve 2,812 -
Stock compensation expense 17 -
Changes in operating assets and liabilities:
Accounts receivable 69 (3,929)
Inventories (1,544) (2,687)
Deferred customer support contract costs (1,667) (2,994)
Other current assets (92) (38)
Other assets (396) -
Accounts payable 1,884 3,444
Accrued expenses (487) 465
Income taxes (17) 244
Deferred revenue from customer support
contracts 2,657 4,062
-------------------
Net cash used in operating activities (641) (2,736)
-------------------
Cash flows from investing activities:
Purchase of property and equipment (253) (96)
-------------------
Net cash used in investing activities (253) (96)
-------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 22 59
-------------------
Net cash provided by financing activities 22 59
-------------------
Decrease in cash and cash equivalents (872) (2,773)
Cash and cash equivalents, beginning of period 12,663 12,565
-------------------
Cash and cash equivalents, end of period $11,791 $9,792
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