Aether Systems Reports First Quarter 2002 Results; Cost Reduction Initiatives Ahead of Schedule; Company Anticipates Q2 Revenue Growth.Business Editors/Hi-Tech Writers OWINGS MILLS, Md.--(BUSINESS WIRE)--May 7, 2002 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 first quarter ended March 31, 2002. Revenues for the first quarter were $23.7 million. The results include 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 $12.3 million, engineering services revenue of $1.7 million, software product revenue of $6.0 million, and device sales of $3.7 million. In Q4 2001, revenues were $25.2 million, with recurring 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 Q1 2001, revenues were $30.7 million with recurring services revenue of $10.4 million, engineering services revenue of $2.4 million, software product revenue of $11.8 million, and device sales of $6.1 million. Aether reported a first quarter 2002 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, of ($0.82) per share or a total of ($34.2 million). In the same period last year, Aether reported an operating loss, excluding certain non-cash and other charges, of ($1.16) per share or a total of ($46.8 million). Non-cash and other charges include 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. associated with Aether's expense reduction efforts, 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, 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. Based on Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), net loss, which includes these 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. , was ($1.32) per share or ($55.6 million) in Q1 2002. In Q1 2001, by comparison, the net loss was ($29.67) per share or ($1.2 billion), due largely to the write down of goodwill and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. associated with fiscal 2000 acquisitions and other investments. 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. (consisting of research and development, general and administrative, and selling and marketing costs) continued to decrease for the fourth consecutive quarter, improving from $42.6 million in Q4 2001 to $36.2 million this quarter. In Q1 2001, operating expenses were $63.2 million. Consequently, Aether continues to reduce its operating cash burn and ended the quarter with $477.5 million in cash and 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. investments. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
In Q1 2001, EBITDA loss was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $52.4 million. These results represent improvements of more than 19 percent sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and 50 percent from the same period last year. As part of Aether's strategy to focus resources on core and near-term near-term adj. Of, for, or involving a short period of time in the near future. revenue opportunities, and its related effort to reduce expenses, the company recognized a restructuring charge of approximately $12.6 million in Q1 2002. This charge relates to a workforce reduction of approximately 225 positions and the reduction of lease space associated with 4 facilities. "We are encouraged by the first quarter's results and anticipate a return to revenue growth in the second quarter of 2002," 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. "The positive trends beginning to develop are reason for optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. , albeit cautious amid an economic environment that remains slow to recover. Our focus on core, revenue-generating areas has enabled us to continue to deliver improvements in operating expenses. Operating expenses have declined in each of the last four quarters. This quarter our operating expenses improved by approximately 15 percent sequentially and over 43 percent from the same period last year. We expect an aggregate improvement of approximately 55 percent by the end of the year as compared to Q1 2001. Over much of the past year, Aether focused a great deal of its efforts on cost reductions. Now, the company is in a solid position to focus on revenue growth." Oros continued, "We continue to back our confident words with strong actions. The company has repurchased more than 10 percent of its original convertible debt at favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. rates, buying an additional $15.0 million face value in the first quarter for $8.4 million. Moreover, insiders Insiders These are directors and senior officers of a corporation-in effect, those who have access to inside information about a company. An insider also is someone who owns more than 10% of the voting shares of a company. bought another 50,000 shares in March. In total, Aether's officers have purchased over one million shares within the past year." Updated Management Guidance In Q2 2002, Aether expects revenues in the upper-$20 million range (previous guidance was $27 million) and operating expenses in the mid- mid- pref. Middle: midbrain. $30 million range (previous guidance was mid-to-upper-$30 million range). Guidance for operating loss per share, excluding certain non-cash charges is in the mid-to-upper-($0.70) range. For the remainder of fiscal 2002, Aether expects continued revenue growth along with operating expenses continuing to improve to the upper-$20 million by Q4 2002. Aether will host a conference call on Wednesday Wednesday: see week. , May 8, 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 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. , May 13, 2002, by calling 800/839-0860, access code 1365. 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 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. This press release contains 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. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used herein, the words anticipate, believe, estimate, intend, may, will, and expect and similar expressions as they relate to Aether Systems, Inc. (Aether or Company) or its management are intended to identify such forward-looking statements. 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) whether sales levels of our products and services perform according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. our expectations; (2) whether trends indicated to date continue into the future; (3) whether products are released according to our expectations; (4) whether changes in business conditions, company strategy or other factors occur; (5) the effects of past or future terrorist attacks, and (6) 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. Actual results could differ materially for a variety of reasons and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or .
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited)
Three months ended
March 31,
--------------------------
2002 2001
----------- -----------
in thousands except per share data
Subscriber revenue $ 12,309 $ 10,400
Engineering services revenue 1,623 2,363
Software and related services 6,022 11,797
Device sales 3,718 6,099
----------- -----------
Total revenue 23,672 30,659
Cost of subscriber revenue 7,354 6,234
Cost of engineering services revenue 803 1,300
Cost of software and related services 2,176 4,082
Cost of device sales 3,431 8,217
----------- -----------
Total cost of revenue 13,764 19,833
----------- -----------
Gross profit 9,908 10,826
Operating expenses:
Research and development 8,626 17,171
General and administrative 17,375 25,804
Selling and marketing 10,154 20,216
Depreciation and amortization 10,994 91,795
Option and warrant expense 2,221 4,580
Impairment of intangibles and other
assets 2,377 959,369
Restructuring charge 12,556 --
----------- -----------
64,303 1,118,935
----------- -----------
Operating loss (54,395) (1,108,109)
Other income (expense):
Interest income (expense), net (2,023) 6,406
Equity in losses of investment (2,773) (14,516)
Investment loss, including
impairments (4,235) (94,744)
Income tax benefit -- 435
Minority interest 1,530 3,664
Cumulative effect of change in
accounting principle relating
to adoption of SFAS 133, Accounting
for Derivatives -- 6,564
----------- -----------
Net loss before extraordinary item (61,896) (1,200,300)
Extraordinary item (early
extinguishment of debt) 6,262 --
----------- -----------
Net loss after extraordinary item (55,634) (1,200,300)
Net loss per share - basic and diluted
before extraordinary item ($ 1.47) ($ 29.67)
extraordinary item $ 0.15 --
----------- -----------
Net loss per share - basic and diluted ($ 1.32) ($ 29.67)
=========== ===========
Weighted average shares outstanding -
basic and diluted 41,993 40,452
=========== ===========
Reconciliation to net operating loss:
Net loss (55,634) (1,200,300)
Add back non-cash and other charges:
Adjustments (impairment of goodwill,
write-down of investments,
inventory obsolescence) 6,612 1,050,032
Amortization of intangibles relating
primarily to acquisitions 4,949 87,890
Proportionate share of losses in
investee 2,773 14,516
Option and warrant expense 2,221 4,580
Charges from adoption of SFAS 133 -- (599)
Restructuring charge 12,556 --
Extraordinary item (6,262) --
Deferred tax benefit -- (435)
Minority interest - amortization and
other non-cash charges (1,452) (2,520)
----------- -----------
Net operating loss (34,237) (46,836)
=========== ===========
Net operating loss per share -
basic and diluted ($ 0.82) ($ 1.16)
=========== ===========
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 Dec. 31
2002 2001
--------- ---------
in thousands (unaudited)
Current assets:
Cash and cash equivalents $ 475,045 $ 527,430
Short-term investments 2,444 2,490
Trade accounts receivable 23,206 24,802
Inventory 27,994 27,178
Prepaid expenses and other current
assets 18,140 19,521
--------- ---------
Total current assets 546,829 601,421
Furniture, computers, and equipment,
net 57,608 61,304
Intangibles and other assets 286,949 286,695
--------- ---------
$ 891,386 $ 949,420
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,541 $ 8,560
Accrued expenses 28,046 32,915
Restructuring reserve 20,740 15,452
Accrued employee compensation and
benefits 10,739 9,983
Deferred revenue 17,031 15,145
Notes payable 27,243 15,493
--------- ---------
Total current liabilities 107,340 97,548
Long-term liabilities:
Convertible subordinated notes
payable and other notes payable 275,643 290,645
Deferred revenue 4,761 6,380
Restructuring reserve 16,230 12,365
Deferred tax liability -- --
Minority interest in net assets of
subsidiary (1,568) (45)
Stockholders' equity 488,980 542,527
Commitments and contingencies
--------- ---------
$ 891,386 $ 949,420
========= =========
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