Datalink Reports 2006 Second-Quarter and Six-Month Operating Results; Second Quarter Sales Rise 39 Percent over the Same Period in 2005; Net Earnings Increase 355 Percent to $2.0 Million versus $446,000 in Year-Earlier.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. -- Please replace the release with the following corrected version due to the omission omission n. 1) failure to perform an act agreed to, where there is a duty to an individual or the public to act (including omitting to take care) or is required by law. Such an omission may give rise to a lawsuit in the same way as a negligent or improper act. of the Statements of Operations and Statement of Cash Flows sections. The corrected release reads: DATALINK REPORTS 2006 SECOND-QUARTER AND SIX-MONTH OPERATING RESULTS; SECOND QUARTER SALES RISE 39 PERCENT OVER THE SAME PERIOD IN 2005; NET EARNINGS INCREASE 355 PERCENT TO $2.0 MILLION VERSUS $446,000 IN YEAR-EARLIER PERIOD Live Webcast of Conference Call at 9:30 AM Central Time Today, July July: see month. 19, 2006 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 June June: see month. 30, 2006, rose 39 percent to $39.8 million from $28.7 million for the prior-year period. During the second quarter of 2006, a single customer accounted for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 20 percent of revenues. The company reported net earnings of $2.0 million, or $.18 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 net earnings of $446,000 or $.04 per diluted share, in the 2005 second quarter. For the six-month period ended June 30, 2006, the company reported revenues of $74.1 million, a 48 percent increase over revenues of $50.0 million in the first six months of 2005. Net earnings for the first six months of 2006 were $2.9 million, or $.26 per diluted share, compared to a net loss of $4.3 million, or $.41 per diluted share for the first six months of 2005. The net loss in the first six months of 2005 included the previously announced 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. Charlie Westling West´ling n. 1. A westerner. , 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 are very pleased to report continued strong performance in the second quarter of 2006, as both sales and net earnings came in above expectations. Datalink continues to make significant progress against our strategic initiatives to increase productivity, deliver storage solutions and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. more effectively and strengthen our resources in 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." According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Westling, the company's accomplishments included: --Fifth consecutive quarter of profitability and eighth consecutive quarter of year-over-year revenue growth; --Highest level of quarterly services revenues in the company's history; --Growing success in driving storage solutions with enterprise customers, with seven customers each generating over $1 million of revenue during the quarter, compared to four in the second quarter of 2005; --A strong book of business going forward, with the company's 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. at the beginning of the third quarter at $19 million. Westling continued, "We believe that we can build off of our strong first half performance and continue our profitable growth for the rest of the year by executing our key initiatives. We remain focused on: --Continuing to increase employee productivity by leveraging investments in our field and customer support areas; --Further penetrating penetrating breaching the tissues of the body. our enterprise customer base; --Targeting high growth market segments and deploying new technologies; and --Delivering greater value to customers through solutions and services." Outlook For the third quarter ending September September: see month. 30, 2006, Datalink expects revenues of between $33 million and $37 million, with net earnings ranging from $.05 to $.10 per diluted share. This outlook reflects the unpredictable nature and timing of large orders received at the end of a quarter and seasonality that is typical of the third quarter. The net amounts do not reflect any income tax benefit or expense. Webcast A live Webcast of the Datalink second-quarter results conference call is scheduled for today, July 19, 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 third quarter 2006 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. We may not achieve significant future revenues from our customer that accounted for approximately 20 percent of our second quarter revenue. 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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net sales:
Products $29,280 $19,918 $54,224 $33,573
Services 10,553 8,823 19,893 16,409
------------------------------------
Total net sales 39,833 28,741 74,117 49,982
------------------------------------
Cost of sales:
Cost of product sales 22,519 15,153 41,159 25,521
Cost of service sales 7,463 5,974 13,966 11,088
------------------------------------
Total cost of sales 29,982 21,127 55,125 36,609
------------------------------------
Gross profit 9,851 7,614 18,992 13,373
------------------------------------
Operating expenses:
Sales and marketing 3,927 3,838 8,104 7,131
General and administrative 2,541 2,245 5,330 4,791
Engineering 1,473 1,078 2,942 2,206
Restructuring charges - - - 3,502
Amortization of intangibles - 65 - 130
------------------------------------
7,941 7,226 16,376 17,760
------------------------------------
Earnings (loss) from operations 1,910 388 2,616 (4,387)
Interest income, net 123 58 250 132
------------------------------------
Net earnings (loss) $2,033 $446 $2,866 $(4,255)
====================================
Net earnings (loss) per common
share:
Basic $0.19 $0.04 $0.27 $(0.41)
Diluted $0.18 $0.04 $0.26 $(0.41)
Weighted average common shares
outstanding:
Basic 10,694 10,308 10,571 10,301
Diluted 11,279 10,376 10,975 10,301
DATALINK CORPORATION
BALANCE SHEETS
(In thousands)
June 30, December 31,
2006 2005
---- ----
(Unaudited)
Assets
Current assets
Cash and cash equivalents $16,822 $13,434
Accounts receivable, net 15,479 18,673
Inventories 953 831
Deferred customer support contract costs 21,794 16,500
Inventories shipped but not installed 7,588 5,064
Other current assets 227 261
------------ ------------
Total current assets 62,863 54,763
------------ ------------
Property and equipment, net 2,296 2,476
Goodwill 5,500 5,500
Other assets 376 404
------------ ------------
Total assets $71,035 $63,143
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $17,383 $19,660
Accrued commissions 1,216 1,359
Accrued income taxes 47 70
Accrued sales and use tax 646 645
Accrued expenses, other 1,567 1,893
Sublease reserve current 376 384
Deferred revenue from customer support
contracts 28,027 21,367
------------ ------------
Total current liabilities 49,262 45,378
Deferred rent 260 289
Sublease reserve non-current 1,457 1,641
------------ ------------
Total liabilities 50,979 47,308
------------ ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 50,000,000
shares authorized, 10,747,043 and
10,404,105 shares issued and outstanding
as of June 30, 2006 and December 31,
2005, respectively 11 10
Additional paid-in capital 27,909 26,555
Accumulated deficit (7,864) (10,730)
------------ ------------
Total stockholders' equity 20,056 15,835
------------ ------------
Total liabilities and stockholders'
equity $71,035 $63,143
============ ============
DATALINK CORPORATION
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2006 2005
---- ----
Cash flows from operating activities:
Net earnings (loss) $2,866 $(4,255)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Provision for bad debts 18 18
Depreciation 522 684
Amortization of intangibles - 131
Deferred rent (29) (74)
Charge for sublease reserve - 3,502
Amortization of sublease reserve (192) (516)
Stock compensation expense 91 33
Changes in operating assets and liabilities:
Accounts receivable 3,176 (1,714)
Inventories (2,646) (1,453)
Deferred customer support contract
costs/revenues, net 1,366 794
Accounts payable (2,277) 644
Accrued expenses (491) 13
Other 62 (381)
-----------------
Net cash provide by (used in) operating
activities 2,466 (2,574)
-----------------
Cash flows from investing activities:
Purchase of property and equipment (342) (826)
-----------------
Net cash used in investing activities (342) (826)
-----------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,264 56
-----------------
Net cash provided by financing activities 1,264 56
-----------------
Increase (decrease) in cash and cash equivalents 3,388 (3,344)
Cash and cash equivalents, beginning of period 13,434 12,663
-----------------
Cash and cash equivalents, end of period $16,822 $9,319
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