Exhibit 99.5
| Contact: | Dusty Pritchett |
|
| Senior Vice President of Finance and Chief Financial Officer |
|
| 256-217-1300 |
AVOCENT REPORTS HIGHER SALES AND NET INCOME
FOR THIRD QUARTER
HUNTSVILLE, Ala. (October 16, 2003) - Avocent Corporation (NASDAQ:AVCT) today reported higher sales, margins and net income for the third quarter ended September 26, 2003, compared to the third quarter ended September 27, 2002.
“Sales increased 18.6% to $76.5 million and income prior to intangible amortization, merger-related expenses and a gain on the sale of certain investment securities (see “Use of Non-GAAP Financial Measures” discussion below) was up 40.1% to $15.3 million, or $0.32 per diluted share, compared with our third quarter 2002,” stated John R. Cooper, president and chief executive officer of Avocent Corporation. “Our earnings benefited from increased sales, higher margins and improved expense levels compared with last year.”
GAAP net income for the third quarter of 2003 was $13.5 million, or $0.28 per diluted share. This compares with a GAAP net loss of $325,000, or $0.01 per share, in the third quarter of 2002.
“We experienced increased demand for our branded products, including our proprietary digital, AMX and SwitchView products. Sales were up across all customer segments in both the U.S. and abroad. In particular, U.S. sales momentum increased in the third quarter, rising 25.3% to $48.9 million compared with the third quarter of last year.
“Research and development expense increased 15.0% to $7.1 million, or 9.3% of third quarter revenues,” continued Mr. Cooper. “We remain focused on developing new products, enhancing existing products and improving our manufacturing efficiencies. The increased funding also reflects our emphasis on software engineering to support the expansion of our digital product line and our development efforts for embedded solutions. We believe our digital and embedded product lines have excellent growth opportunities as we expand our reach within the data center.”
Third Quarter Results
Net sales for the third quarter rose 18.6% to $76.5 million compared with sales of $64.5 million in the third quarter of 2002. Branded sales rose 23.2% from the third quarter of
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last year and accounted for 56.4% of sales. OEM sales rose 13.1% from the third quarter of 2002 and accounted for 43.6% of total third quarter 2003 sales. International sales increased by 8.3% to $27.6 million, or 36.1% of total third quarter 2003 sales.
Gross profit for the third quarter rose to $43.6 million with a gross margin of 57.0% compared with gross profit of $33.2 million and a gross margin of 51.5% in the third quarter of 2002. Improved margins were due to increased sales leverage, improved product mix and lower manufacturing costs for certain key products.
SG&A expenses for the third quarter were $16.8 million, or 22.0% of sales, compared with $15.3 million, or 23.7% of sales, in the third quarter of 2002. Cost containment measures had a positive effect on reducing the growth rate of SG&A expenses.
Income prior to intangible amortization, merger-related expenses and gain on sale of certain investment securities rose to $15.3 million, or $0.32 per diluted share, compared with income prior to intangible amortization and merger-related expenses of $10.9 million, or $0.24 per diluted share, in the third quarter of 2002. Net adjustments to reconcile to GAAP income were $1.8 million in the third quarter of 2003, including $5.7 million in intangible amortization and merger-related expenses offset by a $3.2 million gain on sale of investment securities. Net adjustments to reconcile to GAAP income were $11.2 million in the third quarter of 2002, including $7.5 million of intangible amortization and merger-related expenses and a $6.0 million one-time charge for in-process research and development expenses related to the acquisition of 2C Computing, Inc.
Avocent’s balance sheet and cash position remained strong as of September 26, 2003. The Company’s cash flow from operations was approximately $15 million for the third quarter of 2003 with over $273 million in cash, cash equivalents and investments at the quarter’s end.
Use of Non-GAAP Financial Measures
Income prior to intangible amortization, merger-related expenses and gain on sale of certain investment securities, or operational income as used in the attached financial statement schedules, is not a measure of financial performance under generally accepted accounting principles (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 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 on sales of investments made by Avocent. Avocent believes that operational income is a measure of performance used by some
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investment banks, 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 consolidated statement of operations included in this press release.
Conference Call Information
Avocent will provide an on-line, real-time Web-cast and rebroadcast of its third quarter results conference call to be held October 16, 2003. The live broadcast will be available on-line at www.avocent.com and at 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 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.
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 the development and introduction of new products and technologies, the size and growth of the potential markets for these products and technologies in the future, 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 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 27, 2003. 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 September 26, 2003 |
| |||||||
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| Operational |
| Adjustments ** |
| GAAP |
| |||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 76,482 |
|
|
| $ | 76,482 |
| |
Cost of sales |
| 32,829 |
| $ | 80 |
| 32,909 |
| ||
Gross profit |
| 43,653 |
| (80 | ) | 43,573 |
| |||
|
|
|
|
|
|
|
| |||
Research and development expenses |
| 7,000 |
| 103 |
| 7,103 |
| |||
Selling, general and administrative expenses |
| 16,069 |
| 769 |
| 16,838 |
| |||
Amortization of intangible assets |
| — |
| 4,739 |
| 4,739 |
| |||
Operating income |
| 20,584 |
| (5,691 | ) | 14,893 |
| |||
|
|
|
|
|
|
|
| |||
Other income (expense), net |
| 1,039 |
| 3,158 |
| 4,197 |
| |||
Income before income taxes |
| 21,623 |
| (2,533 | ) | 19,090 |
| |||
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| 6,341 |
| (727 | ) | 5,614 |
| |||
Net income |
| $ | 15,282 |
| $ | (1,806 | ) | $ | 13,476 |
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|
|
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|
|
|
|
| |||
Earnings per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.33 |
|
|
| $ | 0.29 |
| |
Diluted |
| $ | 0.32 |
|
|
| $ | 0.28 |
| |
|
|
|
|
|
|
|
| |||
Weighted average shares and common equivalents outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 46,347 |
| — |
| 46,347 |
| |||
Diluted |
| 47,850 |
| (80 | ) | 47,770 |
| |||
|
| For the Quarter Ended September 27, 2002 |
| |||||||
|
| Operational |
| Adjustments ** |
| GAAP |
| |||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 64,490 |
|
|
| $ | 64,490 |
| |
Cost of sales |
| 31,018 |
| $ | 234 |
| 31,252 |
| ||
Gross profit |
| 33,472 |
| (234 | ) | 33,238 |
| |||
|
|
|
|
|
|
|
| |||
Research and development expenses |
| 5,711 |
| 465 |
| 6,176 |
| |||
Acquired in-process research and development expense |
| — |
| 6,000 |
| 6,000 |
| |||
Selling, general and administrative expenses |
| 13,929 |
| 1,333 |
| 15,262 |
| |||
Amortization of intangible assets |
| — |
| 5,474 |
| 5,474 |
| |||
Operating income |
| 13,832 |
| (13,506 | ) | 326 |
| |||
|
|
|
|
|
|
|
| |||
Other income (expense), net |
| 1,211 |
| — |
| 1,211 |
| |||
Income before income taxes |
| 15,043 |
| (13,506 | ) | 1,537 |
| |||
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| 4,133 |
| (2,271 | ) | 1,862 |
| |||
Net income |
| $ | 10,910 |
| $ | (11,235 | ) | $ | (325 | ) |
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|
|
|
|
|
|
| |||
Earnings per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.24 |
|
|
| $ | (0.01 | ) | |
Diluted |
| $ | 0.24 |
|
|
| $ | (0.01 | ) | |
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|
|
|
|
|
|
| |||
Weighted average shares and common equivalents outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 45,016 |
| — |
| 45,016 |
| |||
Diluted |
| 45,570 |
| (554 | ) | 45,016 |
| |||
** Note: Adjustments relate to amortization of deferred compensation (from the capitalization of the value of stock options assumed), intangibles recorded as the result of the merger of Apex and Cybex in July 2000, the acquisition of Equinox in January 2001 and the acquisition of 2C in August 2002, and a realized gain on the disposal of an equity security investment which had been written down in the fourth quarter of 2001. 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. Please see previous discussion regarding the use of non-GAAP financial measures.
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|
| For the Nine Months Ended September 26, 2003 |
| |||||||
|
| Operational |
| Adjustments ** |
| GAAP |
| |||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 218,256 |
|
|
| $ | 218,256 |
| |
Cost of sales |
| 93,873 |
| $ | 528 |
| 94,401 |
| ||
Gross profit |
| 124,383 |
| (528 | ) | 123,855 |
| |||
|
|
|
|
|
|
|
| |||
Research and development expenses |
| 20,598 |
| 971 |
| 21,569 |
| |||
Selling, general and administrative expenses |
| 48,577 |
| 3,044 |
| 51,621 |
| |||
Amortization of intangible assets |
| — |
| 17,051 |
| 17,051 |
| |||
Operating income |
| 55,208 |
| (21,594 | ) | 33,614 |
| |||
|
|
|
|
|
|
|
| |||
Other income (expense), net |
| 2,949 |
| 3,127 |
| 6,076 |
| |||
Income before income taxes |
| 58,157 |
| (18,467 | ) | 39,690 |
| |||
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| 16,220 |
| (5,519 | ) | 10,701 |
| |||
Net income |
| $ | 41,937 |
| $ | (12,948 | ) | $ | 28,989 |
|
|
|
|
|
|
|
|
| |||
Earnings per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.91 |
|
|
| $ | 0.63 |
| |
Diluted |
| $ | 0.88 |
|
|
| $ | 0.61 |
| |
|
|
|
|
|
|
|
| |||
Weighted average shares and common equivalents outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 45,900 |
| — |
| 45,900 |
| |||
Diluted |
| 47,390 |
| (129 | ) | 47,261 |
| |||
|
| For the Nine Months Ended September 27, 2002 |
| |||||||
|
| Operational |
| Adjustments ** |
| GAAP |
| |||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 189,612 |
|
|
| $ | 189,612 |
| |
Cost of sales |
| 93,284 |
| $ | 1,211 |
| 94,495 |
| ||
Gross profit |
| 96,328 |
| (1,211 | ) | 95,117 |
| |||
|
|
|
|
|
|
|
| |||
Research and development expenses |
| 17,434 |
| 2,151 |
| 19,585 |
| |||
Acquired in-process research and development expense |
| — |
| 6,000 |
| 6,000 |
| |||
Selling, general and administrative expenses |
| 42,523 |
| 8,130 |
| 50,653 |
| |||
Amortization of intangible assets |
| — |
| 16,068 |
| 16,068 |
| |||
Operating income |
| 36,371 |
| (33,560 | ) | 2,811 |
| |||
|
|
|
|
|
|
|
| |||
Other income (expense), net |
| 3,819 |
| — |
| 3,819 |
| |||
Income before income taxes |
| 40,190 |
| (33,560 | ) | 6,630 |
| |||
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| 10,639 |
| (7,554 | ) | 3,085 |
| |||
Net income |
| $ | 29,551 |
| $ | (26,006 | ) | $ | 3,545 |
|
|
|
|
|
|
|
|
| |||
Earnings per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.66 |
|
|
| $ | 0.08 |
| |
Diluted |
| $ | 0.64 |
|
|
| $ | 0.08 |
| |
|
|
|
|
|
|
|
| |||
Weighted average shares and common equivalents outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 44,931 |
| — |
| 44,931 |
| |||
Diluted |
| 45,883 |
| (410 | ) | 45,473 |
| |||
** Note: Adjustments relate to amortization of deferred compensation (from the capitalization of the value of stock options assumed), intangibles recorded as the result of the merger of Apex and Cybex in July 2000, the acquisition of Equinox in January 2001 and the acquisition of 2C in August 2002, and a realized gain on the disposal of an equity security investment which had been written down in the fourth quarter of 2001. 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. Please see previous discussion regarding the use of non-GAAP financial measures.
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AVOCENT CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands)
|
| September 26, |
| December 31, |
| ||
|
| (Unaudited) |
|
|
| ||
|
|
|
|
|
| ||
Cash, cash equivalents and short-term investments |
| $ | 180,428 |
| $ | 169,318 |
|
Accounts receivable, net |
| 47,387 |
| 36,313 |
| ||
Current and deferred income tax receivable |
| 5,108 |
| 6,541 |
| ||
Other receivables, net |
| 398 |
| 1,191 |
| ||
Inventories, net |
| 17,529 |
| 24,422 |
| ||
Other current assets |
| 5,289 |
| 3,256 |
| ||
Total current assets |
| 256,139 |
| 241,041 |
| ||
|
|
|
|
|
| ||
Investments |
| 92,582 |
| 46,572 |
| ||
Property and equipment, net |
| 36,316 |
| 24,313 |
| ||
Goodwill, net |
| 203,625 |
| 203,625 |
| ||
Intangible assets, net |
| 35,460 |
| 52,601 |
| ||
Other assets |
| 587 |
| 455 |
| ||
Total assets |
| $ | 624,709 |
| $ | 568,607 |
|
|
|
|
|
|
| ||
Accounts payable and other accrued expenses |
| $ | 14,368 |
| $ | 14,159 |
|
Income tax payable |
| 9,757 |
| 6,901 |
| ||
Other current liabilities |
| 14,682 |
| 13,662 |
| ||
Total current liabilities |
| 38,807 |
| 34,722 |
| ||
|
|
|
|
|
| ||
Non-current liabilities |
| 11,481 |
| 16,213 |
| ||
|
|
|
|
|
| ||
Total stockholders' equity |
| 574,421 |
| 517,672 |
| ||
|
|
|
|
|
| ||
Total liabilities and stockholders' equity |
| $ | 624,709 |
| $ | 568,607 |
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END
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