Avocent Reports Higher Sales and Net Income for Second Quarter.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 for the second quarter ended July July: see month. 1, 2005. "Our total sales rose to $89.5 million during the second quarter of 2005. We experienced a strong sequential One after the other in some consecutive order such as by name or number. 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 in sales in the second quarter, especially in our U.S. sales of branded products," stated John R. Cooper Cooper may refer to:
"We stepped up certain marketing programs during the quarter to focus on new products, including the reintroduction Noun 1. reintroduction - an act of renewed introduction intro, introduction, presentation - formally making a person known to another or to the public of DSView3," continued Mr. Cooper. "The marketing programs had a positive impact on our second quarter sales as evidenced by the strong rebound in U.S. sales from the first quarter. "During the second quarter, we followed through on our commitment to narrow our research and development efforts by closing three satellite research and development offices and making other selected headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reductions. In addition, we moved to realign re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. our sales force slightly to better match our customers and markets. Our results for the quarter include approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.3 million in severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs related to these office closings and other headcount adjustments." Second Quarter Results Income prior to intangible amortization and merger-related expenses was $15.9 million, or $0.31 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 $15.3 million, or $0.30 per diluted share, in the second quarter of 2004. (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). net income were $4.8 million in the second quarter of 2005, including $6.6 million in intangible amortization and a $2.5 million tax benefit. Net adjustments to reconcile to GAAP net income were $28.7 million in the second quarter of 2004, including $6.4 million in amortization of intangible amortization, a $21.7 million charge for acquired in-process research and development expense related to OSA 1. OSA - Open Scripting Architecture. 2. OSA - Open System Architecture. and a $1.7 million tax benefit. GAAP net income for the second quarter of 2005 was $11.1 million, or $0.22 per diluted share. This compares with a GAAP net loss of $13.4 million, or $0.27 per diluted share, in the second quarter of 2004. 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 increased 2.0% to $89.5 million compared with sales of $87.8 million in the second quarter of 2004. Sales rose 16.6% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen from the first quarter of 2005 on the strength of higher 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 , branded and OSA sales. Branded sales declined 8.4% from the second quarter of 2004 and accounted for 51.1% of total sales. OEM sales increased 15.7% from the second quarter of 2004 and accounted for 48.9% of total second quarter 2005 sales. U.S. sales declined 0.1% to $52.8 million and international sales rose 5.2% to $36.7 million compared with the second quarter of 2004. "Demand for digital products remains strong and was a key factor in our margin growth this quarter," continued Mr. Cooper. "Digital product sales represented approximately 53% of revenues this quarter, up from 47% of revenues in the second quarter of last year." Gross profit for the second quarter of 2005 increased 4.4% to $52.8 million with a gross margin of 59.0%. This compared with gross profit of $50.6 million and a gross margin of 57.6% in the second quarter of 2004. The increase in gross profit was due to higher sales of digital, embedded and IPMI-enabled products. Research and development expenses increased 28.2% to $14.4 million, or 16.1% of sales, compared with $11.2 million, or 12.8% of sales, in the second quarter of 2004. This increase was due primarily to additional engineering teams added from the acquisitions of OSA and Sonic Mobility. R&D expense for the second quarter of 2005 also included approximately $800,000 in severance costs related to the closed offices. Selling, general and administrative expenses rose 9.0% to $24.0 million compared with $22.0 million in the second quarter of 2004. The increase included an increase in marketing costs related to new products, higher legal fees from the Raritan Raritan, river, 85 mi (137 km) long, rising in N central N.J., and flowing generally SE to Raritan Bay, an arm of Lower New York Bay, at Perth Amboy. Through pumping the Raritan supplies water to the Spruce Run and Round Valley reservoirs. lawsuit lawsuit: see procedure; tort. prior to reaching the settlement and approximately $500,000 in severance costs related to realigning our sales force. Avocent's balance sheet and cash position remained strong as of July 1, 2005. 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 $21 million for the second quarter of 2005 with approximately $317 million in cash, cash equivalents and investments at the quarter's end. Avocent had no 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. as of July 1, 2005. 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 or impairments 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 21, 2005. The live broadcast will be available on-line at www.avocent.com as well as 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 (including our combined embedded 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 and IPMI solutions), and engineering and design activities. 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 14, 2005. 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 1, 2005
Operational Adjustments(1) GAAP
----------- ----------- --------
Net sales $89,538 $89,538
Cost of sales 36,711 36,711
----------- ----------- ---------
Gross profit 52,827 - 52,827
Research and development expenses 14,097 291 14,388
Selling, general and administrative
expenses 23,649 376 24,025
Amortization of intangible assets 6,623 6,623
----------- ----------- ---------
Operating income 15,081 (7,290) 7,791
Income from settlement of lawsuit 5,000 5,000
Other income (expense), net 1,954 (15) 1,939
----------- ----------- ---------
Income before income taxes 22,035 (7,305) 14,730
Provision for income taxes 6,148 (2,517) 3,631
----------- ----------- ---------
Net income $15,887 $(4,788) $11,099
=========== =========== =========
Earnings per share:
Basic $0.32 $0.22
Diluted $0.31 $0.22
Weighted average shares and common
equivalents outstanding:
Basic 49,475 - 49,475
Diluted 50,460 (43) 50,417
For the Quarter Ended July 2, 2004
Operational Adjustments(1) 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
(1) 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, the acquisitions of Equinox, 2C,
Soronti, Crystal Link, OSA and Sonic Mobility. 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 1, 2005
Operational Adjustments(1) GAAP
----------- ----------- --------
Net sales $166,343 $166,343
Cost of sales 69,934 69,934
----------- ----------- ---------
Gross profit 96,409 - 96,409
Research and development expenses 28,274 581 28,855
Selling, general and administrative
expenses 45,552 753 46,305
Amortization of intangible assets 13,245 13,245
----------- ----------- ---------
Operating income 22,583 (14,579) 8,004
Income from settlement of lawsuit 5,000 5,000
Other income (expense), net 3,909 (30) 3,879
----------- ----------- ---------
Income before income taxes 31,492 (14,609) 16,883
Provision for income taxes 8,285 (4,335) 3,950
----------- ----------- ---------
Net income $23,207 $(10,274) $12,933
=========== =========== =========
Earnings per share:
Basic $0.47 $0.26
Diluted $0.46 $0.25
Weighted average shares and common
equivalents outstanding:
Basic 49,859 - 49,859
Diluted 50,870 (51) 50,819
For the Six Months Ended July 2, 2004
Operational Adjustments(1) 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
(1) 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, the acquisitions of Equinox, 2C,
Soronti, Crystal Link, OSA and Sonic Mobility. 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
(Unaudited, in thousands)
July 1, Dec. 31,
2005 2004
---------- ----------
Cash, cash equivalents
and short-term investments $251,051 $239,799
Accounts receivable, net 53,083 60,948
Inventories, net 22,807 21,232
Other current assets 8,203 5,923
Deferred income tax 6,377 6,720
---------- ----------
Total current assets 341,521 334,622
Investments 65,783 91,547
Property and equipment, net 39,221 39,896
Goodwill, net 269,992 269,892
Intangible assets, net 20,896 33,981
Other assets 893 843
---------- ----------
Total assets $738,306 $770,781
========== ==========
Accounts payable and other accrued expenses $16,506 $21,368
Income tax payable 9,426 8,494
Other current liabilities 19,841 16,767
---------- ----------
Total current liabilities 45,773 46,629
Non-current liabilities 5,377 10,855
Total stockholders' equity 687,156 713,297
---------- ----------
Total liabilities and stockholders' equity $738,306 $770,781
========== ==========
AVOCENT CORPORATION
Additional Financial Information
(Unaudited, in thousands, except ratios and treasury share data)
Revenue by Quarter Ended Six Months Ended
Distribution Channel July 1, July 2, July 1, July 2,
2005 2004 2005 2004
---------- -------- --------- ---------
OEM $43,742 $37,806 $83,820 $73,182
Branded 45,796 49,990 82,523 100,699
---------- -------- --------- ---------
Total $89,538 $87,796 $166,343 $173,881
========== ======== ========= =========
Revenue, Geographic Quarter Ended Six Months Ended
Composition July 1, July 2, July 1, July 2,
2005 2004 2005 2004
---------- -------- --------- ---------
United States $52,786 $52,860 $92,750 $104,050
International 36,752 34,936 73,593 69,831
---------- -------- --------- ---------
Total $89,538 $87,796 $166,343 $173,881
========== ======== ========= =========
Quarter Ended Six Months Ended
Cash Flow Highlights July 1, July 2, July 1, July 2,
2005 2004 2005 2004
---------- -------- --------- ---------
Cash provided by operations $21,153 $19,159 $31,307 $32,542
Depreciation expense 1,702 1,399 3,278 2,993
Amortization of intangibles 6,622 6,412 13,245 11,174
Capital expenditures 1,595 2,320 2,603 3,690
Purchase of treasury shares 28,408 - 50,271 -
As of As of
July 1, July 2,
Other Information 2005 2004
---------- --------
Days of sales outstanding in
accounts receivable 54.0 50.5
Inventory turns for the
quarter 6.4 6.7
Number of treasury shares
purchased to date 1,875,000 -
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