Exhibit 99.1 Avocent Reports Record Sales and Net Income for Fourth Quarter HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 19, 2006--Avocent Corporation (NASDAQ:AVCT) today reported record sales and net income for the fourth quarter and year ended December 31, 2005. Net sales for the fourth quarter increased 6.8% to $106.8 million compared with sales of $100.0 million in the fourth quarter of 2004. "Avocent set new records for sales through all distribution channels in the fourth quarter," stated John R. Cooper, chairman and chief executive officer of Avocent Corporation. "We also gained traction in all major markets, including the U.S., Europe and Asia. Our growth benefited from higher sales of newer products and contributions from acquisitions made over the past two years. Revenues from digital products and embedded technologies were especially strong compared with last year. "Avocent's gross margin exceeded 60% for the first time and benefited from a higher percentage of digital products and embedded technologies. Our GAAP operating margin for the fourth quarter of 2005 was 24.3% due to the higher gross margin and lower research and development expense. 2005 was the first year that digital products accounted for more than half of Avocent's total revenues," continued Mr. Cooper. Fourth quarter 2005 operational income, which is prior to intangible amortization, tax on repatriated earnings, gain on sale of property held for investment and merger-related expenses, was $24.6 million, or $0.49 per diluted share, compared with income prior to intangible amortization, merger-related expenses, and equity impairment charges of $20.6 million, or $0.40 per diluted share, in the fourth 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 fourth quarter of 2005, including $2.5 million in intangible amortization and $3.8 million in tax on repatriated earnings. During the fourth quarter of 2005, we repatriated $90 million of earnings from our overseas subsidiaries pursuant to the American Jobs Creation Act of 2004. 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 investments in two private companies. In addition, the adjustments in 2004 included a related $3.0 million tax benefit. GAAP net income for the fourth quarter of 2005 increased 57.9% to $19.1 million, or $0.38 per diluted share. This compares with GAAP net income of $12.1 million, or $0.23 per diluted share, in the fourth quarter of 2004. Weighted average shares outstanding declined 3.3% over the year to 49.8 million at the end of fiscal 2005 due to Avocent's repurchase of shares under its previously announced stock repurchase program. Branded sales increased 11.1% from the fourth quarter of 2004 and accounted for 53.5% of total fourth quarter 2005 sales. OEM sales increased 2.2% from the fourth quarter of 2004 and accounted for 46.5% of total fourth quarter 2005 sales. U.S. sales increased 6.1% to $60.1 million and international sales rose 7.7% to $46.7 million compared with the fourth quarter of 2004. Gross profit for the fourth quarter of 2005 increased 10.3% to $65.1 million with a gross margin of 60.9%, a record for Avocent. This compared with gross profit of $59.0 million and a gross margin of 59.0% in the fourth quarter of 2004. The increase in gross profit was due to higher sales and improved product mix, including increased sales of digital products, software and IPMI products. Research and development expenses increased 3.6% to $13.4 million, or 12.5% of sales, compared with $12.9 million, or 12.9% of sales, in the fourth quarter of 2004. "Our focus on R&D has been a primary catalyst in expanding our digital product offerings. Avocent was the first to market with a digital KVM product and we are the leader in this fast growing segment. In addition, our margins have benefited due to the increased percentage of digital products we sell and the improved manufacturing efficiencies we have achieved through product enhancement and redesigns," continued Mr. Cooper. Selling, general and administrative expenses increased 9.6% to $23.3 million compared with $21.2 million in the fourth quarter of 2004. The increase in SG&A expenses was due primarily to higher selling expenses related to the increase in sales and additional marketing expenditures for recently introduced products. "We announced the reorganization of our operations during the fourth quarter into five divisions based on key product segments and markets within the company," continued Mr. Cooper. "We expect the new divisions will facilitate our continued growth by enhancing customer service, speeding delivery of products to market, and better focusing Avocent's research, development and marketing expenditures." Avocent's balance sheet and cash position remained strong as of December 31, 2005. The Company's cash flow from operations was approximately $19 million for the fourth quarter of 2005 with approximately $346 million in cash, cash equivalents and investments at the quarter's end. Avocent had no long-term debt as of December 31, 2005. Use of Non-GAAP Financial Measures Income prior to intangible amortization, tax on repatriated earnings, gain on sale of property held for investment 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, taxes paid on repatriated earnings from overseas subsidiaries, 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 19, 2006. The live broadcast will be available on-line at www.avocent.com as well as www.investorcalendar.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), engineering and design activities, and expected benefits resulting from our reorganization. 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 December 31, 2005 Operational Adjustments GAAP (a) ----------- ----------- --------- Net sales $106,837 $106,837 Cost of sales 41,721 41,721 ----------- ----------- --------- Gross profit 65,116 - 65,116 Research and development expenses 13,123 $266 13,389 Selling, general and administrative expenses 22,916 370 23,286 Amortization of intangible assets - 2,533 2,533 ----------- ----------- --------- Operating income 29,077 (3,169) 25,908 Other income (expense), net 2,316 727 3,043 ----------- ----------- --------- Income before income taxes 31,393 (2,442) 28,951 Provision for income taxes 6,818 3,082 9,900 ----------- ----------- --------- Net income $24,575 $(5,524) $19,051 =========== =========== ========= Earnings per share: Basic $0.50 $0.39 Diluted $0.49 $0.38 Weighted average shares and common equivalents outstanding: Basic 48,917 - 48,917 Diluted 49,771 (8) 49,763 For the Quarter Ended December 31, 2004 Operational Adjustments GAAP (a) ----------- ----------- --------- 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 (a) Note: Adjustments relate to 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 adjustment to other income includes a gain on the sale of property held for investment in 2005; adjustments in 2004 include a write-down of investments in two privately held companies. The adjustment to the 2005 provision for taxes includes a one-time tax expense related to repatriated earnings from our foreign subsidiary pursuant to the American Jobs Creation Act of 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 Year Ended December 31, 2005 Operational Adjustments GAAP (a) ----------- ----------- --------- Net sales $369,888 $369,888 Cost of sales 151,043 151,043 ----------- ----------- --------- Gross profit 218,845 - 218,845 Research and development expenses 55,747 $1,138 56,885 Selling, general and administrative expenses 88,861 1,493 90,354 Amortization of intangible assets - 18,509 18,509 ----------- ----------- --------- Operating income 74,237 (21,140) 53,097 Income from settlement of lawsuit 5,000 5,000 Other income (expense), net 8,307 682 8,989 ----------- ----------- --------- Income before income taxes 87,544 (20,458) 67,086 Provision for income taxes 21,743 (3,006) 18,737 ----------- ----------- --------- Net income $65,801 $(17,452) $48,349 =========== =========== ========= Earnings per share: Basic $1.33 $0.98 Diluted $1.31 $0.96 Weighted average shares and common equivalents outstanding: Basic 49,318 - 49,318 Diluted 50,287 (33) 50,254 For the Year Ended December 31, 2004 Operational Adjustments GAAP (a) ----------- ----------- --------- 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 (a) Note: Adjustments relate to acquired in-process research and development expense from the Sonic Mobility, OSA and Crystal Link acquisitions 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 adjustment to other income includes a gain on the sale of property held for investment in 2005; adjustments in 2004 include a write-down of investments in two privately held companies. The adjustment to the 2005 provision for taxes includes a one-time tax expense related to repatriated earnings from our foreign subsidiary pursuant to the American Jobs Creation Act of 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 (Unaudited, in thousands) December December 31, 2005 31, 2004 ----------- ----------- Cash, cash equivalents and short-term investments $293,903 $239,799 Accounts receivable, net 68,712 60,948 Inventories, net 21,178 21,232 Other current assets 10,524 5,923 Deferred income tax 4,054 6,720 ----------- ----------- Total current assets 398,371 334,622 Investments 51,939 91,547 Property and equipment, net 36,801 39,896 Goodwill, net 269,992 269,892 Intangible assets, net 15,763 33,981 Other assets 885 843 ----------- ----------- Total assets $773,751 $770,781 =========== =========== Accounts payable and other accrued expenses $23,569 $21,368 Income tax payable 11,270 8,494 Other current liabilities 19,973 16,767 ----------- ----------- Total current liabilities 54,812 46,629 Non-current liabilities 3,617 10,855 Total stockholders' equity 715,322 713,297 ----------- ----------- Total liabilities and stockholders' equity $773,751 $770,781 =========== =========== CONTACT: Avocent Corporation Edward H. Blankenship, 256-217-1301