Avocent Reports 24% Increase in Second Quarter Sales.HUNTSVILLE Huntsville, town, Canada Huntsville, town (1991 pop. 14,997), SE Ont., Canada, on the Muskoka River. It has lumber mills and a woodworking plant, but it is sustained mainly by its year-round tourist trade. , Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- Avocent Avocent Corporation (NASDAQ: AVCT) is an information technology products manufacturer headquartered in Huntsville, Alabama. Avocent was formed in 2000 from the merger of the world’s two largest KVM (keyboard, video and mouse) switch manufacturers: Apex and Cybex Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AVCT AVCT Advanced Vehicles Concept Team ) today reported higher sales and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the second quarter and six months ended July July: see month. 2, 2004. "Avocent's sales rose 24.3% in the second quarter to a record $87.8 million as demand increased across almost all markets, product lines and customer segments," stated John R. Cooper Cooper may refer to:
"We completed the acquisition of OSA 1. OSA - Open Scripting Architecture. 2. OSA - Open System Architecture. Technologies early in the second quarter and are very excited about accelerating our development of embedded Inserted into. See embedded system. management technologies. We anticipate OSA's revenues will begin to ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale next quarter as certain OEMs begin shipping IPMI-enabled server lines with embedded OSA technology. Avocent's R&D team is also working closely with OSA to develop a new product family that will complement our existing KVM (K Virtual Machine) A version of the Java Virtual Machine for small devices with limited memory. See J2ME. See also KVM switch. KVM - Keyboard Video Mouse products. We expect the acquisitions of OSA, Crystal Link, and Soronti to have a positive impact on expanding market opportunities for Avocent. "Research and development expenses increased to $11.2 million in the second quarter. The increased funding is focused on expanding our market potential within the data center through new products and technologies and developing the products and technologies acquired over the past year," continued Mr. Cooper. Second Quarter Results Income prior to intangible amortization and merger-related expenses rose 18.8% to $15.3 million, or $0.30 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with income prior to intangible amortization and merger-related expenses of $12.9 million, or $0.27 per diluted share, in the second quarter of 2003. (See "Use of Non-GAAP Financial Measures" discussion below.) Net adjustments to reconcile to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). income were $28.7 million in the second quarter of 2004, including $6.4 million in intangible amortization and a $21.7 million charge for acquired in-process research and development expense related to OSA. In addition, the adjustments included a $1.7 million tax benefit. Net adjustments to reconcile GAAP income were $5.6 million in the second quarter of 2003, which consisted primarily of intangible amortization. GAAP net loss for the second quarter of 2004 was $13.4 million, or $0.27 per diluted share. This compares with a GAAP net income of $7.3 million, or $0.16 per diluted share, in the second quarter of 2003. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the second quarter rose 24.3% to $87.8 million compared with sales of $70.6 million in the second quarter of 2003. Branded sales rose 28.6% from the second quarter of 2003 and accounted for 56.9% of sales. OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and sales rose 19.2% from the second quarter of 2003 and accounted for 43.1% of total second quarter 2004 sales. U.S. sales increased 19.7% to $52.9 million and international sales rose 32.1% to $34.9 million compared with the second quarter of 2003. The 2004 results include the operations of OSA Technologies from April 6, 2004. Gross profit for the second quarter of 2004 rose 24.4% to $50.6 million with a gross margin of 57.6%. This compared with gross profit of $40.7 million and a gross margin of 57.6% in the second quarter of 2003. The increase in gross profit was due to higher sales compared with the second quarter of 2003. Research and development expenses increased 46.7% to $11.2 million, or 12.8% of sales, compared with $7.6 million, or 10.8% of sales, in the second quarter of 2003. The increase was due to higher expenses related to the development of embedded technologies and the addition of R&D teams from OSA, Soronti and Crystal Link since last year. Selling, general and administrative expenses rose 21.6% to $22.0 million compared with $18.1 million in the second quarter of 2003. The increase was due to higher costs related to the addition of the Soronti, Crystal Link and OSA sales and marketing teams, the expansion of certain sales and marketing programs, increased trade show activity, intellectual property defense costs and Sarbanes-Oxley Act See SOX. compliance costs. Avocent's balance sheet and cash position remained strong as of July 2, 2004. The Company's cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $19 million for the second quarter of 2004 with almost $291 million in cash, cash equivalents and investments at the quarter's end. The Company's cash and investments position reflects the payment of approximately $53 million in cash as part of its purchase of OSA Technologies. Avocent had no 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. or long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. at the end of the second quarter. Use of Non-GAAP Financial Measures Income prior to intangible amortization and merger-related expenses, or operational income as used in the attached financial statement schedules, is not a measure of financial performance under 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) and should not be considered a substitute for or superior to GAAP. Avocent's management uses operational income as a financial measure to evaluate performance and allocate To reserve a resource such as memory or disk. See memory allocation. resources within the Company. Management believes this measure presents the Company's results on a more comparable operational basis by excluding non-cash amortization expenses, non-operational expenses associated with mergers and acquisitions, and significant and unusual non-recurring gains and losses on sales of investments made by Avocent. Avocent believes that operational income is a measure of performance used by some investment banks The following is a list of investment banks Financial conglomerates Large financial-services conglomerates combine commercial banking and investment banking, and sometimes insurance. , analysts, investors and others to make informed investment decisions. Other companies may calculate operational income in a different manner so this measure may not be comparable to similar measures presented by other companies. A reconciliation of Avocent's results using operational measures and GAAP is set forth in the condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statements of operations included in this press release. Conference Call Information Avocent will provide an on-line, real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. Web-cast and rebroadcast of its second quarter results conference call to be held July 22, 2004. The live broadcast will be available on-line at www.avocent.com as well as http://phx.corporate-ir.net/playerlink.zhtml?c=116576&s=wm&e=916463 and www.vcall.com beginning at 10:00 a.m. central time. The on-line replay will follow immediately and continue for 30 days. About Avocent Corporation Avocent Corporation is the leading supplier of connectivity A generic term for connecting devices to each other in order to transfer data back and forth. It often refers to network connections, which embraces bridges, routers, switches and gateways as well as backbone networks. solutions for enterprise data centers, service providers and financial institutions worldwide. Branded products include switching, extension, intelligent platform management interface The Intelligent Platform Management Interface (IPMI) specification defines a set of common interfaces to computer hardware and firmware which system administrators can use to monitor system health and manage the system. Several dozen companies support IPMI. (IPMI (Intelligent Platform Management Interface) A protocol for monitoring server hardware for temperature, voltage, chassis intrusion, etc. Introduced in 1998 by Intel, HP, NEC and Dell, IPMI defines a standard set of messages for the characteristics of hardware ), remote access and video display solutions. Additional information is available at: www.avocent.com. 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. This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These include statements regarding the development, introduction, features, and benefits of new products and technologies, the size and growth of the current and future markets for these products and technologies, the future effect of past acquisitions (including expected revenues and market opportunities), engineering and design activities, and manufacturing efficiencies in the future. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with general economic conditions, risks attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to future product demand, sales, and expenses, risks associated with reliance on a limited number of customers, component suppliers, and single source components, risks associated with acquisitions, risks associated with product design efforts and the introduction of new products and technologies, and risks associated with obtaining and protecting intellectual property rights. Other factors that could cause operating and financial results to differ are described in Avocent's 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. filed with the Securities and Exchange Commission on March 12, 2004. Other risks may be detailed from time to time in reports to be filed with the SEC. Avocent does not undertake any obligation to publicly update its forward-looking statements based on events or 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 after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" .
AVOCENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
For the Quarter Ended July 2, 2004
Operational Adjustments(a) GAAP
----------- ------------- --------
Net sales $ 87,796 $ 87,796
Cost of sales 37,101 $ 95 37,196
---------- ------------- --------
Gross profit 50,695 (95) 50,600
Research and development expenses 10,337 889 11,226
Acquired in-process research and
development expense - 21,720 21,720
Selling, general and
administrative expenses 20,721 1,316 22,037
Amortization of intangible assets - 6,412 6,412
---------- ------------- --------
Operating income (loss) 19,637 (30,432) (10,795)
Other income (expense), net 859 (15) 844
---------- ------------- --------
Income (loss) before income taxes 20,496 (30,447) (9,951)
Provision for income taxes 5,158 (1,717) 3,441
---------- ------------- --------
Net income (loss) $ 15,338 $ (28,730) $(13,392)
========== ============= ========
Earnings (loss) per share:
Basic $ 0.31 $ (0.27)
Diluted $ 0.30 $ (0.27)
Weighted average shares and common
equivalents outstanding:
Basic 49,065 - 49,065
Diluted 50,823 (1,758) 49,065
For the Quarter Ended June 27, 2003
Operational Adjustments(a) GAAP
------------ ------------- --------
Net sales $ 70,612 $ 70,612
Cost of sales 29,711 $ 216 29,927
---------- ------------- --------
Gross profit 40,901 (216) 40,685
Research and development expenses 7,264 390 7,654
Selling, general and
administrative expenses 16,937 1,187 18,124
Amortization of intangible assets - 6,156 6,156
---------- ------------- --------
Operating income 16,700 (7,949) 8,751
Other income (expense), net 1,060 (16) 1,044
---------- ------------- --------
Income before income taxes 17,760 (7,965) 9,795
Provision for income taxes 4,846 (2,396) 2,450
---------- ------------- --------
Net income $ 12,914 $ (5,569) $ 7,345
========== ============= ========
Earnings per share:
Basic $ 0.28 $ 0.16
Diluted $ 0.27 $ 0.16
Weighted average shares and common
equivalents outstanding:
Basic 45,917 - 45,917
Diluted 47,479 (118) 47,361
(a) Note: Adjustments relate to acquired in-process research and
development expense from the OSA Technologies Inc. acquisition and
amortization of deferred compensation (from the capitalization of the
value of stock options assumed) and intangibles recorded as the
result of the merger of Apex and Cybex in July 2000, the acquisition
of Equinox in January 2001, the acquisition of 2C in August 2002, the
acquisition of Soronti in December 2003, the acquisition of Crystal
Link in January 2004 and the acquisition of OSA in April 2004. The
calculation of weighted average shares and common equivalents
outstanding differs due to excluding the average unamortized deferred
compensation expense in calculating the operational diluted shares
outstanding.
AVOCENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
For the Six Months Ended July 2, 2004
Operational Adjustments(a) GAAP
------------ ------------- --------
Net sales $ 173,881 $173,881
Cost of sales 72,989 $ 190 73,179
------------ ------------- --------
Gross profit 100,892 (190) 100,702
Research and development expenses 19,591 1,063 20,654
Acquired in-process research and
development expense - 28,210 28,210
Selling, general and
administrative expenses 40,446 1,926 42,372
Amortization of intangible assets 11,174 11,174
----------- ------------- --------
Operating income (loss) 40,855 (42,563) (1,708)
Other income (expense), net 2,011 (30) 1,981
---------- ------------- --------
Income (loss) before income taxes 42,866 (42,593) 273
Provision for income taxes 11,412 (6,290) 5,122
---------- ------------- --------
Net income (loss) $ 31,454 $ (36,303) $ (4,849)
========== ============= ========
Earnings (loss) per share:
Basic $ 0.64 $ (0.10)
Diluted $ 0.62 $ (0.10)
Weighted average shares and common
equivalents outstanding:
Basic 48,958 - 48,958
Diluted 50,785 (1,827) 48,958
For the Six Months Ended June 27, 2003
Operational Adjustments(a) GAAP
------------ ------------- --------
Net sales $ 141,774 $141,774
Cost of sales 61,043 $ 449 61,492
---------- ------------- --------
Gross profit 80,731 (449) 80,282
Research and development expenses 13,598 868 14,466
Selling, general and
administrative expenses 32,508 2,275 34,783
Amortization of intangible assets - 12,312 12,312
---------- ------------- --------
Operating income 34,625 (15,904) 18,721
Other income (expense), net 1,908 (30) 1,878
---------- ------------- --------
Income before income taxes 36,533 (15,934) 20,599
Provision for income taxes 9,879 (4,792) 5,087
---------- ------------- --------
Net income $ 26,654 $ (11,142) $ 15,512
========== ============= ========
Earnings per share:
Basic $ 0.58 $ 0.34
Diluted $ 0.57 $ 0.33
Weighted average shares and common
equivalents outstanding:
Basic 45,671 - 45,671
Diluted 47,162 (136) 47,026
(a) Note: Adjustments relate to acquired in-process research and
development expense from both the Crystal Link Technologies and OSA
Technologies Inc. acquisitions. Adjustments also include the
amortization of deferred compensation (from the capitalization of the
value of stock options assumed) and intangibles recorded as the
result of the merger of Apex and Cybex in July 2000, the acquisition
of Equinox in January 2001, the acquisition of 2C in August 2002, the
acquisition of Soronti in December 2003, the acquisition of Crystal
Link in January 2004 and the acquisition of OSA in April 2004. The
calculation of weighted average shares and common equivalents
outstanding differs due to excluding the average unamortized deferred
compensation expense in calculating the operational diluted shares
outstanding.
AVOCENT CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands)
July 2, December 31,
2004 2003
(Unaudited)
----------- -------------
Cash, cash equivalents
and short-term investments $ 224,633 $ 223,392
Accounts receivable, net 48,688 45,011
Current and deferred income tax
receivable 7,010 5,031
Other receivables, net 395 225
Inventories, net 22,025 21,324
Other current assets 3,224 4,251
---------- -------------
Total current assets 305,975 299,234
Investments 66,149 84,410
Property and equipment, net 39,624 38,473
Goodwill, net 262,798 206,037
Intangible assets, net 43,880 31,889
Other assets 3,522 720
---------- -------------
Total assets $ 721,948 $ 660,763
========== =============
Accounts payable and other accrued
expenses $ 15,020 $ 19,154
Income tax payable 12,274 6,702
Other current liabilities 17,502 16,866
---------- -------------
Total current liabilities 44,796 42,722
Non-current liabilities 12,522 10,884
Total stockholders' equity 664,630 607,157
----------- -------------
Total liabilities and
stockholders' equity $ 721,948 $ 660,763
========== =============
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