Avocent Third Quarter Revenue up 14% over Prior Year.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 an increase in 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 third quarter ended September September: see month. 28, 2007. Net sales rose 14.3% to $162.7 million compared with $142.3 million in the third quarter of 2006. "Our third quarter sales benefited from double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth across all major geographic markets compared with last year," stated John R. Cooper, chairman and chief executive officer of Avocent Corporation. "Increased demand from our reseller/distribution channels was strong and we benefited from a full quarter of revenue contribution from LANDesk LANDesk Software, Inc. is a corporation that provides systems management, security management, and process management solutions to organizations. LANDesk is considered by many to be the first vendor to integrate systems and security management solutions, and today its software has . Branded sales rose 27% to $110.3 million in the third quarter compared with the third quarter of 2006. This also marks the second consecutive quarter that LANDesk set a new revenue record." Third Quarter Results Third quarter 2007 operational net income, which is income prior to acquired in-process research and development, intangible amortization and stock compensation expenses, declined 6% to $28.5 million, or $0.56 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 operational income of $30.4 million, or $0.64 per diluted share, in the third quarter of 2006. (See "Use of Non-GAAP Financial Measures" discussion below.) The decline in operational income was primarily a result of the acquisition of LANDesk on August 31, 2006. During the third quarter of 2006, we benefited from the back-ended trend of LANDesk revenue during a typical quarter. As a result, we recorded 54% of LANDesk revenues at 94% gross profit while recording only 26% of their quarterly 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. during the third quarter of 2006. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income for the third quarter of 2007 was $16.1 million, or $0.32 per diluted share, compared with GAAP net income of $2.6 million, or $0.05 per diluted share, in the third quarter of 2006. Net adjustments to reconcile operational income to GAAP net income were $12.4 million in the third quarter of 2007, including $10.3 million in intangible amortization and $4.9 million in stock compensation expenses. Net adjustments to reconcile to GAAP net income were $27.8 million in the third quarter of 2006, including $18.6 million in acquired in-process research and development related to the LANDesk acquisition, $7.5 million in intangible amortization and $4.6 million in stock compensation expenses. Branded sales increased 27% from the third quarter of 2006 and accounted for 68% of total third quarter 2007 sales. Sales of the products acquired with LANDesk contributed to the increase in Branded product 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 were down 5% from the third quarter of 2006 and accounted for 32% of total third quarter 2007 sales. U.S. sales increased 14% to $95.7 million and international sales rose 15% to $67.0 million compared with the third quarter of 2006. "LANDesk sales set a record in the third quarter primarily due to increased demand for their LDMS LDMS LANDesk Management Suite LDMS Laser Desorption Mass Spectrometry LDMS Laboratory Data Management System (Frontier Science and Technology Research Foundation software package) LDMS Large Documents Management System and security products," continued Mr. Cooper. "LANDesk subscription revenues accounted for 21% of their third quarter sales, up from 18% in the third quarter of 2006. In addition, bookings rose to $29.8 million during the quarter, compared to the third quarter of 2006." Operational gross profit for the third quarter of 2007 increased 18.4% to $107.3 million compared with $90.7 million in the third quarter of 2006. Operational gross margin rose to 66.0% in the third quarter of 2007 compared to 63.7% in the third quarter of 2006. The growth in gross profit and gross margin from last year was due to improved product mix, including increased sales of branded, software and digital products. "Our margins have improved in each of the last three quarters due to higher sales of software and digital products," stated Mr. Cooper. "We are driving our product lines to include more digital and software components to enhance our customers' control over their IT hardware and software assets. Our plans include increased integration of LANDesk's software suite of desktop and server change, configuration, security management and administrative tools with our 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 as part of this strategy." Operational research and development expenses were $20.8 million ($22.8 million on a GAAP basis, which includes stock-based compensation of $1.9 million), or 12.8% of sales, compared with $14.9 million, or 10.5% of sales, in the third quarter of 2006. The majority of this increase in R&D expenses was due to the inclusion of a full quarter of LANDesk costs in the third quarter of 2007 versus only one month of similar costs in the third quarter of 2006. "Avocent's R&D is focused on new technologies and upgrades to existing product and software suites," continued Mr. Cooper. "We continue to expand our customer's management and control of their IT assets beyond hardware based solutions to include more software components and solutions that include virtual server management. We expect these investments will add value in terms of expanding our markets for Avocent products." Operational selling, general and administrative expenses increased to $48.8 million ($52.8 million on a GAAP basis, which includes stock-based compensation of $4.0 million), or 30.0% of sales, compared with $35.0 million, or 24.6% of sales, in the third quarter of 2006. SG&A expenses increased in the third quarter primarily due to higher selling and marketing expenses related to the LANDesk acquisition completed late in the third quarter of 2006. "We continue to make progress in reducing our costs as a percentage of sales," continued Mr. Cooper. "This was the third consecutive quarterly decline in R&D and SG&A expenses as a percentage of sales. It was also our third consecutive quarterly improvement in operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . We believe our operational costs will continue to benefit from the synergies of the acquisitions made over the past few years." Operational 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. , excluding stock-based compensation and intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. amortization, was $37.7 million in the third quarter of 2007 compared with $39.5 million in the third quarter of 2006. The 2006 results included approximately $1.3 million in Cyclades integration costs. Avocent'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 reached $41 million for the third quarter of 2007. Cash flow benefited from improved earnings and balance sheet management, including programs for inventory and accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Avocent paid down $20 million in debt during the quarter. At the end of the third quarter, Avocent's cash, cash equivalents and investments totaled approximately $121 million. Avocent repurchased 300,000 shares during the third quarter of 2007 at a total cost of approximately $8.5 million. Weighted average shares outstanding increased 8.4% over the prior year to 51.1 million in the third quarter of 2007. Third Quarter Division Results Revenues from the Management Systems Division advanced to $126.3 million in the third quarter of 2007 from $124.2 million in the third quarter of 2006, while operating income from this division increased to $42.3 million in the third quarter of 2007 from $40.4 million in the third quarter of 2006. Revenues from LANDesk totaled $28.6 million in the third quarter of 2007 and contributed $885,000 in operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the quarter. This compares to revenues of $13.5 million and a contribution of $5.9 million in operating profit for the third quarter of 2006. Profits were positively affected by the timing of the acquisition of LANDesk on August 31, 2006, as mentioned earlier in this release. Revenues from Avocent's emerging businesses grew to $6.7 million in the third quarter of 2007 compared with $3.7 million in the third quarter of 2006, while operating losses 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. from these divisions decreased to $1.6 million in the third quarter of 2007 from $3.8 million in the third quarter of 2006. Use of Non-GAAP Financial Measures To supplement Avocent's consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP, we present investors with certain non-GAAP operational measures, including net sales, gross profit, operating expenses, and the resulting operating income, income before taxes operational net income, and operational earnings per share, all of which primarily exclude the effects of amortization and depreciation related to purchase accounting adjustments, stock-based compensation and acquired in-process research and development expenses. Specifically, we used the following non-GAAP measures: * The non-GAAP net sales operational measure consists of net sales increased by the pro-forma amortization of deferred revenue of LANDesk at the date of acquisition which was reduced to estimated fair value pursuant to purchase accounting under GAAP. * The non-GAAP gross profit operational measure consists of the non-GAAP net sales operational measure described above, less cost of sales excluding the impact of stock-based compensation and amortization related to purchase accounting adjustments as they relate to cost of sales. * The non-GAAP 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. operational measure consists of GAAP operating expenses, excluding the impact of stock-based compensation and amortization and depreciation related to purchase accounting adjustments as they relate to the particular operating expense. * The non-GAAP operating income operational measure consists of GAAP operating income adjusted for the non-GAAP operational measures described above. * The non-GAAP net income operational measure consists of GAAP net income, adjusted by the non-GAAP operational measures described above and the tax effects of these non-GAAP operational measures, less the removal of a $6.5 million income tax benefit related to previously expensed in-process research and development costs that are now deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). for tax purposes. * The non-GAAP earnings per share operational measure is calculated by dividing the non-GAAP net income operational measure described above by GAAP weighted average basic and diluted shares outstanding. We believe that excluding depreciation and amortization associated with purchase accounting adjustments as well as the tax impact of certain purchase accounting elections for prior acquisitions provides supplemental information and an alternative presentation useful to investors' understanding Avocent's core operating results and trends between periods. Not only are these depreciation and amortization and tax impact adjustments based on amounts assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. in purchase accounting that may have little bearing on present or future replacement costs, but they also are based on management's estimates of remaining useful lives. Similarly, we believe that excluding stock-based compensation expense provides supplemental information and an alternative presentation useful to investors' understanding of our core operating results and trends, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods. We also believe that, in excluding stock-based compensation expense and depreciation and amortization associated with purchase accounting adjustments (together with the related tax effects), our non-GAAP financial measures provide investors with transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. into the information and basis used by management and our board of directors to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods, to compare our results of operations on a more consistent basis against that of other companies in making financial and operating decisions, and to establish targets for management incentive compensation. Avocent believes that the presentation of non-GAAP operational measures of net sales, gross profit, operating income, operational net income, and operational earnings per share provide important supplemental information to management and investors regarding financial and business trends relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the company's financial condition and results of operations. These non-GAAP operational measures have historically been used as key performance metrics Performance metrics are measures of an organizations activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees [1]. by Avocent's senior management as they evaluate both the performance of the consolidated financial results as well as those of individual business segments. These non-GAAP operational measures are reviewed individually as well as in total in measuring our performance against internal and external expectations for the period and the expectations for such key non-GAAP operational measures are the basis for any financial guidance provided by management for future periods. Avocent believes that the presentation of each of these operational measures provides important supplemental information regarding financial and business trends relating to the our financial condition and results of operations. Management believes that the use of each of these non-GAAP financial measures provides enhanced consistency and comparability with our past financial reports, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. We provide this information to investors to enable them to perform additional analyses of past, present and future operating performance, compare us to other companies, and evaluate our ongoing financial operations. We believe that each of these operational measures is useful to investors in their assessment of our operating performance and the valuation of our company. Adjusted net sales, gross profit, operating income, operational net income, and operational earnings per share are significant measures used by management for: * Reporting our financial results and forecasts to our board of directors; * Evaluating the operating performance of our company; * Managing and comparing performance internally across our businesses and externally against our peers; and * Establishing internal operating targets. These non-GAAP operational measures, including net sales, gross profit, operating income, operational net income, and operational earnings per share are used by Avocent as broad measures of financial performance that encompass our operating performance, cash, capital structure, investment management, and income tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. effectiveness. These operational measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. These operational measures have limitations in that they do not reflect all of the costs or reductions to revenues associated with the operations of our business as determined in accordance with GAAP. In addition, these operational measures may not be comparable to non-GAAP financial measures reported by other companies. As a result, one should not consider these measures in isolation or as a substitute for analysis of Avocent's results as reported under GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to operational measures. We expect to continue to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. expenses similar to the non-GAAP adjustments described above, and the exclusion or inclusion of these items from our non-GAAP financial measures should not be construed as an inference (logic) inference - The logical process by which new facts are derived from known facts by the application of inference rules. See also symbolic inference, type inference. that these costs are unusual or infrequent in·fre·quent adj. 1. Not occurring regularly; occasional or rare: an infrequent guest. 2. . Some of the limitations in relying on our non-GAAP financial measures are: * The non-GAAP net sales operational measure is a measure which we have defined for internal and investor purposes. A further limitation associated with this measure is that it includes certain revenues and the related impact on non-GAAP gross profit, operating income, income before taxes, net income, and earnings per share operational measures that impact our GAAP based measures. * The non-GAAP gross profit, operating income, net income, and earnings per share operational measures are limited in that they do not include the impact of stock-based compensation expense or specific costs and benefits associated with certain purchase accounting adjustments. We compensate for these limitations by prominently disclosing the reported GAAP results and providing investors with reconciliations from GAAP to the non-GAAP measures in the financial tables of our earnings press release for the relevant periods. Conference Call and Additional 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. webcast and rebroadcast of its third quarter results conference call to be held October 18, 2007. The live broadcast will be available on-line at www.avocent.com as well as http://ir.avocent.com/ beginning at 10:00 a.m. Central time. The on-line replay will follow immediately and continue for 30 days. Avocent has also furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. additional commentary on the third quarter results and expectations for the remainder of 2007 simultaneously with this release on a Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed with the SEC and on its website. About Avocent Corporation Avocent delivers IT operations and infrastructure management solutions for enterprises worldwide, helping customers to reduce costs and simplify complex IT environments via integrated, centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. in-band and out-of-band hardware and software. Through LANDesk, Avocent also is a leading provider of systems, security, and process management 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 deferred revenue attributable to LANDesk subscription and maintenance revenue, the inclusion of digital and software components in our products lines to enhance customer control of software and hardware assets, the integration of LANDesk's software suite of desktop and server change, configuration, security management, and administrative tools with our KVM products, our expansion beyond hardware based solutions to software components and solutions for virtual server management and the value this will add in expanding the markets for our products, and the benefit from the synergies of the acquisitions we have made. 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 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 and acquisition integration, 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 our 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 1, 2007. 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" . [TABLE OMITTED] [TABLE OMITTED] |
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