8-K

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): January 21, 2004

VERILINK CORPORATION
(Exact name of registrant as specified in charter)

Delaware	000-28562	94-2857548
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

127 JETPLEX CIRCLE
MADISON, AL 35758-8989
(Address of principal executive offices / Zip Code)

256.327.2001
(Registrant’s telephone number, including area code)

Item 12.     Results of Operations and Financial Condition.

                   On January 21, 2004, Verilink Corporation (the “Company”) issued a press release regarding its financial results for the quarter ended January 2, 2004. The Company’s press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

                   The information in this Current Report on Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

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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.

	VERILINK CORPORATION
	(Registrant)
Dated:  January 21, 2004	By:
		C. W. Smith
		Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release, dated January 21, 2004 of Verilink Corporation.

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EX-99

Contact:
Bill Smith
Verilink Corporation
256.327.2204
bsmith@verilink.com

Verilink Reports Second Fiscal Quarter Results

MADISON, Ala. January 21, 2004 Verilink Corporation (NasdaqNM: VRLK) today reported its financial results for the second fiscal quarter ended January 2, 2004.

Net sales for the quarter were $9.1 million, up 48% from net sales of $6.1 million in the second quarter of fiscal 2003, and down 5% from net sales of $9.6 million in the first quarter of fiscal 2004. The Company reported net income of $264,000 for the quarter compared to net income of $605,000 in the second quarter of fiscal 2003 and $1.6 million in the first quarter of fiscal 2004. Diluted earnings per share were $0.02 for the quarter compared to $0.04 for the second quarter of fiscal 2003 and $0.10 in the first quarter of fiscal 2004.

Leigh S. Belden, President and CEO stated, “We are pleased with the increase in sales this quarter of our voice over broadband products which increased 115% to $2.2 million as compared to the first quarter this fiscal year. These products improved product and customer diversification and strengthened our presence in the small to medium enterprise segment, while also reducing the impact of quarterly fluctuations in the sales of products to our largest customer.

Our financial performance again met the guidance we provided during our last earnings conference call, with both profitable results and positive cash flow. This quarter marks the seventh consecutive quarter in which we have achieved net income, excluding the charge for in process R&D related to the NetEngine acquisition in the third quarter of fiscal 2003.”

Gross margins declined to 46.2% for the quarter compared to 51.9% in the second quarter of fiscal 2003 and 53.4% in the first quarter of fiscal 2004 due to product sales mix.

Operating expenses for the second quarter were $4.1 million, or 45.5% of sales, compared to $2.8 million, or 43.3% of sales for the second quarter of fiscal 2003 due to the increase in expenditures for voice over broadband product development and selling expenses. Compared to the first quarter of fiscal 2004, operating expenses increased $508,000 due to an increase in selling, general & administrative expenses.

Verilink Reports Second Fiscal Quarter Results
Page 2

Cash, cash equivalents and short-term investments increased $1 million this quarter and totaled $10.6 million as of January 2, 2004. Cash flow from operating activities was $2.6 million in the first six months of fiscal 2004 compared to $3.6 million in the first six months last year.

A live Webcast of the conference call discussing Verilink’s second quarter results and outlook is scheduled for January 21, 2004 at 4:00 p.m. CDT and is available on the Internet by visiting

http://www.firstcallevents.com/service/ajwz396574615gf12.html

Instructions for listening to this call are contained in the Company’s press release dated January 12, 2004 and may be found on the Company’s website. A replay of the conference call will be available through the PR Newswire website and in the “News and Events” section of the Company’s website at http://www.verilink.com.

About Verilink Corporation

Verilink provides customer premises voice and data access solutions to service providers, strategic partners and enterprise customers on a worldwide basis. Verilink leads the market in voice over packet and TDM solutions including VoIP, VoDSL and VoATM. Data-only offerings include DSU/CSUs, access routers, probes and network monitoring capabilities. The Company’s headquarters are located at 127 Jetplex Circle, Madison, AL 35758. Verilink stock trades on the NASDAQ National Market under the symbol VRLK. To learn more about Verilink, visit the website at http://www.verilink.com.

Note: Statements regarding identified market segments and sales growth opportunities and all other statements in this press release that are not historical facts are forward looking and actual results could differ materially. Among the factors that could cause actual results to differ are the ability to increase sales of acquired product lines, impact of customer concentration and the financial strength of customers, the impact to revenue from future sales opportunities, technological change, and changes in demand for the Company’s products. A detailed discussion of other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the Company’s most recent filings with the Securities and Exchange Commission, including its most recent Form 10-K and Form 10-Q. The Company disclaims any duty to update the forward -looking statements contained herein, except as may be required by law.

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Verilink, the Verilink logo, and NetEngine are registered trademarks of Verilink Corporation. All other trademarks or registered trademarks are the property of the respective owners.

Verilink Reports Second Fiscal Quarter Results
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VERILINK CORPORATION

Condensed Consolidated Financial Statements (thousands except per share amounts; unaudited)

	Three months ended						Six months ended
	January 2, 2004			December 27, 2002			January 2, 2004			December 27, 2002
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$	9,089		$	6,145		$	18,684		$	14,858
Cost of sales		4,888			2,953			9,359			7,151
Gross profit		4,201			3,192			9,325			7,707
Research and development		1,448			706			2,832			1,554
Selling, general and administrative		2,690			1,956			4,936			4,189
Operating income		63			530			1,557			1,964
Interest and other income, net		236			122			416			224
Interest expense		(35	)		(47	)		(73	)		(100	)
Income before provision for income taxes		264			605			1,900			2,088
Provision for income taxes		—			—			—			—
Net income before accounting change		264			605			1,900			2,088
Cumulative effect of change in accounting principle, relating to goodwill		—			—			—			(1,233	)
Net income	$	264		$	605		$	1,900		$	855
Basic earnings per share:
Net income before accounting change	$	0.02		$	0.04		$	0.13		$	0.14
Less:  Cumulative effect of change in accounting principle, relating to goodwill		—			—			—			(0.08	)
Net income	$	0.02		$	0.04		$	0.13		$	0.06
Diluted earnings per share:
Net income before accounting change	$	0.02		$	0.04		$	0.12		$	0.14
Less:  Cumulative effect of change in accounting principle, relating to goodwill		—			—			—			(0.08	)
Net income	$	0.02		$	0.04		$	0.12		$	0.06
Shares used to compute net income per share - basic		14,768			14,966			14,751			14,981
Shares used to compute net income per share - diluted		16,385			15,378			16,193			15,250
							January 2, 2004			June 27, 2003
CONSOLIDATED BALANCE SHEETS
Current assets:
Cash and cash equivalents							$	10,445		$	8,503
Short-term investments								127			101
Accounts receivable, net								3,719			3,621
Inventories, net								2,321			2,296
Other current assets								330			319
Total current assets								16,942			14,840
Property held for lease, net								6,365			6,462
Property, plant, and equipment, net								1,389			1,350
Restricted cash								1,000			1,000
Intangible assets, net								2,563			2,132
Other assets								448			525
Total assets							$	28,707		$	26,309
Current liabilities							$	8,213		$	8,461
Long-term debt and capital lease obligations								3,381			3,749
Stockholders’ equity								17,113			14,099
Total liabilities and stockholders’ equity							$	28,707		$	26,309