EXHIBIT 99.6
Avocent Reports 24% Increase in Second Quarter Sales
HUNTSVILLE, Ala.--(BUSINESS WIRE)--July 22, 2004--Avocent
Corporation (NASDAQ:AVCT) today reported higher sales and operating
income for the second quarter and six months ended July 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, president and
chief executive officer of Avocent Corporation. "Our newer products
and technologies are producing a solid return on our investments in
research and development. We expect to further expand our markets and
increase our sales in these markets as we add more functionality and
control for servers and server room devices with new products and
technologies.
"We completed the acquisition of OSA Technologies early in the
second quarter and are very excited about accelerating our development
of embedded management technologies. We anticipate OSA's revenues will
begin to ramp up 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 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 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
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 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 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
compliance costs.
Avocent's balance sheet and cash position remained strong as of
July 2, 2004. The Company's cash flow from operations was
approximately $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 or 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 (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 and losses on
sales of investments made by Avocent. Avocent believes that
operational income is a measure of performance used by some 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 statements of operations included in this press
release.
Conference Call Information
Avocent will provide an on-line, real-time 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
solutions for enterprise data centers, service providers and financial
institutions worldwide. Branded products include switching, extension,
intelligent platform management interface (IPMI), 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,
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 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 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 after the date hereof.
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
========== =============
CONTACT: Avocent Corporation, Huntsville
Dusty Pritchett, 256-217-1300
www.avocent.com