Exhibit 99.12
Avocent Reports Higher Sales and Net Income for Second Quarter
HUNTSVILLE, Ala.--(BUSINESS WIRE)--July 21, 2005--Avocent
Corporation (NASDAQ:AVCT) today reported higher sales for the second
quarter ended July 1, 2005.
"Our total sales rose to $89.5 million during the second quarter
of 2005. We experienced a strong sequential rebound in sales in the
second quarter, especially in our U.S. sales of branded products,"
stated John R. Cooper, chairman and chief executive officer of Avocent
Corporation. "We also experienced excellent growth from international
markets and our embedded solutions.
"We stepped up certain marketing programs during the quarter to
focus on new products, including the reintroduction of DSView3,"
continued Mr. Cooper. "The marketing programs had a positive impact on
our second quarter sales as evidenced by the strong rebound in U.S.
sales from the first quarter.
"During the second quarter, we followed through on our commitment
to narrow our research and development efforts by closing three
satellite research and development offices and making other selected
headcount reductions. In addition, we moved to realign our sales force
slightly to better match our customers and markets. Our results for
the quarter include approximately $1.3 million in severance costs
related to these office closings and other headcount adjustments."
Second Quarter Results
Income prior to intangible amortization and merger-related
expenses was $15.9 million, or $0.31 per diluted share, compared with
income prior to intangible amortization and merger-related expenses of
$15.3 million, or $0.30 per diluted share, in the second quarter of
2004. (See "Use of Non-GAAP Financial Measures" discussion below.) Net
adjustments to reconcile to GAAP net income were $4.8 million in the
second quarter of 2005, including $6.6 million in intangible
amortization and a $2.5 million tax benefit. Net adjustments to
reconcile to GAAP net income were $28.7 million in the second quarter
of 2004, including $6.4 million in amortization of intangible
amortization, a $21.7 million charge for acquired in-process research
and development expense related to OSA and a $1.7 million tax benefit.
GAAP net income for the second quarter of 2005 was $11.1 million,
or $0.22 per diluted share. This compares with a GAAP net loss of
$13.4 million, or $0.27 per diluted share, in the second quarter of
2004.
Net sales for the second quarter increased 2.0% to $89.5 million
compared with sales of $87.8 million in the second quarter of 2004.
Sales rose 16.6% sequentially from the first quarter of 2005 on the
strength of higher OEM, branded and OSA sales. Branded sales declined
8.4% from the second quarter of 2004 and accounted for 51.1% of total
sales. OEM sales increased 15.7% from the second quarter of 2004 and
accounted for 48.9% of total second quarter 2005 sales. U.S. sales
declined 0.1% to $52.8 million and international sales rose 5.2% to
$36.7 million compared with the second quarter of 2004.
"Demand for digital products remains strong and was a key factor
in our margin growth this quarter," continued Mr. Cooper. "Digital
product sales represented approximately 53% of revenues this quarter,
up from 47% of revenues in the second quarter of last year."
Gross profit for the second quarter of 2005 increased 4.4% to
$52.8 million with a gross margin of 59.0%. This compared with gross
profit of $50.6 million and a gross margin of 57.6% in the second
quarter of 2004. The increase in gross profit was due to higher sales
of digital, embedded and IPMI-enabled products.
Research and development expenses increased 28.2% to $14.4
million, or 16.1% of sales, compared with $11.2 million, or 12.8% of
sales, in the second quarter of 2004. This increase was due primarily
to additional engineering teams added from the acquisitions of OSA and
Sonic Mobility. R&D expense for the second quarter of 2005 also
included approximately $800,000 in severance costs related to the
closed offices.
Selling, general and administrative expenses rose 9.0% to $24.0
million compared with $22.0 million in the second quarter of 2004. The
increase included an increase in marketing costs related to new
products, higher legal fees from the Raritan lawsuit prior to reaching
the settlement and approximately $500,000 in severance costs related
to realigning our sales force.
Avocent's balance sheet and cash position remained strong as of
July 1, 2005. The Company's cash flow from operations was
approximately $21 million for the second quarter of 2005 with
approximately $317 million in cash, cash equivalents and investments
at the quarter's end. Avocent had no long-term debt as of July 1,
2005.
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 Web-cast and
rebroadcast of its second quarter results conference call to be held
July 21, 2005. The live broadcast will be available on-line 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 July 1, 2005
Operational Adjustments(1) GAAP
----------- ----------- --------
Net sales $89,538 $89,538
Cost of sales 36,711 36,711
----------- ----------- ---------
Gross profit 52,827 - 52,827
Research and development expenses 14,097 291 14,388
Selling, general and administrative
expenses 23,649 376 24,025
Amortization of intangible assets 6,623 6,623
----------- ----------- ---------
Operating income 15,081 (7,290) 7,791
Income from settlement of lawsuit 5,000 5,000
Other income (expense), net 1,954 (15) 1,939
----------- ----------- ---------
Income before income taxes 22,035 (7,305) 14,730
Provision for income taxes 6,148 (2,517) 3,631
----------- ----------- ---------
Net income $15,887 $(4,788) $11,099
=========== =========== =========
Earnings per share:
Basic $0.32 $0.22
Diluted $0.31 $0.22
Weighted average shares and common
equivalents outstanding:
Basic 49,475 - 49,475
Diluted 50,460 (43) 50,417
For the Quarter Ended July 2, 2004
Operational Adjustments(1) 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
(1) 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, 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 Statements of Operations
(Unaudited, in thousands, except per share data)
For the Six Months Ended July 1, 2005
Operational Adjustments(1) GAAP
----------- ----------- --------
Net sales $166,343 $166,343
Cost of sales 69,934 69,934
----------- ----------- ---------
Gross profit 96,409 - 96,409
Research and development expenses 28,274 581 28,855
Selling, general and administrative
expenses 45,552 753 46,305
Amortization of intangible assets 13,245 13,245
----------- ----------- ---------
Operating income 22,583 (14,579) 8,004
Income from settlement of lawsuit 5,000 5,000
Other income (expense), net 3,909 (30) 3,879
----------- ----------- ---------
Income before income taxes 31,492 (14,609) 16,883
Provision for income taxes 8,285 (4,335) 3,950
----------- ----------- ---------
Net income $23,207 $(10,274) $12,933
=========== =========== =========
Earnings per share:
Basic $0.47 $0.26
Diluted $0.46 $0.25
Weighted average shares and common
equivalents outstanding:
Basic 49,859 - 49,859
Diluted 50,870 (51) 50,819
For the Six Months Ended July 2, 2004
Operational Adjustments(1) 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
(1) 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, 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
(Unaudited, in thousands)
July 1, Dec. 31,
2005 2004
---------- ----------
Cash, cash equivalents
and short-term investments $251,051 $239,799
Accounts receivable, net 53,083 60,948
Inventories, net 22,807 21,232
Other current assets 8,203 5,923
Deferred income tax 6,377 6,720
---------- ----------
Total current assets 341,521 334,622
Investments 65,783 91,547
Property and equipment, net 39,221 39,896
Goodwill, net 269,992 269,892
Intangible assets, net 20,896 33,981
Other assets 893 843
---------- ----------
Total assets $738,306 $770,781
========== ==========
Accounts payable and other accrued expenses $16,506 $21,368
Income tax payable 9,426 8,494
Other current liabilities 19,841 16,767
---------- ----------
Total current liabilities 45,773 46,629
Non-current liabilities 5,377 10,855
Total stockholders' equity 687,156 713,297
---------- ----------
Total liabilities and stockholders' equity $738,306 $770,781
========== ==========
AVOCENT CORPORATION
Additional Financial Information
(Unaudited, in thousands, except ratios and treasury share data)
Revenue by Quarter Ended Six Months Ended
Distribution Channel July 1, July 2, July 1, July 2,
2005 2004 2005 2004
---------- -------- --------- ---------
OEM $43,742 $37,806 $83,820 $73,182
Branded 45,796 49,990 82,523 100,699
---------- -------- --------- ---------
Total $89,538 $87,796 $166,343 $173,881
========== ======== ========= =========
Revenue, Geographic Quarter Ended Six Months Ended
Composition July 1, July 2, July 1, July 2,
2005 2004 2005 2004
---------- -------- --------- ---------
United States $52,786 $52,860 $92,750 $104,050
International 36,752 34,936 73,593 69,831
---------- -------- --------- ---------
Total $89,538 $87,796 $166,343 $173,881
========== ======== ========= =========
Quarter Ended Six Months Ended
Cash Flow Highlights July 1, July 2, July 1, July 2,
2005 2004 2005 2004
---------- -------- --------- ---------
Cash provided by operations $21,153 $19,159 $31,307 $32,542
Depreciation expense 1,702 1,399 3,278 2,993
Amortization of intangibles 6,622 6,412 13,245 11,174
Capital expenditures 1,595 2,320 2,603 3,690
Purchase of treasury shares 28,408 - 50,271 -
As of As of
July 1, July 2,
Other Information 2005 2004
---------- --------
Days of sales outstanding in
accounts receivable 54.0 50.5
Inventory turns for the
quarter 6.4 6.7
Number of treasury shares
purchased to date 1,875,000 -
CONTACT: Avocent Corporation
Dusty Pritchett, 256-217-1300
or
Teddy Blankenship, 256-217-1301