Aether Systems Reports Third Quarter 2002 Results; 18 Percent Improvement in Operating Expenses in Q3 vs Q2 2002.Business Editors/Hi-Tech Writers OWINGS MILLS, Md.--(BUSINESS WIRE)--Nov. 6, 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 third quarter ended September September: see month. 30, 2002. Total revenues for the third quarter 2002 were $31.7 million as compared to $24.9 million for third quarter 2001. For the nine month period ended September 30, 2002, total revenues were $87.0 million as compared to $87.7 million for the prior year-period. 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 $18.8 million, engineering services revenue of $0.7 million, software product revenue of $6.2 million, and device sales of $6.0 million. In Q2 2002, total revenues were $31.6 million, with recurring 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 Q3 2001, total revenues were $24.9 million, with recurring services revenue of $11.2 million, engineering services revenue of $0.6 million, software product revenue of $8.2 million, and device sales of $4.9 million. The Company stated that it continued to make significant progress on reducing its 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. . Operating expenses (consisting of research and development, general and administrative, and selling and marketing costs) decreased for the sixth consecutive quarter to $25.9 million, an 18 percent improvement from Q2 2002 and a more than a 50 percent improvement as compared to the same period last year. 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. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and more than 77 percent as compared to the same period last year. Aether reported a Q3 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 ($0.45) per share or a total of ($19.0 million). In the same period last year, Aether reported an operating loss, excluding certain non-cash and other charges, of ($1.10) per share or a total of ($44.9 million). Non-cash items and other charges 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. "We are pleased with our continued progress in reducing operating expenses while maintaining a stable revenue base during this prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. period of macroeconomic mac·ro·ec·o·nom·ics n. (used with a sing. verb) The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. and sector weakness," 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. "Total organic revenue growth for the quarter was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 3.8 percent over the previous quarter, and our recurring revenue base remained high at approximately 60 percent of total revenue. Our ability to contain costs is highlighted by the fact that since the second quarter of 2001, we have reduced operating expenses by 60 percent while achieving a 75 percent improvement in EBITDA." Oros continued, "As we move forward in this very challenging marketplace, we can now shift more of our attention from cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. to revenue generation and profitability. To that end, we undertook a comprehensive internal review, which resulted in the development of a strategic plan for growth. This plan was further refined with the help of outside consultants. The foundation of the plan is to continue to implement a highly targeted product marketing and sales program that will leverage our proven expertise and technology in the wireless market. We look forward to sharing the details of this plan." On October October: see month. 15, 2002, the Company announced a tender offer to buy back up to $100 million face value of convertible debt. If the Company successfully completes this debt repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. , Aether will have approximately $107 million in bonds outstanding, down from its original balance of $310 million. As a result of this debt repurchase on its announced terms, the Company will further strengthen its balance sheet and expects annual interest expense to decrease by $6 million to approximately $6.4 million. 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). ), the Company's net loss, which includes the 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. mentioned above and other charges, was ($5.37) per share or ($226.2 million) in Q3 2002. In Q3 2001, by comparison, the net loss was ($5.98) per share or ($243.4 million). Management Guidance For the next two quarters, Aether expects revenues to average at least $30 million as the Company further reduces expenses and moves to implement its strategic plan. The Company expects operating expenses to approach the low $20 million range by Q1 2003. Additionally, the company expects to report an EBITDA loss below $10 million by Q1 2003. Aether will host a conference call on Thursday Thursday: see week. , November November: see month. 7, 2002 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 5 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on Tuesday Tuesday: see week. , November 12, 2002, by calling 1-800-839-0860, access code 1500. About Aether Systems, Inc. Aether Systems delivers wireless and mobile data solutions that make people more productive and their organizations more profitable. Aether's products and services are built on Aether Fusion, the company's standards-based platform that allows for secure, reliable extension of critical information to virtually any wireless or mobile environment. Return on investment in Aether solutions comes from a unique combination of strengths - quick access to multiple back-end (programming) back-end - Any software performing either the final stage in a process, or a task not apparent to the user. A common usage is in a compiler. A compiler's back-end generates machine language and performs optimisations specific to the machine's architecture. information sources, workflow The automatic routing of documents to the users responsible for working on them. Workflow is concerned with providing the information required to support each step of the business cycle. that is optimized for specific industries, and turnkey See turnkey system. 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. services and professional support. Backed by years of in-market expertise, Aether is making it possible for thousands of businesses and government agencies to unleash the power of the mobile workforce. 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 the 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 Nine months ended
September 30, September 30,
-------------------------- -------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
in thousands
except per
share data
Subscriber
revenue $ 18,767 $ 11,179 $ 50,957 $ 32,987
Engineering
services
revenue 703 642 3,038 5,786
Software and
related
services 6,186 8,205 17,841 29,874
Device sales 6,055 4,922 15,165 19,045
------------ ------------ ------------ ------------
Total
revenue 31,711 24,948 87,001 87,692
Cost of
subscriber
revenue 10,155 6,805 28,712 19,657
Cost of
engineering
services
revenue 276 314 1,397 3,099
Cost of
software
and related
services 2,186 2,892 6,626 9,549
Cost of
device sales 5,666 17,560 13,616 33,699
------------ ------------ ------------ ------------
Total cost
of
revenue 18,283 27,571 50,351 66,004
------------ ------------ ------------ ------------
Gross
profit
(loss) 13,428 (2,623) 36,650 21,688
Operating
expenses:
Research
and
development 5,658 16,170 21,275 52,045
General and
administrative 14,029 21,955 46,965 71,439
Selling and
marketing 6,227 14,780 25,266 55,507
------------ ------------ ------------ ------------
Total
operating
expenses 25,914 52,905 93,506 178,991
------------ ------------ ------------ ------------
EBITDA(a) (12,486) (55,528) (56,856) (157,303)
Depreciation
and
amortization 10,217 32,068 32,285 153,312
Option and
warrant
expense 1,318 3,513 5,709 12,450
Impairment of
intangibles
and fixed
assets 62,496 129,201 64,873 1,090,781
Restructuring
charge 8,444 18,230 24,025 34,089
------------ ------------ ------------ ------------
Operating
loss (94,961) (238,540) (183,748) (1,447,935)
Other income
(expense):
Interest
income
(expense),
net (2) 1,061 (3,328) 10,661
Equity in
losses of
investment (1,067) (16,762) (4,673) (48,285)
Investment
loss, including
impairments,
net (3,682) (45,661) (13,794) (141,553)
Income tax
benefit - 9,129 - 10,003
Minority
interest (154) 47,394 (39) 55,541
Other income -
escrow
settlement (47) 2,272 -
------------ ------------ ------------ ------------
Net loss
before
cumulative
effect of
change in
accounting
principle
and
extraordinary
item (99,913) (243,379) (203,310) (1,561,568)
Cumulative
effect of
change in
accounting
principle:
Adoption of
SFAS 133,
Accounting
for
Derivatives - - - 6,564
Adoption of
FASB
141/142,
Accounting
for
Goodwill (129,306) - (129,306) -
------------ ------------ ------------ ------------
Net loss
before
extraordinary
item (229,219) (243,379) (332,616) (1,555,004)
Extraordinary
item (early
extinguishment
of debt) 3,007 - 31,315 7,684
------------ ------------ ------------ ------------
Net loss after
extraordinary
item (226,212) (243,379) (301,301) (1,547,320)
Net loss per
share - basic
and diluted
before
extraordinary
item and
cumulative
effect of
change in
accounting
principle ($ 2.37)($ 5.98)($ 4.83)( $38.50)
Extraordinary
item -
related
to early
extinguishment
of debt $ 0.07 - $ 0.74 $ 0.19
Cumulative
effect of
change in
accounting
principle:
Adoption of
SFAS 133,
Accounting
for
Derivatives - - - $ 0.16
Adoption of
FASB 142,
Accounting
for
Goodwill (3.07) - (3.07) -
------------ ------------ ------------ ------------
Net loss per
share -
basic
and diluted ($ 5.37)($ 5.98)($ 7.16)($ 38.15)
============ ============ ============ ============
Weighted
average
shares
outstanding -
basic
and diluted 42,097 40,694 42,082 40,561
============ ============ ============ ============
Reconciliation
to net
operating
loss:
Net loss (226,212) (243,379) (301,301) (1,547,320)
Add back
non-cash
and other
charges:
Other
adjustments
(impairment
of goodwill,
write-down
of investments,
inventory
obsolescence) 66,178 187,348 78,667 1,240,738
Amortization
of
intangibles 3,862 27,929 13,680 141,068
Proportionate
share of
losses in
investee 1,067 16,762 4,673 48,285
Option and
warrant
expense 1,318 3,513 5,709 12,451
Charges from
adoption of
SFAS 133 - - - (599)
Charges from
adoption of
FASB 142 129,306 - 129,306 -
Other
income -
escrow
settlement 47 - (2,272) -
Restructuring
charge 8,444 18,230 24,025 34,089
Extraordinary
item (3,007) - (31,315) (7,684)
Deferred
tax
benefit - (9,129) - (10,004)
Minority
interest -
amortiza-
tion - (46,131) (94) (51,160)
------------ ------------ ------------ ------------
Net
operating
loss (18,997) (44,857) (78,922) (140,136)
============ ============ ============ ============
Net
operating
loss
per
share -
basic
and
dilu-
ted ($ 0.45)($ 1.10)($ 1.88)($ 3.45)
============ ============ ============ ============
(a) EBITDA is a non-GAAP measure.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31
2002 2001
-------------------------------
in thousands (unaudited)
Current assets:
Cash and cash equivalents $40,905 $527,430
Short-term investments 333,873 2,490
Trade accounts receivable 24,752 24,802
Inventory 23,438 27,178
Assets held for sale 5,500 -
Prepaid expenses and other
current assets 17,767 19,521
-------------------------------
Total current assets 446,235 601,421
Furniture, computers, and
equipment, net 28,808 61,304
Intangibles and other assets 65,271 286,695
-------------------------------
$540,314 $949,420
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $56 $15,493
Accounts payable 1,168 8,560
Accrued expenses 24,604 32,915
Restructuring reserve 14,207 15,452
Accrued employee compensation
and benefits 9,457 9,983
Deferred revenue 14,365 15,145
-------------------------------
Total current
liabilities 63,857 97,548
Long-term liabilities:
Convertible subordinated notes
payable and other notes payable 207,382 290,645
Deferred revenue 10,432 6,380
Restructuring reserve 8,465 12,365
Other long term liabilities 1,998 -
Minority interest in net
assets of subsidiary - (45)
Stockholders' equity 248,180 542,527
Commitments and contingencies
-------------------------------
$540,314 $949,420
===============================
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