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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 19, 1998
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Digi International Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 0-17972 41-1532464
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
11001 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 912-3444
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Item 5. OTHER EVENTS.
The Press Release of Digi International Inc. dated November 19,
1998 which is attached hereto as Exhibit 99 is hereby incorporated by reference
in response to this Item 5.
Item 7. EXHIBITS.
99. Press Release dated November 19, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIGI INTERNATIONAL INC.
Date: November 19, 1998 By /s/ Jerry A. Dusa
------------------------------
Jerry A Dusa
President and Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Exhibit Page
--- ------- ----
<S> <C> <C>
99 Press Release dated November 19, 1998. Filed
Electronically
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EXHIBIT 99
FOR IMMEDIATE RELEASE
CONTACT: Jerry Dusa
Digi International
612-912-3636
[email protected]
Donna Burke
Digi International
612-912-3124
[email protected]
DIGI INTERNATIONAL REPORTS 1998 FISCAL FOURTH QUARTER AND YEAR-END RESULTS
MINNEAPOLIS, NOVEMBER 19, 1998 -- Digi International Inc. (Nasdaq: DGII) today
announced financial results for its fiscal fourth quarter and year, ended
September 30, 1998.
Sales for the fourth quarter were $48.8 million compared to $42.1 million
for the same quarter of l997. Net income for the fourth quarter of 1998,
excluding charges for acquired in-process research and development and
restructuring, would have been $2.3 million, or $.15 per fully diluted share,
consistent with "First Call" estimates. Including charges of $39.2 million for
acquired in-process research and development and restructuring charges of $1
million, the company's operating loss for the fiscal fourth quarter was $36.8
million and the net loss was $37.6 million, or $2.62 per basic share.
FISCAL 1998 RESULTS
Sales for the fiscal year ended September 30, 1998 increased to $182.9
million from $165.6 million for fiscal l997. Operating income, excluding the
fourth quarter charges for acquired in-process research and development and
restructuring charges, rose to $24.1 million for fiscal l998 compared to
operating income of $6.1 million, excluding the effects of a $10.5 million
restructuring charge, for the previous year. The operating losses for fiscal
years l998 and l997, including the charges for acquired in-process research and
development and the restructuring charges, were $16.1 million and $4.3 million,
respectively. The net
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losses for fiscal years l998 and 1997 were $22.7 million, or $1.65 per share,
and $15.8 million, or $1.18 per share, respectively.
WRITE-OFF AND RESTRUCTURING CHARGES
For the fourth quarter and year ended September 30, 1998, the company
reported a restructuring charge of $1.02 million, or $.07 per basic share ($.04
per estimated fully diluted share, net of tax), which reflected the
consolidation of facilities and the re-organization and integration of ITK
operations with Digi European operations. The company also wrote off acquired
in-process research and development of $39.2 million, or $2.74 per basic share
($2.59 per estimated fully diluted share). The company has responded to
questions provided by the SEC about these write-offs. Such write-offs are
currently under scrutiny by the SEC for many publicly held companies.
"The fourth quarter was very important in laying the groundwork for Digi's
future growth," said Jerry A. Dusa, president and CEO of Digi International.
"The integration of the two recently acquired companies is progressing as
planned. They position Digi to pursue new markets such as Internet telephony
and to strengthen our geographic reach in Europe, as well as enhance our
leadership position in our core serial port business. In addition, we are
optimistic about the broad range of new products we recently announced. Looking
forward to l999, we believe that we are well positioned to show growth in both
sales and profitability over l998."
2
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<TABLE>
<CAPTION>
Three Months Ended September 30 1998 1997
- --------------------------------- ---- ----
<S> <C> <C>
Net sales $48,833,351 $42,125,201
Acquired research and development (1) $39,200,000 -
Restructuring (1) $1,020,000 -
Operating (loss) income ($36,860,150) $4,647,113
Net loss ($37,577,455) ($3,879,896)
Net loss per share - basic and diluted ($2.62) ($0.29)
Weighted average common shares 14,318,462 13,433,740
outstanding - basic and diluted
Twelve Months Ended September 30
- ----------------------------------
Net sales $182,931,670 $165,597,937
Acquired research and development (1) $39,200,000 -
Restructuring (1) $1,020,000 $10,471,482
Operating loss ($16,082,069) ($4,330,264)
AetherWorks net gain (loss) $1,350,000 ($5,764,201)
Net loss ($22,658,871) ($15,790,844)
Net loss per share - basic and diluted ($1.65) ($1.18)
Weighted average common shares 13,729,765 13,393,408
outstanding - basic and diluted
</TABLE>
(1) Relating to the acquisitions of ITK International, Inc. and Central Data
Corp.
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FORWARD-LOOKING STATEMENTS:
Certain statements made above may contain forward-looking statements that
involve risks and uncertainties. Factors that could cause actual results to
differ include but are not limited to the following:
- - THE EXPECTATION THAT THE COMPANY WILL SHOW IMPROVED SALES AND PROFITABILITY
- This expectation may be impacted by presently unanticipated delays in
implementing the company's fiscal 1999 business plan, as well as
unanticipated expenses or general market conditions and competitive
conditions that may be encountered.
- - THE EXPECTATION THAT THE INTEGRATION OF THE TWO RECENTLY ACQUIRED COMPANIES
WILL OPEN NEW MARKETS - This expectation may be impacted by general market
and competitive conditions that may be encountered.
Digi International, based in Minneapolis, is a leading provider of data
communications hardware and software that delivers seamless connectivity
solutions for open systems, server-based remote access, Internet telephony, and
LAN markets. The company markets its products through an international network
of distributors and resellers, system integrators and original equipment
manufacturers (OEMs). For complete product information, see Digi's Web site at
www.dgii.com or call 1-800-344-4273 (U.S) or (612) 912-3444 (International).
####
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DIGI INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Sept. 30 Twelve months ended Sept. 30
----------------------------------- --------------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net sales $ 48,833,351 $ 42,125,201 $ 182,931,670 $ 165,597,937
Cost of sales 23,434,457 21,062,642 88,539,156 85,482,536
-------------- -------------- -------------- --------------
Gross margin 25,398,894 21,062,559 94,392,514 80,115,401
-------------- -------------- -------------- --------------
Operating expenses:
Sales and marketing 10,984,907 8,323,469 37,288,027 36,671,271
Research and development 5,076,455 4,048,049 16,963,410 17,978,135
General and administrative 5,977,682 4,043,928 16,003,146 19,324,777
Acquired research & development 39,200,000 - 39,200,000 -
Restructuring 1,020,000 - 1,020,000 10,471,482
-------------- -------------- -------------- --------------
Total operating expenses 62,259,044 16,415,446 110,474,583 84,445,665
-------------- -------------- -------------- --------------
Operating income (loss) (36,860,150) 4,647,113 (16,082,069) (4,330,264)
Other income, net 341,016 (189,646) 1,818,286 153,809
AetherWorks Corporation net gain (loss) - (1,129,725) 1,350,000 (5,764,201)
AetherWorks Corporation write off - (5,758,548) - (5,758,548)
-------------- -------------- -------------- --------------
Income (loss) before income taxes (36,519,134) (2,430,806) (12,913,783) (15,699,204)
Provision (benefit) for income taxes 1,058,321 1,449,090 9,745,088 91,640
-------------- -------------- -------------- --------------
Net income (loss) $ (37,577,455) $ (3,879,896) $ (22,658,871) ($15,790,844)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income (loss) per common share,
basic $ (2.62) $ (0.29) $ (1.65) $ (1.18)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income (loss) per common share,
assuming dilution $ (2.62) $ (0.29) $ (1.65) $ (1.18)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average common shares, basic 14,318,462 13,433,740 13,729,765 13,393,408
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average common shares,
assuming dilution 14,318,462 13,433,740 13,729,765 13,393,408
-------------- -------------- -------------- --------------
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</TABLE>
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DIGI INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 September 30
ASSETS 1998 1997
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,355,368 $ 31,329,666
Accounts receivable, net 48,549,145 25,658,522
Inventories, net 27,365,924 23,683,312
Other 5,349,397 4,147,942
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Total current assets 91,619,834 84,819,442
Property, equipment and improvements, net 33,990,923 23,617,696
Intangible assets, net 31,354,483 6,876,597
Other 2,978,883 2,997,601
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Total assets $ 159,944,123 $ 118,311,336
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,255,175 $ 10,118,921
Demand notes payable 10,707,000
Current portion of long-term debt 264,025
Income taxes payable 3,007,045 1,771,986
Accrued expenses:
Advertising 2,651,742 2,847,672
Compensation 5,300,903 2,388,468
Restructuring 5,254,000
Accrued AetherWorks Corporation
obligations 3,350,000
Other 11,284,223 2,363,258
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Total current liabilities 53,724,113 22,840,305
Long-term debt 11,124,446 -
Other 275,000 -
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Total liabilities 65,123,559 22,840,305
Commitments and contingency
Stockholders' equity:
Preferred stock, $.01 par value;
2,000,000 shares authorized;
none outstanding
Common stock, $.01 par value; 60,000,000
shares authorized; 15,790,975 and
14,727,256 shares issued 157,910 147,273
Additional paid-in capital 68,695,448 44,403,102
Retained earnings 52,455,031 75,113,902
Foreign currency translation adjustment (815,809) -
-------------- --------------
120,492,580 119,664,277
Unearned stock compensation (3,777,204) (1,787,658)
Treasury stock, at cost, 1,247,094 and
1,269,492 common shares (21,894,812) (22,405,588)
-------------- --------------
Total stockholders' equity 94,820,564 95,471,031
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Total liabilities and stockholders'
equity $ 159,944,123 $ 118,311,336
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</TABLE>
