Aether Systems Announces First Quarter 2004 Results.Business Editors/High-Tech Writers OWINGS MILLS, Md.--(BUSINESS WIRE)--May 6, 2004 Aether aether: see ether, in physics and astronomy. Aether god of whole atmosphere. [Gk. Myth.: Jobes, 42] See : Air Systems, Inc., (Nasdaq:AETH), a leading provider of wireless and mobile data solutions, today reported financial results for the first quarter ended March 31, 2004. Revenues for Q1 2004 were $12.5 million, which consist of subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. revenue of $5.3 million, software and related services revenue of $4.2 million and device sales of $3.0 million. In the same period last year, revenues were $14.9 million, with subscriber revenue of $7.3 million, software and related services revenue of $5.3 million and device sales of $2.3 million. Revenues in Q1 2004 were flat as compared to Q4 2003. Net income for Q1 2004 was $0.21 per share or $9.1 million, as compared to a net loss of ($0.29) per share or ($12.4 million) in the same period last year. In Q4 2003, net loss was ($0.29) per share or ($12.4 million). Net income for the current quarter includes a gain on the sale of Aether's Enterprise Mobility Solutions ("EMS Ems, town, Germany Ems or Bad Ems (bät ĕms), town (1994 pop. 10,130), Rhineland-Palatinate, W Germany, on the Lahn River. ") segment of $17.9 million, which was completed in January January: see month. 2004.(1) Loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for Q1 2004 was ($0.20) per share or ($8.8 million), as compared to a loss of ($0.22) per share or ($9.3 million) in the same period last year. In Q4 2003, the loss from continuing operations was ($0.23) per share or ($10.1 million). Aether's net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. , excluding certain non-cash and other charges, in Q1 2004 was ($0.16) per share, or ($6.8 million).(2) This is a non-GAAP financial measure that management considers, along with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures, when evaluating the Company's operating performance. In the same period last year, net operating loss, excluding certain non-cash and other charges, was ($0.17) per share, or ($7.1 million). In Q4 2003, net operating loss, excluding certain non-cash and other charges, was ($0.18) per share or ($7.7 million) which included approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.5 million ($0.04 per share) of professional and other fees and expenses that Aether incurred in pursuing potential strategic transactions that, as of the end of fiscal year 2003, management did not expect would be completed and that were reported as part of Aether's general and administrative operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in Q4 2003. This non-GAAP financial measure is discussed below and is reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to net operating loss, which is the most directly comparable GAAP financial measure, in an attachment See attach a file. to this press release, as required by the SEC's Regulation G.(3) Total cash and cash equivalents (including investments available for sale) increased by $9.6 million during Q1 2004. The increase resulted primarily from approximately $18.0 million in cash received from the sale of the EMS segment, plus investment income and changes to net working capital of $1.3 million offset by $5.1 million spent to operate our ongoing business, and a semi-annual debt interest payment of $4.6 million. "Aether continues to focus on achieving its primary objectives of becoming profitable and seeking to enhance the value of our assets to our stockholders," said Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. David S. Oros. "In terms of our existing operations, we were encouraged that Q1 2004 revenue remained flat as compared to the prior quarter, after having experienced several quarter-over-quarter revenue declines. We recognize that achieving our primary objectives will require us to make significant additional changes to our businesses and our company. Consequently, we continue to explore a range of strategic alternatives, with our goal being to decide upon and begin implementing strategic choices in the second half of this year that we believe will help us achieve our objectives more quickly." The Company's outstanding 6 percent convertible subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes are due March 22, 2005. As the maturity date is less than 12 months from the end of the first quarter, the amount of the notes -- $154.9 million -- has been reclassified as a short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. liability on the Company's balance sheet as of March 31, 2004. Because Aether expects to liquidate To pay and settle the amount of a debt; to convert assets to cash; to aggregate the assets of an insolvent enterprise and calculate its liabilities in order to settle with the debtors and the creditors and apportion the remaining assets, if any, among the stockholders or owners of the a portion of its investments to repay these notes at their maturity, the Company has reclassified $154.9 million of such investments from long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. to short-term as of March 31, 2004. Operating expenses in Q1 2004 were $14.2 million, as compared to $16.3 million in the same period last year and $15.6 million in Q4 2003. Use of Non-GAAP Financial Measure This press release refers to net operating loss from continuing operations, excluding non-cash and other charges, which is a non-GAAP financial measure, as defined by the SEC's Regulation G. We provide this non-GAAP financial measure because we believe that when considered with the comparable GAAP measure, it enhances an investor's ability to compare the Company's performance from one period to the next. Aether management considers this non-GAAP financial measure in evaluating the Company's operations. We also believe it aids in management's and investors' assessment of the use of cash by the Company's core operations, as it excludes cash items (such as restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. ) that in management's judgment do not reflect the ongoing cash expenses of the Company's continuing business, as well as non-cash gains and charges. In addition, analysts and others in the investment community use this metric to evaluate the Company's performance and to express performance estimates for the Company. This non-GAAP financial measure requires management to make judgments about the exclusion exclusion /ex·clu·sion/ (eks-kloo´zhun) 1. a shutting out or elimination. 2. surgical isolation of a part, as of a segment of intestine, without removal from the body. of certain items, and if different judgments were made, the amounts reported would be different. Conference Call Aether will host a conference call on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , May 7, 2004 at 8:30 a.m. Eastern Time. Interested parties may access the call at www.aethersystems.com or by telephone at 1-800-441-0022. Please ask for the Aether Systems call. Replay of this call will be available until May 28, 2004, by calling 1-800-839-0860, access code 1435. About Aether Systems, Inc. Aether Systems provides wireless and mobile data solutions that increase efficiency and productivity for the transportation, fleet management, and public safety markets. Aether's transportation and fleet management solutions, in use by over 600 fleets, include the industry-leading MobileMax(TM) multi-mode system. MobileMax(TM) automatically switches between land-based and satellite communications to ensure complete coverage and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. communications. Aether's public safety solutions help hundreds of police and fire departments in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. leverage the power of wireless for improved service to the public. The PacketCluster(TM) family of products provides officers in the field with empowering applications including direct access to motor vehicle and warrant information within seconds, and paperless reporting systems. For more information, please visit www.aethersystems.com (1) In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting practices ("GAAP"), the results of the EMS segment for all periods prior to 2004 have been reclassified as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , so that period-to-period comparisons are presented on a comparable basis. The results for Q1 2004 do not include results from discontinued operations, as the EMS segment was sold effective as of the start of the quarter. Accordingly, net income for Q1 2004 is comparable to loss from continuing operations for Q1 and Q4 2003. (2) "Non-cash and other charges" include restructuring charges, the amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and other non-cash items primarily relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc acquisitions, the Company's share of losses in joint ventures under equity method accounting, gain on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, and non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) relating to options and warrants and certain other items, all of which are set forth on a reconciliation attached to this press release. (3) Net operating loss, excluding certain non-cash and other charges, does not include the results of discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: operations. Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Disclosure This press release contains "forward-looking statements," as such term is used in the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . Such forward looking statements include those regarding the Company's efforts to achieve profitability, its expectation that it will not incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. significant restructuring charges in the future, its pursuit of various strategic options, and the impact of such strategic options on shareholder value. When used herein, the words anticipate, believe, estimate, intend, may, will, and expect and similar expressions as they relate to Aether or its management are intended to identify such forward-looking statements. Forward-looking statements are based on our current expectations and assumptions, which are subject to risks and uncertainties. They are not guarantees of our future performance or results. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by, these forward-looking statements. Factors that could cause or contribute to such differences include: (1) our ability to implement business strategies that will achieve our objectives, (2) our ability to realize value from our accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. net operating and net capital losses, (3) potential liabilities relating to sales of our assets, (4) whether or not we are able to adequately staff our operations, and (5) other factors discussed in our filings with the Securities and Exchange Commission. Aether undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These and other risks and uncertainties are discussed in detail in our 2003 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and should be reviewed carefully.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
---------------------
2004 2003
---------- ----------
in thousands except per share data
Subscriber revenue $5,276 $7,312
Software and related services 4,230 5,258
Device sales 2,963 2,286
---------- ----------
Total revenue 12,469 14,856
Cost of subscriber revenue 2,005 3,449
Cost of software and related services 1,162 1,181
Cost of device sales 3,527 2,736
---------- ----------
Total cost of revenue 6,694 7,366
---------- ----------
Gross profit 5,775 7,490
Operating expenses:
Research and development 2,548 2,653
General and administrative 6,465 8,156
Selling and marketing 1,872 2,300
Depreciation and amortization 2,294 2,278
Option and warrant expense 525 394
Impairment of intangibles and fixed assets - 447
Gain on disposal of assets (30) (5)
Restructuring charge 499 104
---------- ----------
Total operating expenses 14,173 16,327
---------- ----------
Operating loss (8,398) (8,837)
Other income (expense):
Interest expense, net (928) (261)
Equity in losses of investment - (59)
Investment gain (loss), including impairments,
net 557 (166)
---------- ----------
Loss from continuing operations (8,769) (9,323)
Loss from discontinued operations - (3,117)
Gain on sale of discontinued operations 17,915 -
---------- ----------
Net income (loss) $9,146 $(12,440)
========== ==========
Loss per share - basic and diluted - from
continuing operations $(0.20) $(0.22)
Loss per share - basic and diluted - from
discontinued operations - (0.07)
Income per share - basic and diluted - gain on
sale of discontinued operations 0.41 -
---------- ----------
Net income (loss) per share - basic and
diluted $0.21 $(0.29)
========== ==========
Weighted average shares outstanding - basic
and diluted 43,273 42,271
========== ==========
Reconciliation to net operating loss excluding
non-cash and other charges:(1)
Loss from continuing operations per GAAP $(8,769) $(9,323)
Add back non-cash and other charges:
Impairment of intangibles and fixed assets - 447
Investment (gain) loss, including
impairments, net (557) 166
Amortization of intangibles 1,528 1,081
Proportionate share of losses in investee - 59
Option and warrant expense 525 394
Restructuring charge (includes cash and non
cash charges) 499 104
Gain on disposal of assets (30) (5)
---------- ----------
Net operating loss excluding non-cash and
other charges $(6,804) $(7,077)
========== ==========
---------- ----------
Net operating loss excluding non-cash and
other charges per share - basic and diluted $(0.16) $(0.17)
========== ==========
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2004 2003
------------ ------------
in thousands (Unaudited)
Current assets:
Cash and cash equivalents $33,595 $26,222
Investments available for sale 154,912 20
Trade accounts receivable 14,284 15,014
Inventory 10,962 10,162
Assets from discontinued operations - 14,219
Leased equipment receivable 2,946 2,636
Prepaid expenses and other current assets 18,869 16,338
------------ ------------
Total current assets 235,568 84,611
Restricted cash 11,488 13,460
Investments available for sale 70,167 220,849
Furniture, computers, and equipment, net 8,309 9,335
Investments not readily available for sale 245 2,273
Leased equipment receivable 8,581 8,765
Intangibles and other assets 56,618 58,812
------------ ------------
$390,976 $398,105
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible subordinated notes payable $154,912 $-
Accounts payable 654 388
Accrued expenses 9,233 12,220
Liabilities from discontinued operations - 9,687
Restructuring reserve 809 1,407
Accrued employee compensation and benefits 2,705 2,796
Accrued interest payable 205 2,529
Deferred revenue 15,543 15,373
------------ ------------
Total current liabilities 184,061 44,400
Long-term liabilities:
Convertible subordinated notes payable - 154,912
Deferred revenue 18,661 18,799
Restructuring reserve - 70
Deferred rent 607 623
Stockholders' equity 187,647 179,301
Commitments and contingencies
------------ ------------
$390,976 $398,105
============ ============
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