Exhibit 99.7
Avocent Reports First Quarter Results
HUNTSVILLE, Ala.--(BUSINESS WIRE)--April 21, 2005--Avocent
Corporation (NASDAQ:AVCT) today reported revenue of $76.8 million for
the first quarter ended April 1, 2005.
"Avocent's first quarter results were consistent with the revised
revenue estimates provided in mid-March," stated John R. Cooper,
chairman and chief executive officer of Avocent Corporation. "Sales to
OEMs increased over last year, however, sales of our U.S. branded
products were lower than we originally expected due to a number of
factors we previously discussed in March. Sales activity increased
later in the quarter and we are pleased with the recovery in our
branded sales, which have moved closer to more normal levels in recent
weeks.
"We continued to invest in research and development in the first
quarter to support new product introductions and products under
development. We recorded our first design wins that combined embedded
KVM and IPMI solutions during the quarter and believe this area holds
excellent promise for Avocent in the future. We remain positive about
our new product pipeline and the impact it will have on future sales."
First Quarter Results
Income prior to intangible amortization and merger-related
expenses was $7.3 million, or $0.14 per diluted share, compared with
income prior to intangible amortization and merger-related expenses of
$16.1 million, or $0.33 per diluted share, in the first quarter of
2004. (See "Use of Non-GAAP Financial Measures" discussion below.) Net
adjustments to reconcile to GAAP net income were $5.5 million in the
first quarter of 2005, including $6.6 million in intangible
amortization and a $1.8 million tax benefit. Net adjustments to
reconcile to GAAP net income were $7.6 million in the first quarter of
2004, including $4.8 million in amortization of intangible assets,
$6.5 million in acquired in-process R&D expenses and a $4.6 million
tax benefit.
GAAP net income for the first quarter of 2005 was $1.8 million, or
$0.04 per diluted share. This compares with a GAAP net income of $8.5
million, or $0.17 per diluted share, in the first quarter of 2004.
Net sales for the first quarter declined 10.8% to $76.8 million
compared with sales of $86.1 million in the first quarter of 2004.
Branded sales declined 27.6% from the first quarter of 2004 and
accounted for 47.8% of total sales. OEM sales rose 13.3% from the
first quarter of 2004 and accounted for 52.2% of total first quarter
2005 sales. U.S. sales declined 21.9% to $40.0 million and
international sales rose 5.6% to $36.8 million compared with the first
quarter of 2004.
"OEM sales benefited from the contribution of embedded products,"
continued Mr. Cooper. "We believe our opportunities in this area will
continue to expand as we strengthen our embedded product suite.
International sales also increased, reflecting the investments we made
in our sales infrastructure in certain European and Asian countries."
Gross profit for the first quarter of 2005 declined 13.0% to $43.6
million with a gross margin of 56.7%. This compared with gross profit
of $50.1 million and a gross margin of 58.2% in the first quarter of
2004. The decrease in gross profit was due to the lower sales volume.
Research and development expenses increased 53.4% to $14.5
million, or 18.8% of sales, compared with $9.4 million, or 11.0% of
sales, in the first quarter of 2004. This increase was due primarily
to increased investments in new products, supporting new product
introductions and an increase in R&D staff to support these efforts.
Selling, general and administrative expenses rose 9.6% to $22.3
million compared with $20.3 million in the first quarter of 2004. The
increase included higher legal costs in the first quarter to support
patent litigation scheduled for trial in the second quarter.
Avocent's balance sheet and cash position remained strong as of
April 1, 2005. The Company's cash flow from operations was
approximately $10 million for the first quarter of 2005 with over $325
million in cash, cash equivalents and investments at the quarter's
end. Avocent had no long-term debt as of April 1, 2005.
"We used our strong cash position to repurchase approximately
700,000 shares of Avocent's stock during the first quarter," continued
Mr. Cooper. "We have repurchased approximately one million shares to
date under the two million share repurchase authorization announced in
November 2004."
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 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 webcast and rebroadcast
of its first quarter results conference call to be held April 21,
2005. The live broadcast will be available online at www.avocent.com
as well as 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 (including our combined embedded KVM and
IPMI solutions), 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 14, 2005. 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 April 1, 2005
Operational Adjustments GAAP
(a)
----------- -------------------
Net sales $ 76,805 $ 76,805
Cost of sales 33,223 33,223
-------- ---------- -------
Gross profit 43,582 43,582
Research and development expenses 14,176 $ 291 14,467
Selling, general and administrative
expenses 21,903 377 22,280
Amortization of intangible assets - 6,622 6,622
-------- -------- -------
Operating income 7,503 (7,290) 213
Other income (expense), net 1,955 (15) 1,940
-------- -------- -------
Income before provision for income
taxes 9,458 (7,305) 2,153
Provision for income taxes 2,137 (1,818) 319
-------- -------- -------
Net income $ 7,321 $ (5,487)$ 1,834
======== ======== =======
Earnings per share:
Basic $ 0.15 $ 0.04
Diluted $ 0.14 $ 0.04
Weighted average shares and common equivalents
outstanding:
Basic 50,208 - 50,208
Diluted 51,510 (58) 51,452
For the Quarter Ended April 2, 2004
Operational Adjustments GAAP
(a)
----------- -------------------
Net sales $ 86,085 $86,085
Cost of sales 35,888 $ 95 35,983
-------- -------- -------
Gross profit 50,197 (95) 50,102
Research and development expenses 9,254 174 9,428
Acquired in-process research and
development expense - 6,490 6,490
Selling, general and administrative
expenses 19,725 610 20,335
Amortization of intangible assets - 4,762 4,762
-------- -------- -------
Operating income 21,218 (12,131) 9,087
Other income (expense), net 1,151 (14) 1,137
-------- -------- -------
Income before provision for income
taxes 22,369 (12,145) 10,224
Provision for income taxes 6,253 (4,572) 1,681
-------- -------- -------
Net income $ 16,116 $ (7,573)$ 8,543
======== ======== =======
Earnings per share:
Basic $ 0.34 $ 0.18
Diluted $ 0.33 $ 0.17
Weighted average shares and common equivalents
outstanding:
Basic 47,650 - 47,650
Diluted 49,538 (25) 49,513
(a) Note: Adjustments relate to acquired in-process research and
development expense from the Crystal link 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. 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)
April 1, December 31,
2005 2004
(Unaudited) (Unaudited)
------------ ------------
Cash, cash equivalents
and short-term investments $241,346 $239,799
Accounts receivable, net 50,034 60,948
Current and deferred income tax receivable 6,134 7,095
Other receivables, net 397 566
Inventories, net 24,316 21,232
Other current assets 6,788 4,982
------------ ------------
Total current assets 329,015 334,622
Investments 84,127 91,547
Property and equipment, net 39,328 39,896
Goodwill 270,001 269,892
Intangible assets, net 27,421 33,981
Other assets 887 843
------------ ------------
Total assets $750,779 $770,781
============ ============
Accounts payable and other accrued expenses $15,200 $21,368
Income tax payable 8,356 8,494
Other current liabilities 16,515 16,767
------------ ------------
Total current liabilities 40,071 46,629
Non-current liabilities 7,712 10,855
Total stockholders' equity 702,996 713,297
------------ ------------
Total liabilities and stockholders' equity $750,779 $770,781
============ ============
CONTACT: Avocent Corporation
Dusty Pritchett, 256-217-1300