Aether Systems Reports Second Quarter 2002 Results; Revenue Growth Over First Quarter Complements Continuing Cost Reductions; Company Repurchases $68.2 Million of Convertible Debt.Business Editors/Hi-Tech Writers OWINGS MILLS, Md.--(BUSINESS WIRE)--Aug. 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 and mobile data solutions, today reported financial results for the second quarter ended June June: see month. 30, 2002. Revenues for the second quarter were $31.6 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 $19.9 million, engineering services revenue of $0.7 million, software product revenue of $5.6 million, and device sales of $5.4 million. In Q1 2002, revenues were $23.7 million, with recurring 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 Q2 2001, revenues were $32.1 million, with recurring services revenue of $11.4 million, engineering services revenue of $2.8 million, software product revenue of $9.9 million, and device sales of $8.0 million. Aether reported a second 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 ($0.61) per share or a total of ($25.7 million). In the same period last year, Aether reported an operating loss, excluding certain non-cash and other charges, of ($1.19) per share or a total of ($48.4 million). Non-cash items and other charges could include an extraordinary gain on the early retirement of debt, 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. and other charges, was ($0.46) per share or ($19.5 million) in Q2 2002 (these results include a $22.0 million extraordinary gain on the early retirement of debt). In Q2 2001, by comparison, the net loss was ($2.55) per share or ($103.6 million). 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 fifth consecutive quarter, improving from $36.2 million in Q1 2002 to $31.4 million this quarter. In Q2 2001, operating expenses were $62.9 million. 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.
adj. 1. Almost exact or correct: the approximate time of the accident. 2. $49.4 million. These results represent improvements of 31 percent sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and more than 63 percent from the same period last year. "We are pleased to have been able to deliver nearly 8 percent sequential One after the other in some consecutive order such as by name or number. organic revenue growth (this excludes the impact of the @Track transaction) in what continues to be a challenging economic environment," said Aether 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 "We believe this can be attributed to the careful balance required between expense reduction efforts undertaken in a tenuous tenuous Intensive care adjective Referring to a 'touch-and-go,' uncertain, or otherwise 'iffy' clinical situation environment with the Company's focus on nearer-term revenue opportunities. We have fully integrated the assets purchased in Q1 in connection with our @Track transaction, which had a positive impact on EBITDA for the quarter. Furthermore, while absorbing ab·sorb tr.v. ab·sorbed, ab·sorb·ing, ab·sorbs 1. To take (something) in through or as through pores or interstices. 2. To occupy the full attention, interest, or time of; engross. a full quarter's worth of operating expenses associated with those assets, Aether continued to make significant progress relative to its cost reduction initiatives with total operating expenses declining more than 13 percent sequentially and 50 percent from the same period last year. While we must remain cautious, we are quite encouraged with these results as we believe they speak to the significant progress that has been made as well as the strength of Aether's positioning and the markets the company serves." Oros continued, "The Company also repurchased $68.2 million face value of convertible debt ($8.2 million was purchased in July July: see month. 2002) at a significant discount. In addition, 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. purchased nearly 115,000 shares of the company's capital stock. Since Q2 2001, officers and directors have bought approximately 1.3 million shares representing about 3 percent of the current shares outstanding, while the company also has retired one third of its convertible debt." Management Guidance Aether expects modest sequential organic revenue growth for the balance of 2002. The company expects continued operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. reductions as it approaches the mid- mid- pref. Middle: midbrain. to upper-$20 million range by Q4 2002. Previous guidance was for the upper-$20 million range. Aether will host a conference call on Thursday Thursday: see week. , August 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 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. , August 12, 2002, by calling 1-800-839-0860, access code 1500. 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 Six months ended
June 30, June 30,
---------------------- --------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
in thousands except
per share data
Subscriber
revenue $19,881 $11,408 $32,190 $21,808
Engineering
services
revenue 712 2,781 2,335 5,144
Software and
related
services 5,633 9,873 11,655 21,670
Device sales 5,392 8,022 9,110 14,121
---------- ---------- ---------- ----------
Total revenue 31,618 32,084 55,290 62,743
Cost of subscriber
revenue 11,203 6,617 18,557 12,851
Cost of
engineering
services revenue 318 1,487 1,121 2,787
Cost of software
and related
services 2,264 2,574 4,440 6,656
Cost of device
sales 4,519 7,922 7,950 16,139
---------- ---------- ---------- ----------
Total cost of
revenue 18,304 18,600 32,068 38,433
---------- ---------- ---------- ----------
Gross profit 13,314 13,484 23,222 24,310
Operating expenses:
Research and
development 6,991 18,705 15,617 35,876
General and
administrative 15,561 23,680 32,936 49,484
Selling and
marketing 8,885 20,511 19,039 40,727
---------- ---------- ---------- ----------
EBITDA(1) (18,123) (49,412) (44,370) (101,777)
Depreciation and
amortization 11,074 29,448 22,068 121,243
Option and
warrant expense 2,170 4,358 4,391 8,938
Impairment of
goodwill
associated
with
acquisitions -- 2,211 2,377 961,580
Restructuring
charge 3,025 15,859 15,581 15,859
---------- ---------- ---------- ----------
Operating loss (34,392) (101,288) (88,787) (1,209,397)
Other income
(expense):
Interest income
(expense), net (1,310) 3,195 (3,326) 9,601
Equity in losses
of investment (833) (17,007) (3,606) (31,523)
Investment loss,
including
impairments (5,877) (1,147) (10,112) (95,891)
Income tax
benefit -- 440 -- 875
Minority interest (1,408) 4,483 115 8,147
Other income
- escrow
settlement 2,319 -- 2,319 --
Cumulative effect
of change in
accounting
principle
relating to
adoption of
SFAS 133,
Accounting
for
Derivatives -- -- -- 6,564
---------- ---------- ---------- ----------
Net loss
before
extraordinary
item (41,501) (111,324) (103,397) (1,311,624)
extraordinary item
(early
extinguishment of
debt) 22,046 7,684 28,308 7,684
---------- ---------- ---------- ----------
Net loss after
extraordinary
item (19,455) (103,640) (75,089) (1,303,940)
Net loss per share
- basic and
diluted before
extraordinary
item and
cumulative effect
of change in
accounting
principle ($0.98) ($2.74) ($ 2.45) ($32.54)
Extraordinary
item - related
to early
extinguishment
of debt $0.52 $ 0.19 $0.67 $0.19
Cumulative
effect of
change in
accounting
principle
relating to
adoption of
SFAS 133,
Accounting for
Derivatives -- -- -- $0.16
---------- ---------- ---------- ----------
Net loss per share
- basic and
diluted ($0.46) ($2.55) ($1.78) ($32.19)
========== ========== ========== ==========
Weighted average
shares
outstanding -
basic and diluted 42,156 40,576 42,074 40,511
========== ========== ========== ==========
Reconciliation to
net operating
loss:
Net loss (19,455) (103,640) (75,089) (1,303,940)
Add back non-
cash and other
charges:
Other
adjustments
(impairment
of goodwill,
write-down of
investments,
inventory
obsolescence) 5,877 3,358 12,489 1,053,390
Amortization
of
intangibles 4,869 25,249 9,818 113,139
Proportionate
share of
losses in
investee 833 17,007 3,606 31,523
Option and
warrant expense 2,170 4,358 4,391 8,938
Charges from
adoption of
SFAS 133 -- -- -- (599)
Other income -
escrow
settlement (2,319) -- (2,319) --
Restructuring
charge 3,025 15,859 15,581 15,859
Extraordinary
item (22,046) (7,684) (28,308) (7,684)
Deferred tax
benefit -- (440) -- (875)
Minority
interest -
amortization 1,351 (2,509) (94) (5,029)
---------- ---------- ---------- ----------
Net
operating
loss (25,695) (48,442) (59,925) (95,278)
========== ========== ========== ==========
Net operating
loss per
share -
basic and
diluted ($0.61) ($1.19) ($1.42) ($2.35)
========== ========== ========== ==========
(1) EBITDA is a non-GAAP measure.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30 December 31
2002 2001
----------- -----------
in thousands (unaudited)
Current assets:
Cash and cash equivalents $ 120,912 $ 527,430
Short-term investments 314,702 2,490
Trade accounts receivable 28,455 24,802
Inventory 29,327 27,178
Prepaid expenses and other
current assets 17,526 19,521
--------- ---------
Total current assets 510,922 601,421
Furniture, computers, and equipment, net 52,770 61,304
Intangibles and other assets 268,840 286,695
--------- ---------
$ 832,532 $ 949,420
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 52,752 $ 15,493
Accounts payable 5,817 8,560
Accrued expenses 29,349 32,915
Restructuring reserve 16,842 15,452
Accrued employee compensation and benefits 8,501 9,983
Deferred revenue 16,563 15,145
--------- ---------
Total current liabilities 129,824 97,548
Long-term liabilities:
Convertible subordinated notes payable
and other notes payable 215,537 290,645
Deferred revenue 6,591 6,380
Restructuring reserve 11,035 12,365
Minority interest in net assets of
subsidiary (153) (45)
Stockholders' equity 469,698 542,527
--------- ---------
Commitments and contingencies $832,532 $949,420
========= =========
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