SLNK Spectralink Corp (MM)

SpectraLink Grows Quarterly Revenue by 39 Percent and Quarterly Earnings by 53 Percent Year-Over-Year BOULDER, Colo., Jan. 27 /PRNewswire-FirstCall/ -- SpectraLink Corp. (NASDAQ:SLNK), a leader in enterprise wireless communications, today reported record revenue of $27.6 million for the fourth quarter ended Dec. 31, 2004, representing 39 percent growth over the same period last year. Net income for the quarter was $3.9 million, or 20 cents earnings per fully diluted share, which is a 53 percent increase over the fourth quarter of 2003. Last year, fourth quarter net income was $2.5 million, or 13 cents earnings per fully diluted share on revenue of $19.9 million. For the year ended Dec. 31, 2004, earnings per fully diluted share was 56 cents on record net income of $11.0 million and record revenue of $90.0 million. This represents 34 percent growth in annual net income, and over 26 percent growth in annual revenue when compared to 2003 net income of $8.2 million and $71.4 million in revenue that generated 42 cents earnings per fully diluted share. "I am extremely pleased with 2004 results, and in particular, what we achieved in the fourth quarter," said John Elms, SpectraLink president and chief executive officer. "In the fourth quarter, sales of our NetLink Wireless Telephones surpassed Link Wireless Telephone System sales for the first time in our history. International sales more than doubled from the third quarter to the fourth quarter resulting in annual revenue of more than fourfold its 2003 contribution. We announced four new OEM agreements in the first half of the year that helped OEM revenue contribution achieve record levels each quarter in 2004. All of this was successfully orchestrated by the new executive team that was put in place last spring." David Rosenthal, SpectraLink chief financial officer, went on to say, "We delivered very strong financials in the fourth quarter that allowed us to close the year with record levels of annual revenue and earnings. We have now delivered 26 consecutive quarters of positive net income and 24 consecutive quarters of positive cash flow from operations. We saw cash and investments grow every quarter on our balance sheet even after paying four quarterly dividends this year and reinitiating our stock repurchase program in the third quarter." Webcast Information SpectraLink will hold an audio webcast to discuss fourth quarter and fiscal year 2004 earnings results, today, Jan. 27, 2005, at 4:30 p.m. Eastern time. You can access the webcast and replay at http://www.spectralink.com/. About SpectraLink SpectraLink Corporation (NASDAQ:SLNK) is the leading U.S. manufacturer and provider of wireless telephone systems for the workplace. SpectraLink distributes its products through strategic OEM partnerships, industry-leading service, equipment, and application providers, cultivating a vast customer base among industries including retail, education, healthcare, manufacturing, finance, information systems and telecommunications. For more information, visit http://www.spectralink.com/. This release may contain forward-looking statements that are subject to many risks and uncertainties, including the understanding that the results published today remain un-audited per the new Sarbanes Oxley regulations until our auditors issue an opinion letter in conjunction with the company's filing of the Form 10-K; the inability to close several large orders in the sales pipeline; the unpredictable growth of international sales; adverse changes in economic and business conditions affecting SpectraLink's customers; the intensely competitive nature of the wireless communications industry, and a customer preference to buy all telephone communications systems from a single source provider that manufactures and sells PBX or key/hybrid systems; changes in rules and regulations of the FCC; and the anticipated growth of the market for on-premises wireless telephone systems. More information about potential risk factors that could affect our results is available in SpectraLink's filings with the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2003, and subsequent Form 10-Q filings. SPECTRALINK CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) ASSETS December 31, December 31, 2004 2003 CURRENT ASSETS: Cash and cash equivalents $14,625 $51,861 Investment in marketable securities - current 11,984 -- Trade accounts receivable, net of allowance of $374 and $341, respectively 21,252 14,470 Income taxes receivable -- 204 Inventory, net of allowance of $720 and $591, respectively 8,076 7,653 Deferred income taxes - current portion 1,473 1,562 Prepaids and other 1,088 800 Total current assets 58,498 76,550 INVESTMENT IN MARKETABLE SECURITIES, net of current portion 27,781 -- PROPERTY AND EQUIPMENT, at cost: Furniture and fixtures 2,481 2,312 Equipment 10,503 9,245 Leasehold improvements 1,036 989 14,020 12,546 Less - accumulated depreciation (9,436) (8,463) Net property and equipment 4,584 4,083 DEFERRED INCOME TAXES, net of current portion 103 151 OTHER 460 387 TOTAL ASSETS $91,426 $81,171 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $1,132 $1,453 Income taxes payable 1,038 -- Accrued payroll, commissions and employee benefits 3,727 3,114 Accrued sales, use and property taxes 732 724 Accrued warranty expenses 901 493 Other accrued expenses and liabilities 3,315 2,269 Deferred revenue 7,144 6,319 Total current liabilities 17,989 14,372 LONG-TERM LIABILITIES 214 250 TOTAL LIABILITIES 18,203 14,622 STOCKHOLDERS' EQUITY: Preferred stock, 5,000 shares authorized, none issued and outstanding -- -- Common stock, $0.01 par value, 50,000 shares authorized, 23,407 and 22,800 shares issued, respectively, and 19,138 and 18,871 shares outstanding, respectively 234 227 Additional paid-in capital 77,356 71,010 Retained earnings 28,030 24,706 Treasury stock, 4,270 and 3,929 shares, respectively at cost (32,397) (29,394) TOTAL STOCKHOLDERS' EQUITY 73,223 66,549 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $91,426 $81,171 SPECTRALINK CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts) (Unaudited) Three Months Ended Years Ended December 31, December 31, 2004 2003 2004 2003 NET SALES $27,604 $19,880 $90,010 $71,428 COST OF SALES 10,273 6,792 32,643 23,813 Gross Profit 17,331 13,088 57,367 47,615 OPERATING EXPENSES: Research and Development 2,263 1,847 8,899 7,759 Marketing and Selling 7,212 6,150 25,065 22,846 General and Administrative 1,882 1,164 6,352 4,230 Total Operating Expenses 11,357 9,161 40,316 34,835 INCOME FROM OPERATIONS 5,974 3,927 17,051 12,780 INVESTMENT INCOME AND OTHER 304 71 688 302 INCOME BEFORE INCOME TAXES 6,278 3,998 17,739 13,082 INCOME TAX EXPENSE 2,373 1,454 6,785 4,906 NET INCOME $3,905 $2,544 $10,954 $8,176 BASIC EARNINGS PER SHARE $0.20 $0.14 $0.58 $0.44 BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 19,060 18,800 19,050 18,570 DILUTED EARNINGS PER SHARE $0.20 $0.13 $0.56 $0.42 DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 19,450 19,740 19,550 19,270 SPECTRALINK CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Years Ended December 31, 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $10,954 $8,176 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,637 1,239 Gain on disposal (83) -- Income tax benefit from the exercise of stock options 950 2,060 Provision for bad debts 118 34 Provision for excess and obsolete inventory 1,212 762 Deferred income taxes 137 (562) Changes in assets and liabilities -- Increase in trade accounts receivable (6,900) (3,268) Decrease (increase) in income taxes receivable 204 (99) Increase in inventory (1,635) (966) Increase in other assets and income taxes receivable (361) (157) (Decrease) increase in accounts payable (321) 430 Increase in income taxes payable 1,038 -- Increase in accrued liabilities 2,068 2,040 Increase in deferred revenue 825 1,038 Net cash provided by operating activities 9,843 10,727 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,239) (2,681) Proceeds from disposal of property and equipment 184 -- Purchases of investments in marketable securities (39,784) -- Net cash used in investing activities (41,839) (2,681) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under long-term obligation (29) (19) Proceeds from exercises of common stock options 4,779 4,584 Proceeds from issuances of common stock 643 609 Dividends paid (7,630) (1,882) Purchases of treasury stock (3,003) (3,688) Net cash used in financing activities (5,240) (396) (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (37,236) 7,650 CASH AND CASH EQUIVALENTS, beginning of year 51,861 44,211 CASH AND CASH EQUIVALENTS, end of year $14,625 $51,861 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $4,654 $1,981 SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: Assets acquired under long-term obligation $28 $128 DATASOURCE: SpectraLink Corporation CONTACT: Bob Husted, Investor Relations Manager, or David Rosenthal, Chief Financial Officer, both of SpectraLink Corporation, +1-303-440-5330 Web site: http://www.spectralink.com/

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