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NORSTAN, INC. REPORTS 10.6 PERCENT HIGHER FIRST QUARTER FISCAL 1994 REVENUES; 16.4 PERCENT OPERATING INCOME INCREASE

 MAPLE GROVE, Minn., Aug. 23 /PRNewswire/ -- With continued strength in its core telephone equipment sales and service business and expanded sales in nontraditional products, Norstan, Inc. (NASDAQ: NRRD), a full- range provider of communications solutions that included business telephone systems, videoconferencing equipment, long distance services and voice processing products and services, today reported 10.6 percent higher first-quarter fiscal 1994 revenues. Operating income for the fiscal 1994 first quarter ended July 31, 1993, increased 16.4 percent, to $1.93 million from $1.66 million in the comparable quarter. Revenues in the most recent quarter totaled $48.7 million versus $44.0 million in the first quarter of fiscal 1993, which ended Aug. 1, 1992.
 Paul Baszucki, Norstan vice chairman and chief executive officer, said, "Typically, the first quarter is our weakest, especially following a strong fourth quarter such as we had in fiscal 1993. We're pleased with our order flow in the first quarter and we look forward to an even better second quarter. We're entering the second quarter with a backlog 10 percent higher than at the start of the fiscal year."
 Income before the cumulative effect of the change in accounting for income taxes for the first quarter of fiscal 1994 totaled $1.0 million or 24 cents per share on 4.2 million weighted average shares outstanding. This compares to net income in the fiscal 1993 first quarter of $1.0 million or 25 cents per share on 4.0 million shares outstanding. The earlier first quarter included a pre-tax gain of $225,000 or net income of 3 cents per share related to the sale of the ROLM business in the Omaha, Neb. area. The most recent first quarter net income of $625,000 or 15 cents per share includes a one-time charge of $375,000 or 9 cents per share for the effect of Statement of Financial Accounting Standards No. 109 -- Accounting for Income Taxes.
 Norstan's gross margin for the quarter was 34.8 percent compared to 34.9 percent a year ago. Its operating margin was 4.0 percent vs. 3.8 percent in the comparable fiscal 1993 quarter. Selling, general and administrative expenses represented 30.8 percent compared to the earlier quarter's SG&A of 31.1 percent.
 Baszucki said Norstan looks for continued improvement from its start-up business units in the southern United States and Canada. While the South Region was marginally profitable in the first quarter, Canada operated at a loss. Management expects the South Region to be profitable for the remainder of the year; however, results for Canada are not expected to approach break-even levels in fiscal 1994.
 "We are well positioned to build our Canadian sales," Baszucki said, "and we offer our Canadian customers a full line of products from leading-edge vendors that include Octel; Aspect; Compression Labs, Inc. (CLI); and ROLM."
 Baszucki announced the appointment of a new vice president of sales in Canada. "Joe Rubin, who was previously the general manager of our Milwaukee branch, is one of the company's best sales resources. We expect him to be extremely effective in Canada," Baszucki said.
 During the first quarter, Norstan was cited as the recommended vendor of videoconferencing equipment by the Midwest Higher Education Consortium. Members of the seven-state consortium are scheduled to invest several million dollars to bring videoconferencing technology to education, and Norstan expects to benefit from the consortium's endorsement.
 In July, Norstan, the country's largest independent distributor of ROLM products, extended its distribution agreement with ROLM. "We have an excellent 17-year relationship with ROLM," said Baszucki. While Norstan's previous agreements were for periods of one to three years in duration, this agreement is for a five-year period.
 Norstan Inc., based in Maple Grove, is a full-range provider of communications solutions that include business telephone systems, videoconferencing equipment, long distance services and voice processing products and services. Its 1,600 employees serve 12,500 customers representing 1.25 million telephone lines in 18 states and Canada. In fiscal 1993, approximately 35 percent of the company's $195.9 million in revenues were generated by products and services Norstan did not offer five years ago.
 NORSTAN, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 Quarter Ended
 7/31/93 8/1/92
 Revenues $48,670 $43,976
 Cost of sales 31,742 28,623
 Gross margin 16,928 15,353
 Selling, general and
 administrative expenses 14,997 13,694
 Operating income 1,931 1,659
 Interest expense (197) (226)
 Interest and other income, net (40) 239
 Income before cumulative effect of
 accounting change and provision
 for income taxes 1,694 1,672
 Provision for income taxes 694 669
 Income before cumulative effect of
 accounting change 1,000 1,003
 Cumulative effect of change in
 accounting for income taxes (375) --
 Net income $625 $1,003
 Net income per common and common
 equivalent share:
 Income before cumulative effect
 of accounting change $0.24 $0.25
 Cumulative effect of change in
 accounting for income taxes $(0.09) --
 Net income per share $0.15 $0.25
 Weighted average number of common
 and common equivalent shares
 outstanding 4,209 3,987
 Certain amounts previously reported in fiscal year 1993 have been reclassified to conform to the fiscal year 1994 presentation. These reclassifications have no effect on previously reported operating income or net income.
 -0- 8/23/93
 /CONTACT: Paul Baszucki, vice chairman, CEO, 612-420-1100, or Richard Cohen, vice chairman, CFO, 612-420-1104, both of Norstan; or Fred Nachman or Pat Allen, 312-266-7800, both of the Financial Relations Board, for Norstan/
 (NRRD)


CO: Norstan, Inc. ST: Minnesota IN: TLS SU: ERN

DB-AL -- MN009 -- 5155 08/23/93 16:07 EDT
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Date:Aug 23, 1993
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