Financial: Digital Link Q4 Results With Return to Profitability - Company Financial Information

EDGE, On & About AT&T, Jan 25, 1999

Digital Link Corporation (Nasdaq:DLNK) Wednesday announced financial results for its fourth quarter ended December 31, 1998 and the 1998 fiscal year ended December 31, 1998. For the fourth quarter of fiscal 1998, net sales decreased 3% to $14,040,000 from $14,408,000 for the same period of the prior year.

Net income for the fourth quarter of 1998 was $437,000 or $0.05 per basic and diluted share as compared to a net loss of $489,000 or $.05 per basic and diluted for the fourth quarter of 1997. For fiscal year 1998, net sales decreased 17% to $54,627,000 from $66,008,000 for the same period of the prior year. Net loss for fiscal year 1998 was $1,681,000 or $0.18 per share before R & D write-off costs and restructuring and other related charges, which when included increased net loss by $4,791,000 or $0.53 per basic and diluted share, resulting in a net loss of $6,472,000 or $0.71 per basic and diluted share. "We are pleased with the progress made in the last three months. We need to focus on strong and consistent execution for the long-term success of the Company," said Vinita Gupta, Chairperson and CEO of the Company. Digital Link Corporation is a leading provider of high-performance, cost-effective, digital network access products for both narrowband and broadband applications. The company offers access solutions that increase the level of intelligence at the demarcation point where LANs and WANs meet. These products are used by Internet service providers and carriers as infrastructure equipment and by enterprises for connectivity to WAN services. Digital Link is headquartered in Sunnyvale, California, and offers its ISO 9001-certified products worldwide. Additional information is available at Digital Link's web site: http://www.dl.com.

                    DIGITAL LINK CORPORATION
             CONSOLIDATED STATEMENTS OF OPERATIONS
             (In thousands, except per share data)


                          Quarter ended            Year-to-date
                           December 31,             December 31,
                          1998       1997          1998      1997
                          ----       ----          ----      ----
Net sales               $ 14,040   $ 14,408    $ 54,627    $ 66,008

Cost of sales              7,240      7,458      31,442      29,078
  Gross profit             6,800      6,950      23,185      36,930

Expenses:
     Research &
      development          2,335      2,776      12,580      11,005
     Selling, general
       & administrative    4,314      5,477      18,716      22,019
     Purchased research
       & development and
       restructuring
       charges                 0          0       4,805       3,651
        Total operating
          expenses         6,649      8,253      36,101      36,675

        Operating
          income (loss)      151     (1,303)    (12,916)        255

Interest income              577        600       2,196       2,524
     Income (loss)
      before provision for
      income taxes           728       (703)    (10,720)      2,779

Provision (benefit)
  for income taxes           291       (214)     (4,248)        847
     Net income (loss)  $    437   $   (489)   $ (6,472)   $  1,932

     Net income (loss)
       per share, basic $   0.05   $  (0.05)   $  (0.71)   $   0.21

     Shares used in
       computing per
       share
       amounts, basic      8,776      9,375       9,176       9,249

  Net income (loss)
    per share, diluted  $   0.05   $  (0.05)   $  (0.71)   $   0.20

  Shares used
   in computing per
   share amounts,
   diluted                 8,937      9,375       9,176       9,600


                    DIGITAL LINK CORPORATION
                  CONSOLIDATED BALANCE SHEETS
                         (In thousands)

                                        December 31,  December 31,
                                            1998            1997
                                     -----------------------------

ASSETS
Current Assets:
    Cash and short-term
      marketable securities                   $16,034       $20,530
    Accounts receivable                         4,767         5,193
    Inventories                                 4,306         8,163
    Prepaids and other
      current assets                              998         1,433
     Income taxes receivable                    2,501          --
    Deferred income taxes                       3,069         2,304
       Total current assets                    31,675        37,623

    Long-term marketable
      securities                               18,696        21,899
    Property and equipment, net                 2,582         3,325
    Deferred income taxes                       1,560         2,062
    Other assets                                  393         1,147
       Total assets                           $54,906       $66,056

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
    Accounts payable                          $ 2,365       $ 2,407
    Accrued payroll expense                     2,168         2,344
    Other accrued liabilities                   4,764         3,785
    Income taxes payable                          243           186
       Total current
          liabilities                           9,540         8,722

Shareholders' equity                           45,366        57,334

       Total liabilities
        and shareholders' equity              $54,906       $66,056