Exhibit 99.19
Avocent Reports Record Sales for Second Quarter
HUNTSVILLE, Ala.--(BUSINESS WIRE)--July 19, 2006--Avocent Corporation
(NASDAQ:AVCT) today reported that net sales for the second quarter ended June
30, 2006 were $118.0 million, an increase of 31.8% compared with the second
quarter of 2005.
"The strong results in the second quarter reflected renewed strength across
our core product lines," stated John R. Cooper, chairman and chief executive
officer of Avocent Corporation. "We are particularly pleased that the rapid
integration of the Cyclades acquisition, which closed at the end of the first
quarter 2006, enabled the serial management products to make the expected
contribution to our revenue. We also are pleased with the increased sales of our
digital KVM products and embedded software solutions and the strong growth in
Asian sales."
Overall Results
Second quarter 2006 operational income, which is income prior to intangible
amortization and stock compensation expenses, was $18.7 million, or $0.38 per
diluted share, compared with operational income of $15.9 million, or $0.31 per
diluted share, in the second quarter of 2005. (See "Use of Non-GAAP Financial
Measures" discussion below.) Weighted average shares outstanding declined 3.4%
over the prior year to 48.7 million in the second quarter of 2006 due to
Avocent's repurchase of shares under its previously-announced stock repurchase
programs.
GAAP net income for the second quarter of 2006 increased to $13.6 million,
or $0.28 per diluted share. This compares with GAAP net income of $11.1 million,
or $0.22 per diluted share, in the second quarter of 2005. Net adjustments to
reconcile operational income to GAAP net income were $5.1 million in the second
quarter of 2006, including $3.3 million in intangible amortization and $1.8
million in stock compensation expenses. Net adjustments to reconcile to GAAP net
income were $4.3 million in intangible amortization and $510,000 in stock
compensation expenses in the second quarter of 2005.
"Second quarter earnings benefited from higher sales, growth in margins and
the results of cost reductions implemented in the second half of 2005. Our
earnings were particularly strong in light of the $2.3 million in additional
costs we incurred in the second quarter related to the integration of Cyclades.
In addition, last year's second quarter earnings included a one-time $5.0
million gain from the settlement of a lawsuit," noted Mr. Cooper. "We are also
pleased that the Cyclades integration efforts continue to run ahead of our
original internal schedule and we anticipate additional operational efficiencies
to be realized during the next two quarters."
Branded sales increased 54.3% from the second quarter of 2005 and accounted
for 59.9% of total second quarter 2006 sales. Sales of products acquired with
Cyclades were included in Branded sales for the quarter and contributed to the
large increase in sales of Branded products. OEM sales increased 8.3% from the
second quarter of 2005 and accounted for 40.1% of total second quarter 2006
sales. Digital product sales accounted for 57% of total sales and embedded
product revenues climbed to $8.8 million, an increase of 79.1% compared with the
second quarter of 2005. U.S. sales increased 27.6% to $67.3 million and
international sales rose 37.9% to $50.7 million compared with the second quarter
of 2005.
Gross profit, excluding stock-based compensation, for the second quarter of
2006 increased 35.5% to a record $71.6 million and a 60.6% gross margin,
compared with $52.8 million and a gross margin of 59.0% in the second quarter of
2005. The increase in gross profit and margin was due to higher sales and
improved product mix, including increased sales of digital products and higher
embedded product revenues.
Research and development expenses, excluding stock-based compensation,
decreased to $13.6 million, or 11.5% of sales, from $14.1 million, or 15.7% of
sales, in the second quarter of 2005. "Over the last year we have systematically
redirected our R&D investments from mature markets to our digital products and
other faster-growing markets. We also remain focused on product enhancements and
redesigns to improve our product benefits and improve manufacturing
efficiencies," continued Mr. Cooper. "Our ability to absorb Cyclades'
engineering organization without increasing R&D expenses is a result of the
actions we took during the last half of 2005 to reduce our engineering costs in
several more mature areas of development."
Selling, general and administrative expenses, excluding stock-based
compensation, increased 30.1% to $30.8 million compared with $23.6 million in
the second quarter of 2005. Avocent had higher selling expenses in the second
quarter of 2006 related to the increase in sales, the inclusion of Cyclades for
a full quarter and additional marketing expenditures for recently introduced
products.
During the second quarter of 2006, Avocent incurred $2.3 million in
severance and integration expenses related to integrating Cyclades.
Operating income, excluding stock-based compensation and intangible asset
amortization, increased 65.6% to $25.0 million in the second quarter of 2006
compared with $15.1 million in the second quarter of 2005.
Avocent's cash flow from operations was approximately $13.5 million for the
second quarter of 2006. Avocent funded the Cyclades acquisition with over $90
million in cash-on-hand. During the second quarter, Avocent announced the
signing of a $250 million unsecured five-year revolving bank line of credit to
fund, in part, future stock repurchases and the acquisition of LANDesk Group
Limited, which Avocent expects to complete in August 2006.
During the second quarter of 2006, Avocent repurchased approximately 4.0
million of its common shares at a total cost of approximately $95.3 million.
Second Quarter Division Results
Revenues from the Management Systems Division advanced 29.1% to $103.0
million in the second quarter of 2006 from $79.8 million in the second quarter
of 2005, while operating income from this division increased to $26.9 million in
the second quarter of 2006 from $21.2 million in the second quarter of 2005,
primarily as a result of the acquisition of Cyclades and the increase in
revenues from the digital product lines. Revenues for the Embedded Software and
Solutions Division grew 79.1% to $8.8 million in the second quarter of 2006 from
$4.9 million in the second quarter of 2005, while operating income increased to
$3.1 million in the second quarter of 2006 from $484,000 in the second quarter
of 2005, primarily resulting from the increased revenue contribution of our
embedded KVM solutions as adoption of these platforms by our OEM customers
increases and additional revenue from the acquisition of the Agilent remote
management product line in March 2006. Revenues from the three emerging
businesses grew 39.1% to $5.3 million in the second quarter of 2006 compared
with $3.8 million in the second quarter of 2005, while operating losses from
these divisions decreased to $3.0 million in the second quarter of 2006 from
$3.9 million in the second quarter of 2005.
Use of Non-GAAP Financial Measures
Income prior to intangible amortization, stock compensation and in-process
research and development 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 acquisitions, and non-cash stock-based
compensation expense. Avocent believes that operational income is a measure of
performance used by many 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 and Additional Information
Avocent will provide an on-line, real-time webcast and rebroadcast of its
second quarter results conference call to be held July 20, 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. Avocent has also
furnished additional commentary on the second quarter results simultaneously
with this release on a Form 8-K filed with the SEC and on its website.
About Avocent Corporation
Avocent Corporation is the leading supplier of connectivity solutions for
enterprise data centers, branch offices, and small to medium size businesses
worldwide. Branded and OEM products include remote and local access solutions
for switching, serial console, power extension, intelligent platform management
interface (IPMI), mobile and video display management 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 future revenue and penetration of the
serial-management market resulting from our acquisition of Cyclades, 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 those for the Linux server market),
engineering and design activities, and the integration and operation of
Cyclades. 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 and
acquisition integration, 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 our annual
report on Form 10-K filed with the Securities and Exchange Commission on March
6, 2006 and our quarterly report on Form 10-Q filed with the SEC on May 10,
2006. 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 June 30, 2006
Stock
Operational Compensation(a) Adjustments(b) GAAP
----------- --------------- -------------- ---------
Net sales $ 118,005 $118,005
Cost of sales 46,430 $ 164 46,594
----------- --------------- -------------- ---------
Gross profit 71,575 (164) - 71,411
Research and
development
expenses 13,559 762 - 14,321
Selling, general
and
administrative
expenses 30,771 1,796 151 32,718
Cyclades
severance and
integration
expenses 2,269 - - 2,269
Amortization of
intangible
assets - - 4,901 4,901
----------- --------------- -------------- ---------
Operating
income 24,976 (2,722) (5,052) 17,202
Other income
(expense), net 1,778 - - 1,778
----------- --------------- -------------- ---------
Income before
income taxes 26,754 (2,722) (5,052) 18,980
Provision for
income taxes 8,051 (969) (1,683) 5,399
----------- --------------- -------------- ---------
Net income $ 18,703 $ (1,753) $ (3,369) $ 13,581
=========== =============== ============== =========
Earnings per
share:
Basic $ 0.39 $ 0.28
Diluted $ 0.38 $ 0.28
Weighted average
shares and
common
equivalents
outstanding:
Basic 47,943 - - 47,943
Diluted 48,709 - - 48,709
For the Quarter Ended July 1, 2005
Stock
Operational Compensation(a) Adjustments(b) 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 23,649 219 157 24,025
Amortization of
intangible
assets - 6,623 6,623
----------- --------------- -------------- ---------
Operating
income 15,081 (510) (6,780) 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 (510) (6,795) 14,730
Provision for
income taxes 6,148 - (2,517) 3,631
----------- --------------- -------------- ---------
Net income $ 15,887 $ (510) $ (4,278) $ 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
(a) Stock Compensation relates to expensing of stock options, restricted stock
units and performance shares and amortization of deferred compensation (from
the capitalization of the value of stock options assumed in acquisitions).
Avocent adopted SFAS 123R effective January 1, 2006 and began recording
expense related to outstanding unvested stock options on that date as well
as on subsequent equity compensation grants.
(b) Adjustments relate to intangibles recorded as the result of acquisitions.
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 in 2005.
AVOCENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
For the Six Months Ended June 30, 2006
Stock
Operational Compensation(a) Adjustments(b) GAAP
----------- --------------- -------------- ---------
Net sales $ 212,517 $212,517
Cost of sales 84,936 $ 214 85,150
----------- --------------- -------------- ---------
Gross profit 127,581 (214) - 127,367
Research and
development
expenses 26,467 1,063 - 27,530
Acquired in-
process research
and development
expenses - 2,100 2,100
Selling, general
and
administrative
expenses 53,514 2,286 302 56,102
Cyclades
severance and
integration
expenses 2,269 - 2,269
Amortization of
intangible
assets - - 7,252 7,252
----------- --------------- -------------- ---------
Operating
income 45,331 (3,563) (9,654) 32,114
Other income
(expense), net 4,795 - - 4,795
----------- --------------- -------------- ---------
Income before
income taxes 50,126 (3,563) (9,654) 36,909
Provision for
income taxes 14,002 (1,231) (2,376) 10,395
----------- --------------- -------------- ---------
Net income $ 36,124 $ (2,332) $ (7,278) $ 26,514
=========== =============== ============== =========
Earnings per
share:
Basic $ 0.74 $ 0.55
Diluted $ 0.73 $ 0.54
Weighted average
shares and
common
equivalents
outstanding:
Basic 48,515 - - 48,515
Diluted 49,336 - - 49,336
For the Six Months Ended July 1, 2005
Stock
Operational Compensation(a) Adjustments(b) 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 45,552 438 315 46,305
Amortization of
intangible
assets - 13,245 13,245
----------- --------------- -------------- ---------
Operating
income 22,583 (1,019) (13,560) 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 (1,019) (13,590) 16,883
Provision for
income taxes 8,285 - (4,335) 3,950
----------- --------------- -------------- ---------
Net income $ 23,207 $ (1,019) $ (9,255) $ 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
(a) Stock Compensation relates to expensing of stock options, restricted stock
units and performance shares and amortization of deferred compensation (from
the capitalization of the value of stock options assumed in acquisitions).
Avocent adopted SFAS 123R effective January 1, 2006 and began recording
expense related to outstanding unvested stock options on that date as well
as on subsequent equity compensation grants.
(b) Adjustments relate to acquired in-process research and development expense
from the Cyclades acquisition and intangibles recorded as the result of
acquisitions. 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 in 2005.
AVOCENT CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
June 30, December 31,
2006 2005
----------- -----------
Cash, cash equivalents
and short-term investments $ 163,454 $ 293,903
Accounts receivable, net 78,399 68,712
Inventories, net 31,849 21,178
Other current assets 10,902 10,524
Deferred income tax 6,532 4,054
----------- -----------
Total current assets 291,136 398,371
Investments 30,335 51,939
Property and equipment, net 37,954 36,801
Goodwill 332,946 269,992
Other intangible assets, net 53,761 15,763
Other assets 13,030 885
----------- -----------
Total assets $ 759,162 $ 773,751
=========== ===========
Accounts payable and other accrued expenses $ 32,269 $ 23,569
Income tax payable 10,188 11,270
Other current liabilities 27,779 18,908
----------- -----------
Total current liabilities 70,236 53,747
Line of credit 12,005 -
Other non-current liabilities 28,933 4,682
----------- -----------
Total liabilities 111,174 58,429
Total stockholders' equity 647,988 715,322
----------- -----------
Total liabilities and stockholders' equity $ 759,162 $ 773,751
=========== ===========
AVOCENT CORPORATION
Additional Financial Information
(Unaudited, in thousands)
Quarter Ended Six Months Ended
Revenue by Product Line June 30, July 1, June 30, July 1,
2006 2005 2006 2005
-------- ------- -------- --------
KVM $ 83,806 $75,486 $161,797 $141,144
Serial Management 13,817 732 14,810 1,857
Other 20,382 13,320 35,910 23,342
-------- ------- -------- --------
Total $118,005 $89,538 $212,517 $166,343
======== ======= ======== ========
Quarter Ended Six Months Ended
Revenue by Distribution Channel June 30, July 1, June 30, July 1,
2006 2005 2006 2005
-------- ------- -------- --------
Branded $ 70,642 $45,796 $118,597 $ 82,523
OEM 47,363 43,742 93,920 83,820
-------- ------- -------- --------
Total $118,005 $89,538 $212,517 $166,343
======== ======= ======== ========
Quarter Ended Six Months Ended
Revenue by Division June 30, July 1, June 30, July 1,
2006 2005 2006 2005
-------- ------- -------- --------
Management Systems $102,995 $79,804 $187,360 $149,644
Embedded Software and Solutions 8,828 4,928 14,961 8,708
Other business units 5,251 3,775 8,272 6,960
Corporate and unallocated 931 1,031 1,924 1,031
-------- ------- -------- --------
Total $118,005 $89,538 $212,517 $166,343
======== ======= ======== ========
Quarter Ended Six Months Ended
Operating Profit by Division June 30, July 1, June 30, July 1,
2006 2005 2006 2005
-------- ------- -------- --------
Management Systems $ 26,920 $21,181 $ 51,636 $ 37,104
Embedded Software and Solutions 3,090 484 4,493 (95)
Other business units (3,019) (3,858) (6,779) (8,973)
Corporate and unallocated (4,737) (3,237) (7,578) (6,472)
-------- ------- -------- --------
Total $ 22,254 $14,570 $ 41,772 $ 21,564
======== ======= ======== ========
Quarter Ended Six Months Ended
Cash Flow Highlights June 30, July 1, June 30, July 1,
2006 2005 2006 2005
-------- ------- -------- --------
Cash provided by operations $ 13,527 $21,153 $ 30,091 $ 31,307
Depreciation expense 2,200 1,702 3,974 3,278
Capital expenditures 1,468 1,595 3,157 2,603
Purchase of treasury shares 95,303 28,408 122,255 50,271
CONTACT: Avocent Corporation, Huntsville
Edward H. Blankenship, 256-217-1301