Aether Systems Announces Year End and Fourth Quarter 2001 Results.Business Editors/Hi-Tech Writers OWINGS MILLS, Md.--(BUSINESS WIRE)--Feb. 5, 2002 Cash Position Remains Strong as 2001 Revenues Nearly Double; Gross Margins Improve and 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. Continue to Decrease 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 data products and services, today reported financial results for the fiscal year and fourth quarter ended Dec. 31, 2001. Revenue for 2001 increased nearly 95 percent to $112.9 million, from $58.2 million in 2000. Revenue for the fourth quarter was $25.2 million, compared to $25.0 million in Q3 2001, and included recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. services revenue of $11.0 million, engineering services revenue of $2.1 million, software product revenue of $7.1 million, and device sales of $5.0 million. In Q4 2000, Aether's revenues were $25.8 million, with recurring services revenue of $8.3 million, engineering services revenue of $3.9 million, software product revenue of $8.6 million, and device sales of $5.0 million. Aether reported a fourth quarter 2001 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 charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. , of ($1.02) per share or a total of ($42.1 million). In the same period last year, Aether reported an operating loss, excluding certain non-cash charges, of ($0.90) per share or a total of ($35.2 million). Non-cash charges include 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 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, 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. These charges totaled $76.0 million in Q4 2001, compared to $97.1 million in Q4 2000. Operating expenses continued to decrease for the third sequential One after the other in some consecutive order such as by name or number. quarter, improving from $52.9 million in Q3 2001 to $44.2 million this quarter. In Q4 2000, operating expenses were $57.3 million. Over the past several quarters, Aether has reduced operating expenses by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $100 million on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis and remains focused on cost-cutting initiatives. Consequently, Aether continues to reduce its operating cash burn, and ended the year with $530 million in cash. As part of Q4 cost-cutting efforts, the company recognized a restructuring charge 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. of $10.9 million, primarily related to the consolidation of European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations. "In the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of a challenging economic environment, Aether has been able to maintain a solid revenue base while significantly reducing expenses," 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. Dave Oros. "In 2001, we streamlined operations across the company while growing revenue by 95 percent over 2000. These are encouraging signs that demonstrate Aether's ability to adapt as market conditions dictate TO DICTATE. To pronounce word for word what is destined to be at the same time written by another. Merlin Rep. mot Suggestion, p. 5 00; Toull. Dr. Civ. Fr. liv. 3, t. 2, c. 5, n. 410. , while building an infrastructure that is fully prepared for an economic rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective and a return to growth." Oros continued, "Aether has become even more focused as it has cut expenses and established a formidable presence in a variety of growth areas including Mobile Government and Transportation and Logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. . In Mobile Government, Aether provides public safety products and services at local, state and national levels. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about this area of our business as agencies and municipalities consider how to address their homeland security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States needs and prepare for new appropriations from the Federal government. Officers at the Super Bowl and Boston's Logan Logan, city (1990 pop. 32,762), seat of Cache co., N Utah, on the Logan River; inc. 1859. It is the center of an irrigated dairy and farm area, with huge cheese plants, other food-processing facilities, and diverse manufactures. Airport, for example, have used Aether's PocketBlue(TM) for secure wireless messaging and access to criminal databases. Aether's Transportation and Logistics division is gaining momentum as well, consistently adding customers to its current base of over 200 transportation companies." "In 2002, Aether plans to introduce new products that take advantage of today's networks as well as next generation networks currently being rolled out. Our engineering teams have gained invaluable insight and experience through the successful deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of field service solutions, such as those developed for Sun Microsystems' global field service technicians. As a result, an intelligent client application for field service automation is being productized to enhance customer service, and maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. the productivity of service organizations that deliver field support to customers. Additionally, other new and exciting products will emerge from our partnership with AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. , with our Aether Fusion platform powering products that target the small and medium enterprise market. Aether will continue to deliver on its mission to provide empowering wireless computing computing - computer solutions to the enterprise that deliver a clear return on investment." Fiscal Year 2001 Summary For the year, Aether's total revenue of $112.9 million included recurring services revenue of $44.0 million, engineering services revenue of $7.9 million, software product revenue of $37.0 million, and device sales of $24.0 million. In 2000, by comparison, Aether reported total revenue of $58.2 million, with recurring services revenue of $24.8 million, engineering services revenue of $9.5 million, software product revenue of $17.3 million and devices sales of $6.6 million. Operating expenses for 2001 were $223.2 million as compared to $137.3 in 2000. Aether will host a conference call on Wednesday Wednesday: see week. , February February: see month. 6, 2002 at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . 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 5 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on Monday Monday: see week. , February 11, 2002, by calling 1-800-839-0860, access code 1204. About Aether Systems, Inc. Aether Systems helps enterprise customers improve efficiency and profitability by providing the services, software and support necessary to extend existing and future business applications from the desktop to any wireless device. Through Aether Fusion(TM), Aether's wireless enabling technology foundation, Aether develops, deploys and manages wireless solutions built on industry standard technology and backed by Aether's expertise in wireless hosting, software and services. Aether provides the worlds of business and government with a single source for reliable, scalable and cost effective wireless solutions. For more information, please visit www.aethersystems.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This press release includes forward-looking statements 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. based on the current expectations of Aether about future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about Aether that could cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, market acceptance of the products developed or to be developed by Aether, the ability of Aether to develop new technologies and projects, future decisions regarding investments and acquisitions and future market values of similar businesses, the success of Aether's efforts to reduce marginal costs Marginal cost The increase or decrease in a firm's total cost of production as a result of changing production by one unit. marginal cost The additional cost needed to produce or purchase one more unit of a good or service. while increasing sales, and the success of joint efforts with partner companies. These risks and other risk factors are described under the caption, "Risk Factors" in Aether's filings with the Securities and Exchange Commission. Aether undertakes no obligation to update the forward-looking statements contained in this press release.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited)
Three months ended Year ended
December 31, December 31,
---------------------- ----------------------
2001 2000 2001 2000
--------- ----------- ----------- ---------
in thousands except
per share data
Subscriber revenue $ 11,044 $ 8,267 $ 44,031 $ 24,802
Engineering services
revenue 2,074 3,890 7,860 9,444
Software and related
services 7,108 8,587 36,982 17,278
Device sales 4,962 5,031 24,007 6,630
--------- ----------- ----------- ---------
Total revenue 25,188 25,775 112,880 58,154
Cost of subscriber
revenue 7,510 3,874 27,167 11,254
Cost of engineering
services revenue 545 2,182 3,644 5,693
Cost of software
and related services 2,076 2,282 11,625 5,724
Cost of device sales 4,619 5,065 38,318 7,345
--------- ----------- ----------- ---------
Total cost of
revenue 14,750 13,403 80,754 30,016
--------- ----------- ----------- ---------
Gross profit 10,438 12,372 32,126 28,138
Operating expenses:
Research and
development 12,579 15,807 64,625 30,189
General and
administrative 20,030 20,676 91,469 52,937
Selling and
marketing 11,586 20,789 67,093 54,151
In process research
and development
related to
acquisitions -- 1,800 -- 7,860
Depreciation and
amortization 27,413 81,319 180,724 238,074
Option and warrant
expense 3,458 4,274 15,908 14,345
Impairment of
intangibles 30,220 -- 1,121,001 --
Restructuring charge 10,917 -- 45,006 --
--------- ----------- ----------- ---------
116,203 144,665 1,585,826 397,556
--------- ----------- ----------- ---------
Operating loss (105,765) (132,293) (1,553,700) (369,418)
Other income
(expense):
Interest income
(expense), net (2,002) 10,811 8,659 42,351
Equity in losses
of investment (9,238) (16,486) (57,523) (47,886)
Investment loss,
including
impairments (1,831) -- (143,384) --
Income tax benefit 691 987 10,694 1,561
Minority interest (2) 4,727 55,539 10,692
Cumulative effect
of change in
accounting principle
relating to adoption
of SFAS 133,
Accounting
for Derivatives -- -- 6,564 --
--------- ----------- ----------- ---------
Net loss before
extraordinary
item (118,147) (132,254) (1,673,151) (362,700)
Extraordinary item
(early
extinguishment
of debt) -- 7,684
--------- ----------- ----------- ---------
Net loss after
extraordinary item (118,147) (132,254) (1,665,467) (362,700)
Net loss per share
- basic and diluted
before extraordinary
item ($ 2.86) ($ 3.37) ($ 41.08) ($ 9.99)
extraordinary item $ 0.00 $ 0.00 $ 0.19 $ 0.00
--------- ----------- ----------- ---------
Net loss per share
- basic and diluted ($ 2.86) ($ 3.37) ($ 40.89) ($ 9.99)
========= =========== =========== =========
Weighted average
shares outstanding
- basic and diluted 41,241 39,283 40,732 36,310
========= =========== =========== =========
Reconciliation to
net operating loss:
Net loss (118,147) (132,254) (1,665,467) (362,700)
Add back non-cash
charges:
Adjustments
(impairment of
goodwill, write-down
of investments,
inventory
obsolescence) 32,051 -- 1,272,789 --
Amortization of
intangibles
primarily relating
to acquisitions 21,036 78,040 162,104 230,836
In process research
and development
acquired -- 1,800 -- 7,860
Proportionate share
of losses in
investee 9,238 16,486 57,523 47,886
Option and warrant
expense 3,458 4,275 15,909 14,345
Charges from
adoption of
SFAS 133 -- -- (599) --
Restructuring
charge 10,917 -- 45,006 --
Extraordinary
item -- -- (7,684) --
Deferred tax
benefit (691) (987) (10,695) (1,595)
Minority interest
- amortization -- (2,537) (51,160) (6,906)
--------- ----------- ----------- ---------
Net operating
loss (42,138) (35,177) (182,274) (70,274)
========= =========== =========== =========
Net operating
loss per share
- basic and
diluted ($ 1.02) ($ 0.90) ($ 4.47) ($ 1.94)
========= =========== =========== =========
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31,
2001 2000
-------------- -----------
in thousands (unaudited)
Current assets:
Cash and cash equivalents $527,430 $872,747
Short-term investments 2,490 2,648
Trade accounts receivable 24,802 30,263
Inventory 27,178 19,130
Prepaid expenses and other current
assets 19,521 17,081
-------------- -----------
Total current assets 601,421 941,869
Furniture, computers, and
equipment, net 61,304 53,223
Intangibles and other assets 286,695 1,682,283
-------------- -----------
$949,420 $2,677,375
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,560 $9,747
Accrued expenses 41,142 66,949
Restructuring reserve 15,452 -
Accrued employee compensation and
benefits 13,083 12,566
Deferred revenue 15,145 14,170
Notes payable 15,493 18,813
-------------- -----------
Total current liabilities 108,875 122,245
Long-term liabilities:
Convertible subordinated notes
payable and other notes payable 290,645 321,201
Deferred revenue 6,380
Restructuring reserve 12,365 -
Deferred tax liability - 10,694
Minority interest in net assets
of subsidiary - 55,537
Stockholders' equity 531,155 2,167,698
Commitments and contingencies
-------------- -----------
$949,420 $2,677,375
============== ===========
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