Datalink Corporation Reports Second Quarter and Six Month Operating Results
Sales and Earnings Growth Continues
MINNEAPOLIS--(BUSINESS WIRE)--July 19, 2000-- Datalink Corporation (NASDAQ: DTLK - news), a premier independent provider of networked data storage solutions, reported that revenues for the quarter ended June 30, 2000 increased 17% to $ 34.9 million from $29.8 million in the same period a year ago. Net income was $1.4 million or $.15 per diluted share, compared to $2.0 million or $.33 per diluted share for the same period in the prior year. Net income, adjusted for comparability purposes to include taxes and exclude costs of a public offering cancelled due to market conditions, was $1.6 million or $.18 per diluted share, compared to $1.2 million or $.20 per diluted share in the second quarter of 1999.
For the six months ended June 30, 2000, revenues totaled $62.9 million, an increase of 13% over the $55.5 million in revenues generated in the same period a year ago. Net income before the cumulative impact of a change in accounting principle for the six months ended June 30, 2000 was $2.3 million or $.25 per diluted share, compared to $3.9 million or $ .61 per diluted share in the same period a year ago. Net income, adjusted for comparability purposes to include income taxes and exclude public offering costs was $2.5 million, or $.28 per diluted share, compared to $2.1 million or $.33 per diluted share for the same period in 1999.
Greg Meland, Datalink's President and CEO commented: ``It has been a quarter of significant accomplishments and recognition for Datalink. We continued to profitably grow our business by bringing the best networked data storage technologies to our customers. In the first half of 2000, we opened three new offices: Portland, Raleigh and San Diego. We were recognized by Business Week magazine as a high growth company and by Network World magazine as a company with high productivity per employee. While the recognition is significant for us, our company has always been about helping our customers to succeed.''
``Today, more than ever, companies in our marketplace are facing daunting challenges with the storage and management of their computer data. Using SANs (Storage Area Networks) and a broad array of new data storage hardware and software products, we have the tools and have developed the technological know-how to meet the growing data storage technology and data storage capacity needs of the marketplace.''
``As we look forward, we see no end to the dramatic increases in the volume of business-critical data. We believe that we are well positioned to help businesses with the challenge of managing this data. Our business model continues to generate success for our customers as well as profitable growth for us.''
As previously announced, Datalink modified its revenue recognition policies beginning January 1, 2000 in response to the Securities and Exchange Commission's recently issued Staff Accounting Bulletin No. 101 - ``Revenue Recognition.'' With these operating results, Datalink has continued to apply its new policies. The changes related to sales of hardware and software solutions and service contracts. Historically, Datalink recognized hardware and software product revenues upon shipment to customers and service contract revenues upon signing of the contract. Datalink now recognizes hardware and software product revenues upon completion of installation services, and service contract revenues over the life of the contract, which is typically one year.
Included in the operating results for the three months ended June 30, 2000 is $381,000 of offering costs related to the Company's decision to cancel a second public offering of its common stock due to adverse market conditions.
Datalink Corporation, based in Minneapolis, Minnesota, is a premier independent provider of networked data storage solutions for open systems computing environments. Datalink develops solutions that are designed to store, access and protect business critical information using best of breed technologies and professional services. Datalink's multi-tiered professional services organization delivers a comprehensive suite of services, including analysis, design, integration, implementation, training, technical support and maintenance.
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Datalink Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
(unaudited) (unaudited)
2000 1999 2000 1999
---- ---- ---- ----
Revenues $34,911 $29,843 $62,909 $55,525
Cost of revenues 25,071 22,191 45,383 41,262
----------------- ----------------
Gross profit 9,840 7,652 17,526 14,263
----------------- ----------------
Sales and marketing 3,958 3,004 7,433 5,533
General and administrative 2,387 1,920 4,524 3,610
Engineering 853 614 1,446 1,390
Offering costs (1) 381 - 381 173
----------------- ----------------
Total operating expenses 7,579 5,538 13,784 10,706
----------------- ----------------
Income from operations 2,261 2,114 3,742 3,557
Interest income (expense), net 123 (109) 199 (183)
----------------- ----------------
Income before income taxes 2,384 2,005 3,941 3,374
Income taxes (2) 978 39 1,616 (517)
----------------- ----------------
Income before cumulative
effect of a change in
accounting principle 1,406 1,966 2,325 3,891
Cumulative impact of a
change in accounting policy,
net of income taxes (3) - - (1,327) -
----------------- ----------------
Net income (loss) $ 1,406 $ 1,966 $ 998 $ 3,891
================= ================
Net income per share:
Basic:
Income per share before
cumulative effect of a
change in accounting principle $ 0.16 $ 0.33 $ 0.26 $ 0.61
Loss per share from the
cumulative effect of a
change in accounting principle - - (0.15) -
----------------- ----------------
Net income (loss) per share $ 0.16 $ 0.33 $ 0.11 $ 0.61
================= ================
Fully diluted:
Income per share before
cumulative effect of a change
in accounting principle $ 0.15 $ 0.33 $ 0.25 $ 0.61
Loss per share from the
cumulative effect of a change
in accounting principle - - (0.14) -
----------------- ----------------
Net income (loss) per share $ 0.15 $ 0.33 $ 0.11 $ 0.61
================= ================
Weighted average shares
outstanding:
Basic 8,776 6,004 8,774 6,355
Fully diluted 9,192 6,004 9,182 6,355
(1) Reflects legal, accounting and other costs associated with the
Company's public offerings, which were postponed or cancelled due to
market conditions.
(2) Income tax benefit in 1999 reflects a one time tax benefit from
the conversion of the Company's wholly-owned subsidiary from
C-Corporation status to the Company's S-Corporation status.
(3) Effective January 1, 2000, the Company changed its revenue
recognition policies related to hardware and software products and for
service contracts. The amount represents the cumulative impact of the
new policies, net of income taxes, on periods prior to January 1,
2000.
Pro forma income (loss) and income (loss) per share calculations:
Pro forma income before cumulative
effect of a change in accounting
principle (1) $ 1,406 $ 1,160 $ 2,325 $ 1,991
Cumulative effect of a change
in accounting principle, net of
income taxes - - (1,327) -
--------------- ----------------
Net income (loss) $ 1,406 $ 1,160 $ 998 $ 1,991
=============== ================
Pro forma income per share before
cumulative effect of a change in
accounting prinicple (2) $ 0.15 $ 0.16 $ 0.25 $ 0.26
Cumulative effect per share, of a
change in accounting principle,
net of income taxes - - (0.14) -
--------------- ----------------
Net income (loss) per share $ 0.15 $ 0.16 $ 0.11 $ 0.26
=============== ================
Weighted average shares used in
calculating pro forma income per
share:
Fully diluted weighted average
shares 9,192 6,004 9,182 6,355
Additional shares required to
fund distribution to shareholders - 1,309 - 1,309
--------------- ----------------
9,192 7,313 9,182 7,664
=============== ================
(1) Pro forma net income is calculated as if the Company was subject
to income taxes for all periods presented.
(2) Pro forma income per share is computed by dividing pro forma net
income by the fully dilluted weighted average number of shares for the
period, after giving effect to the number of shares that would be
required to be sold at the initial offering price to fund a
distribution to the shareholders of all previously taxed, but
undistributed, S Corporation earnings.
Net income per share assuming income taxes and excluding offering cost
expenses before the cumulative effect of a change in accounting
principle:
Net income (1) $ 1,631 $ 1,183 $ 2,550 $ 2,093
Net income per share:
Basic $ 0.19 $ 0.20 $ 0.29 $ 0.33
Fully diluted $ 0.18 $ 0.20 $ 0.28 $ 0.33
Weighted average shares
outstanding:
Basic 8,776 6,004 8,774 6,355
Fully diluted 9,192 6,004 9,182 6,355
(1) Reflects net income excluding offering expenses and assuming the
Company was subject to income taxes for all periods presented.
Datalink Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30,
2000 December 31,
(preliminary 1999
and unaudited)
--------------- ---------------
Assets
Current assets
Cash and cash equivalents $ 9,551 $ 6,515
Accounts receivable, net 13,146 19,272
Inventories 6,571 9,528
Inventories shipped but not installed 4,138 -
Other current assets 349 361
Deferred income taxes 1,884 427
--------------- ---------------
Total current assets 35,639 36,103
--------------- ---------------
Property and equipment, net 3,331 2,496
Intangibles, net 3,003 3,412
Other assets 66 47
--------------- ---------------
Total assets $42,039 $42,058
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $12,673 $13,695
Accrued expenses 2,714 2,809
Income taxes payable 434 257
Note payable to former stockholder,
current portion 705 705
Capital lease obligation, current
portion - 13
Deferred compensation, current portion 34 73
Distribution payable to S corporation
stockholders - 744
Unearned revenue 1,385 -
--------------- ---------------
Total current liabilities 17,945 18,296
Note payable to former stockholder,
less current portion 704 1,409
Deferred income taxes 626 648
--------------- ---------------
Total liabilities 19,275 20,353
--------------- ---------------
Stockholders' equity
Common stock, $.001 par value,
50,000,000 shares authorized,
8,792,043 and 8,772,537 shares
issued and outstanding as of
June 30, 2000 and December 31,
1999, respectively 9 9
Additional paid in capital 18,359 18,213
Retained earnings 4,396 3,483
--------------- ---------------
Total stockholders' equity 22,764 21,705
--------------- ---------------
Total liabilities and
stockholders' equity $42,039 $42,058
=============== =============== |
