Exhibit 99.1
Avocent Reports Record Sales of $100 Million for Fourth Quarter
HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 20, 2005--Avocent
Corporation (NASDAQ:AVCT) today reported record sales and improved net
income for the fourth quarter and year ended December 31, 2004.
"Avocent's revenues rose 16.4% to just over $100.0 million in the
fourth quarter, our first quarter to reach $100 million in sales,"
stated John R. Cooper, president and chief executive officer of
Avocent Corporation. "Our record sales were due to increased demand
across product lines and geographic boundaries. Sales to OEMs were
particularly strong in the fourth quarter as a result of growth in
sales of our digital products and the contribution of IPMI and
embedded solutions.
"Net income, on a GAAP basis, rose to $12.1 million, or $0.23 per
diluted share, an increase of 26.3% compared with the fourth quarter
of last year. Our margins rose to 59.0% in the fourth quarter, over
three percentage points higher than the fourth quarter of last year.
Our margin improvement reflects higher sales of digital products,
contribution from IPMI and embedded solutions and continued
enhancements in product design to lower our manufacturing costs.
"We have made significant investments in R&D over the past several
quarters in new products and product enhancements. These investments
are paying off in terms of strengthening our KVM products, building on
our digital suite of products and broadening our markets to include
software, IPMI and embedded solutions. Our sales team and operations
staff deserve significant credit in translating our R&D investments
into record results for Avocent," continued Mr. Cooper.
Fourth Quarter Results
Income prior to intangible amortization, merger-related expenses
and impairment charges related to certain investments in private
companies rose 18.5% to a record $20.6 million, or $0.40 per diluted
share (including a net decrease of $0.02 per share attributable to
OSA), compared with income prior to intangible amortization and
merger-related expenses of $17.4 million, or $0.36 per diluted share,
in the fourth quarter of 2003. (See "Use of Non-GAAP Financial
Measures" discussion below.) Net adjustments to reconcile to GAAP net
income were $8.6 million in the fourth quarter of 2004, including $6.6
million in intangible amortization and $3.4 million in impairment
charges related to certain investments in private companies. In
addition, the adjustments included a $3.0 million tax benefit. Net
adjustments to reconcile to GAAP net income were $7.9 million in the
fourth quarter of 2003, including $4.8 million in amortization of
intangible assets, $3.9 million in acquired in-process R&D expenses
and a $1.8 million tax benefit.
GAAP net income for the fourth quarter of 2004 was $12.1 million,
or $0.23 per diluted share. This compares with a GAAP net income of
$9.6 million, or $0.20 per diluted share, in the fourth quarter of
2003.
Net sales for the fourth quarter rose 16.4% to just over $100.0
million compared with sales of $86.0 million in the fourth quarter of
2003. Branded sales rose 15.1% from the fourth quarter of 2003 and
accounted for 51.4% of sales. OEM sales rose 17.7% from the fourth
quarter of 2003 and accounted for 48.6% of total fourth quarter 2004
sales. OEM sales were strong in the fourth quarter due to increased
sales of our digital product family and higher revenues from our IPMI
and embedded solutions. U.S. sales increased 21.0% to $56.6 million
and international sales rose 10.8% to $43.4 million compared with the
fourth quarter of 2003.
"Our sales growth benefited from increased demand for our digital
products that represented 51.8% of fourth quarter sales," continued
Mr. Cooper. "This was the first quarter that digital products
represented over half our revenues. Our traditional KVM products also
showed solid growth and benefited from increased demand for newer
products, including AMX and SwitchView."
Gross profit for the fourth quarter of 2004 rose 23.0% to $59.0
million with a gross margin of 59.0%. This compared with gross profit
of $48.0 million and a gross margin of 55.8% in the fourth quarter of
2003. The increase in gross profit was due to higher sales and
improved product mix, including higher sales of digital, embedded
products and IPMI-enabled products.
Research and development expenses increased 57.2% to $12.9
million, or 12.9% of sales, compared with $8.2 million, or 9.6% of
sales, in the fourth quarter of 2003. This increase was due primarily
to increased investment in new product development as well as the
additional engineering teams added from the acquisitions of Soronti,
Crystal Link, OSA and Sonic Mobility.
"Avocent's commitment to our research and development remains a
key part in expanding our pipeline of new products," stated Mr.
Cooper. "In the last three weeks, we made significant product
announcements that provide the framework for expanding Avocent's
support of servers and related appliances in the data center. We are
very excited about the new products and the opportunities the new
technologies have for broadening our markets beyond our traditional
KVM appliances.
"Our recently introduced DSView3 software is an all new management
platform that has been in development for over a year. DSView3
incorporates browser-based controls that allow network administrators
to control servers and related appliances anywhere-anytime.
Administrators have more control, enhanced backup capabilities and
improved disaster recovery through our proprietary hub and spoke
architecture.
"We also just announced our new DSI 5100, Avocent's first branded
product that incorporates OSA technology. DSI 5100 is an IPMI proxy
appliance that fully integrates with the new DSView3 software and
allows network administrators to monitor and manage IPMI embedded
functions on various OEMs' servers," continued Mr. Cooper.
"Furthermore, yesterday we announced three new serial over IP
appliances which provide secure remote access and management to a wide
range of devices, such as network hubs, routers, switches and other
critical network devices," concluded Mr. Cooper.
Selling, general and administrative expenses rose 13.1% to $21.2
million compared with $18.8 million in the fourth quarter of 2003. The
increase was due to higher costs related to the addition of the
Soronti, Crystal Link, OSA and Sonic Mobility sales and marketing
teams, the expansion of certain sales and marketing programs, legal
fees and other costs related to protecting our intellectual property
rights, and Sarbanes-Oxley Act compliance costs.
Avocent's balance sheet and cash position remained strong as of
December 31, 2004. The Company's cash flow from operations was
approximately $25 million for the fourth quarter of 2004 with over
$331 million in cash, cash equivalents and investments at the
quarter's end. Avocent had no long-term debt as of December 31, 2004.
Use of Non-GAAP Financial Measures
Income prior to intangible amortization, merger-related expenses
and impairment charges related to certain investments in private
companies, 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 or
impairments 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 fourth quarter results conference call to be held
January 20, 2005. The live broadcast will be available on-line at
www.avocent.com as well as www.vcall.com beginning at 9:00 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), 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 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 December 31, 2004
Operational Adjustments(1) GAAP
----------- ----------- -----------
Net sales $100,049 $100,049
Cost of sales 41,021 41,021
----------- ----------- -----------
Gross profit 59,028 59,028
Research and development
expenses 12,248 $677 12,925
Selling, general and
administrative expenses 20,381 864 21,245
Amortization of intangible
assets -- 6,623 6,623
----------- ----------- -----------
Operating income 26,399 (8,164) 18,235
Other income (expense), net 1,613 (3,464) (1,851)
----------- ----------- -----------
Income before income taxes 28,012 (11,628) 16,384
Provision for income taxes 7,363 (3,046) 4,317
----------- ----------- -----------
Net income $20,649 $(8,582) $12,067
=========== =========== ===========
Earnings per share:
Basic $0.41 $0.24
Diluted $0.40 $0.23
Weighted average shares and
common equivalents outstanding:
Basic 49,874 -- 49,874
Diluted 51,553 (78) 51,475
For the Quarter Ended December 31, 2003
Operational Adjustments(1) GAAP
----------- ----------- -----------
Net sales $85,982 $85,982
Cost of sales 37,916 $95 38,011
----------- ----------- -----------
Gross profit 48,066 (95) 47,971
Research and development
expenses 8,038 186 8,224
Acquired in-process research
and development expense -- 3,940 3,940
Selling, general and
administrative expenses 18,155 622 18,777
Amortization of intangible
assets -- 4,754 4,754
----------- ----------- -----------
Operating income 21,873 (9,597) 12,276
Other income (expense), net 1,196 (115) 1,081
----------- ----------- -----------
Income before income taxes 23,069 (9,712) 13,357
Provision for income taxes 5,642 (1,844) 3,798
----------- ----------- -----------
Net income $17,427 $(7,868) $9,559
=========== =========== ===========
Earnings per share:
Basic $0.37 $0.20
Diluted $0.36 $0.20
Weighted average shares and
common equivalents outstanding:
Basic 47,020 -- 47,020
Diluted 48,910 (47) 48,863
(1) Note: Adjustments relate to acquired in-process research and
development expense from the Soronti 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 and the acquisitions of
Equinox, 2C, Soronti, Crystal Link, OSA and Sonic Mobility.
Adjustments in 2004 include a write-down of investments in two
privately held companies. 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 Year Ended December 31, 2004
Operational Adjustments(1) GAAP
----------- ----------- -----------
Net sales $365,255 $365,255
Cost of sales 152,210 $190 152,400
----------- ----------- -----------
Gross profit 213,045 (190) 212,855
Research and development
expenses 42,898 2,455 45,353
Acquired in-process research
and development expense -- 29,260 29,260
Selling, general and
administrative expenses 81,171 3,652 84,823
Amortization of intangible
assets -- 24,279 24,279
----------- ----------- -----------
Operating income 88,976 (59,836) 29,140
Other income (expense), net 4,862 (3,510) 1,352
----------- ----------- -----------
Income before income taxes 93,838 (63,346) 30,492
Provision for income taxes 24,541 (12,089) 12,452
----------- ----------- -----------
Net income $69,297 $(51,257) $18,040
=========== =========== ===========
Earnings per share:
Basic $1.42 $0.37
Diluted $1.37 $0.36
Weighted average shares and
common equivalents outstanding:
Basic 48,964 -- 48,964
Diluted 50,658 (128) 50,530
For the Year Ended December 31, 2003
Operational Adjustments(1) GAAP
----------- ----------- -----------
Net sales $304,238 $304,238
Cost of sales 131,788 $624 132,412
----------- ----------- -----------
Gross profit 172,450 (624) 171,826
Research and development
expenses 28,636 1,157 29,793
Acquired in-process research
and development expense -- 3,940 3,940
Selling, general and
administrative expenses 66,732 3,666 70,398
Amortization of intangible
assets -- 21,805 21,805
----------- ----------- -----------
Operating income 77,082 (31,192) 45,890
Other income (expense), net 4,143 3,013 7,156
----------- ----------- -----------
Income before income taxes 81,225 (28,179) 53,046
Provision for income taxes 21,862 (7,363) 14,499
----------- ----------- -----------
Net income $59,363 $(20,816) $38,547
=========== =========== ===========
Earnings per share:
Basic $1.29 $0.83
Diluted $1.24 $0.81
Weighted average shares and
common equivalents outstanding:
Basic 46,194 -- 46,194
Diluted 47,814 (121) 47,693
(1) Note: Adjustments relate to acquired in-process research and
development expense from the Soronti, Crystal Link Technologies,
OSA Technologies, and Sonic Mobility 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 and the acquisitions of Equinox, 2C, Soronti,
Crystal Link, OSA and Sonic Mobility. Adjustments in 2004 include
a write-down of investments in two privately held companies.
Adjustments in 2003 include 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.
AVOCENT CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December 31, December 31,
2004 2003
(Unaudited)
----------- -----------
Cash, cash equivalents and short-term
investments $239,799 $223,392
Accounts receivable, net 60,948 45,011
Current and deferred income tax receivable 7,095 5,031
Other receivables, net 566 225
Inventories, net 21,232 21,324
Other current assets 4,982 4,251
----------- -----------
Total current assets 334,622 299,234
Investments 91,547 84,410
Property and equipment, net 39,896 38,473
Goodwill, net 269,892 206,037
Intangible assets, net 33,981 31,889
Other assets 843 720
----------- -----------
Total assets $770,781 $660,763
=========== ===========
Accounts payable and other accrued expenses $21,368 $19,154
Income tax payable 8,494 6,702
Other current liabilities 17,726 16,866
----------- -----------
Total current liabilities 47,588 42,722
Non-current liabilities 9,896 10,884
Total stockholders' equity 713,297 607,157
----------- -----------
Total liabilities and stockholders' equity $770,781 $660,763
=========== ===========
CONTACT: Avocent Corporation
Dusty Pritchett, 256-217-1300