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| Contact: | Dusty Pritchett Senior Vice President of Finance and Chief Financial Officer 256-217-1300 |
AVOCENT REPORTS IMPROVED FOURTH QUARTER RESULTS ON HIGHER SALES
HUNTSVILLE, Ala. (January 30, 2003)—Avocent Corporation (NASDAQ:AVCT) today reported higher sales, operating income and net income for the fourth quarter and year ended December 31, 2002.
"We are pleased with the results experienced throughout our business in the fourth quarter," stated John R. Cooper, president and chief executive officer of Avocent Corporation. "Both our OEM and branded product groups enjoyed sequential and year over year increases in sales. In addition, we experienced sequential and year over year sales growth in both our domestic and international markets. International sales were particularly strong as we believe the investments we have made in Europe and Asia are beginning to pay dividends. The continued strength in demand for our new digital technology products had a positive impact on sales as well as margins and operating income.
"We continue to invest in new products. Research and development expenses rose 49.7% from the fourth quarter of last year to $6.6 million, or 9.3% of sales. We believe we have significant opportunities to build on our product technologies to provide enhanced connectivity solutions to our customers in the future. We also continue to invest in improving our manufacturing efficiencies to enhance margins of existing products.
"We believe our strong financial position will be an important part in building shareholder value at Avocent in the future. At year-end, we had approximately $216 million in cash and investments and had no long-term debt. Combined with our strong cash flow from operations, we are in an excellent position to make further strategic investments to enhance our competitive position in our markets," continued Mr. Cooper.
Fourth Quarter Results
Net sales for the fourth quarter rose 13.5% to $71.0 million compared with sales of $62.6 million in the fourth quarter of 2001. Fourth quarter sales rose 10.1% sequentially from the third quarter of 2002. OEM sales rose 15.2% from the fourth quarter of 2001 and accounted for 49.8% of total fourth quarter 2002 sales. Reseller/distributor sales rose 20.1% from the fourth quarter of last year and accounted for 46.8% of sales. Sales in the U.S. accounted for 54.6%, or $38.8 million, of fourth quarter 2002 sales. International sales were $32.2 million, or 45.4%, of total fourth quarter 2002 sales. Avocent experienced especially strong sales in European countries. Sales of digital products represented 28.9% of fourth quarter 2002 sales.
Gross profit for the fourth quarter was $36.8 million with a gross margin of 51.8% compared with gross profit of $26.6 million and a gross margin of 42.6% in the fourth quarter of 2001. Higher sales of the newer digital product family contributed to improved fourth quarter margins in 2002, while margins in the fourth quarter of 2001 were adversely affected by lower absorption of overhead due to lower sales and a $3 million inventory charge.
SG&A expenses for the fourth quarter were $14.9 million (21.0% of sales) compared with $13.6 million (21.8% of sales) in the fourth quarter of 2001.
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Income prior to intangible amortization and merger-related expenses rose to $12.8 million, or $0.28 per diluted share, compared with income prior to intangible amortization and merger-related expenses of $7.2 million, or $0.16 per diluted share, in the fourth quarter of 2001. Intangible amortization and merger-related expenses totaled $5.6 million in the fourth quarter of 2002 and $233.4 million in the fourth quarter of 2001.
GAAP net income for the fourth quarter of 2002 was $7.2 million, or $0.16 per diluted share. This compares with a net loss of $226.2 million, or $5.07 per share, in the fourth quarter of 2001. The 2001 results include $34.7 million of intangible amortization, a $195.4 million write-down for goodwill impairment and a $3.3 million non-recurring charge related to an other-than-temporary decline in the fair value of the Company's investment portfolio.
Avocent's balance sheet and cash position remained strong as of December 31, 2002. The Company's cash flow from operations was approximately $16 million for the fourth quarter with $216 million in cash, cash equivalents, and investments at the quarter's end.
Year-End Results
Net sales for 2002 rose 1.8% to $260.6 million compared with sales of $255.9 million in 2001. OEM sales rose 2.8% from 2001 and accounted for 45.9% of total 2002 sales. Reseller/distributor sales rose 5.2% from last year and accounted for 50.7% of sales. Sales in the U.S. accounted for 59.7%, or $155.6 million, of 2002 sales. International sales were $105.0 million, or 40.3%, of total 2002 sales.
Gross profit for 2002 was $133.1 million with a gross margin of 51.1% compared with gross profit of $120.1 million and a gross margin of 46.9% in 2001.
SG&A expenses for 2002 were $57.4 million (22.0% of sales) compared with $58.9 million (23.0% of sales) in 2001.
Income prior to intangible amortization and merger-related expenses rose to $42.3 million, or $0.92 per diluted share, compared with income prior to intangible amortization and merger-related expenses of $34.5 million, or $0.75 per diluted share, in 2001. Intangible amortization and merger-related expenses totaled $31.6 million in 2002 and $355.0 million in 2001. Cash flow from operations was approximately $71 million in 2002 compared to approximately $73 million in 2001.
GAAP net income for 2002 was $10.7 million, or $0.24 per diluted share. This compares with a net loss of $320.5 million, or $7.22 per share, in 2001. The 2001 results include $147.0 million of intangible amortization, a $195.4 million write-down for goodwill impairment, a $9.3 million non-recurring charge for an inventory write-down and severance expense and a $3.3 million non-recurring charge related to an other-than-temporary decline in the fair value of the Company's investment portfolio.
Conference Call Information
Avocent will provide an on-line, real-time Web-cast and rebroadcast of its fourth quarter results conference call to be held January 30, 2003. The live broadcast will be available on-line atwww.avocent.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 solutions for enterprise data centers, service providers, and financial institutions worldwide. Branded products include switching, extension, remote access, and video display solutions. Additional information is available at: www.avocent.com.
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Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding future SG&A and R&D expenses, future margins, the size and growth of the potential markets for Avocent's products and technology in the future, product development, strategic investments, and new product introductions, engineering and design activities, and shareholder value 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 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 product design efforts and the introduction of new products and technologies, and risks related to OEM sales. Other factors that could cause operating and financial results to differ are described in Avocent's annual report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2002. 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 after the date hereof.
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AVOCENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
| | For the Quarter Ended December 31, 2002 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Operational | Adjustments* | GAAP | |||||||
| Net sales | $ | 70,989 | $ | 70,989 | ||||||
| Cost of sales | 34,225 | $ | 154 | 34,379 | ||||||
| Gross profit | 36,764 | (154 | ) | 36,610 | ||||||
| Research and development expenses | 6,573 | 364 | 6,937 | |||||||
| Selling, general and administrative expenses | 14,887 | 1,353 | 16,240 | |||||||
| Amortization of intangible assets | — | 6,121 | 6,121 | |||||||
| Impairment write-down of intangible assets | — | — | — | |||||||
| Operating income | 15,304 | (7,992 | ) | 7,312 | ||||||
| Other income (expense), net | 1,297 | — | 1,297 | |||||||
| Income before income taxes | 16,601 | (7,992 | ) | 8,609 | ||||||
| Provision for income taxes | 3,811 | (2,395 | ) | 1,416 | ||||||
| Net income | $ | 12,790 | $ | (5,597 | ) | $ | 7,193 | |||
| Earnings per share: | ||||||||||
| Basic | $ | 0.28 | $ | 0.16 | ||||||
| Diluted | $ | 0.28 | $ | 0.16 | ||||||
| Weighted average shares and common equivalents outstanding: | ||||||||||
| Basic | 45,106 | 45,106 | ||||||||
| Diluted | 46,054 | (244 | ) | 45,810 | ||||||
For the Quarter Ended December 31, 2001 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | Operational | Adjustments* | GAAP | ||||||||
| Net sales | $ | 62,562 | $ | 62,562 | |||||||
| Cost of sales | 35,915 | $ | 512 | 36,427 | |||||||
| Gross profit | 26,647 | (512 | ) | 26,135 | |||||||
| Research and development expenses | 4,390 | 992 | 5,382 | ||||||||
| Selling, general and administrative expenses | 13,645 | 2,699 | 16,344 | ||||||||
| Amortization of intangible assets | — | 33,221 | 33,221 | ||||||||
| Impairment write-down of intangible assets | — | 195,365 | 195,365 | ||||||||
| Operating income (loss) | 8,612 | (232,789 | ) | (224,177 | ) | ||||||
| Other income (expense), net | 1,282 | (4,899 | ) | (3,617 | ) | ||||||
| Income (loss) before income taxes | 9,894 | (237,688 | ) | (227,794 | ) | ||||||
| Provision for income taxes | 2,738 | (4,302 | ) | (1,564 | ) | ||||||
| Net income (loss) | $ | 7,156 | $ | (233,386 | ) | $ | (226,230 | ) | |||
| Earnings (loss) per share: | |||||||||||
| Basic | $ | 0.16 | $ | (5.07 | ) | ||||||
| Diluted | $ | 0.16 | $ | (5.07 | ) | ||||||
| Weighted average shares and common equivalents outstanding: | |||||||||||
| Basic | 44,619 | — | 44,619 | ||||||||
| Diluted | 45,713 | (1,094 | ) | 44,619 | |||||||
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AVOCENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
| | For the Year Ended December 31, 2002 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Operational | Adjustments** | GAAP | |||||||
| Net sales | $ | 260,600 | $ | — | $ | 260,600 | ||||
| Cost of sales | 127,509 | 1,364 | 128,873 | |||||||
| Gross profit | 133,091 | (1,364 | ) | 131,727 | ||||||
| Research and development expenses | 24,006 | 2,516 | 26,522 | |||||||
| Acquired in-process research and development expense | — | 6,000 | 6,000 | |||||||
| Selling, general and administrative expenses | 57,411 | 9,480 | 66,891 | |||||||
| Amortization of intangible assets | — | 22,189 | 22,189 | |||||||
| Impairment write-down of intangible assets | — | — | — | |||||||
| Operating income | 51,674 | (41,549 | ) | 10,125 | ||||||
| Other income (expense), net | 5,115 | — | 5,115 | |||||||
| Income before income taxes | 56,789 | (41,549 | ) | 15,240 | ||||||
| Provision for income taxes | 14,450 | (9,948 | ) | 4,502 | ||||||
| Net income | $ | 42,339 | $ | (31,601 | ) | $ | 10,738 | |||
| Earnings per share: | ||||||||||
| Basic | $ | 0.94 | $ | 0.24 | ||||||
| Diluted | $ | 0.92 | $ | 0.24 | ||||||
| Weighted average shares and common equivalents outstanding: | ||||||||||
| Basic | 44,977 | — | 44,977 | |||||||
| Diluted | 45,932 | (383 | ) | 45,549 | ||||||
For the Year Ended December 31, 2001 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | Operational | Adjustments** | GAAP | ||||||||
| Net sales | $ | 255,911 | $ | — | $ | 255,911 | |||||
| Cost of sales | 135,840 | 14,085 | 149,925 | ||||||||
| Gross profit | 120,071 | (14,085 | ) | 105,986 | |||||||
| Research and development expenses | 18,204 | 4,316 | 22,520 | ||||||||
| Acquired in-process research and development expense | — | 4,570 | 4,570 | ||||||||
| Selling, general and administrative expenses | 58,881 | 15,919 | 74,800 | ||||||||
| Amortization of intangible assets | — | 132,879 | 132,879 | ||||||||
| Impairment write-down of intangible assets | — | 195,365 | 195,365 | ||||||||
| Operating income (loss) | 42,986 | (367,134 | ) | (324,148 | ) | ||||||
| Other income (expense), net | 5,634 | (4,899 | ) | 735 | |||||||
| Income (loss) before income taxes | 48,620 | (372,033 | ) | (323,413 | ) | ||||||
| Provision for income taxes | 14,096 | (17,043 | ) | (2,947 | ) | ||||||
| Net income (loss) | $ | 34,524 | $ | (354,990 | ) | $ | (320,466 | ) | |||
| Earnings (loss) per share: | |||||||||||
| Basic | $ | 0.77 | $ | (7.22 | ) | ||||||
| Diluted | $ | 0.75 | $ | (7.22 | ) | ||||||
| Weighted average shares and common equivalents outstanding: | |||||||||||
| Basic | 44,674 | — | 44,374 | ||||||||
| Diluted | 45,752 | (1,378 | ) | 44,374 | |||||||
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AVOCENT CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands)
| | December 31, 2002 | December 31, 2001 | |||||
|---|---|---|---|---|---|---|---|
| | (Unaudited) | | |||||
| Cash, cash equivalents and short-term investments | $ | 169,318 | $ | 164,776 | |||
| Accounts receivables, net | 36,313 | 49,091 | |||||
| Current and deferred income tax receivable | 6,541 | 13,169 | |||||
| Other receivables, net | 525 | 2,115 | |||||
| Inventories, net | 24,422 | 27,155 | |||||
| Other current assets | 3,922 | 2,134 | |||||
| Total current assets | 241,041 | 258,440 | |||||
| Investments | 46,572 | 9,637 | |||||
| Property and equipment, net | 24,313 | 21,343 | |||||
| Goodwill, net | 203,625 | 186,147 | |||||
| Intangible assets, net | 52,601 | 71,014 | |||||
| Other assets | 455 | 617 | |||||
| Total assets | $ | 568,607 | $ | 547,198 | |||
| Accounts payable and other accrued expenses | $ | 14,159 | $ | 13,481 | |||
| Income tax payable | 6,901 | 7,016 | |||||
| Other current liabilities | 13,662 | 16,040 | |||||
| Total current liabilities | 34,722 | 36,537 | |||||
| Non-current liabilities | 16,213 | 24,053 | |||||
| Total stockholders' equity | 517,672 | 486,608 | |||||
| Total liabilities and stockholders' equity | $ | 568,607 | $ | 547,198 | |||
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