EXHIBIT 99.1
Record Fourth Quarter and Year for Avocent
HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 25, 2007--Avocent
Corporation (NASDAQ: AVCT) today reported record revenues for the
fourth quarter and year ended December 31, 2006. Net sales for the
fourth quarter increased 58% to $168.9 million compared with $106.8
million in the fourth quarter of 2005. Net sales for the year
increased to $523.7 million in 2006 from $369.9 million in 2005.
"Avocent reported record fourth quarter revenues as a result of
continued growth from our core KVM products, including digital and
embedded technologies, and the contribution from the Cyclades and
LANDesk acquisitions," stated John R. Cooper, chairman and chief
executive officer of Avocent Corporation. "In our first full quarter
of operations with LANDesk it added approximately $29.7 million to
fourth quarter revenues and was a primary factor in our gross margin
rising to a record 66.7%."
Fourth Quarter Earnings Summary
Fourth quarter 2006 operational income, which is income prior to
intangible amortization and stock compensation expenses, rose 32% to
$32 million, or $0.62 per diluted share, compared with operational
income of $24.6 million, or $0.49 per diluted share, in the fourth
quarter of 2005. (See "Use of Non-GAAP Financial Measures" discussion
below.)
GAAP net income for the fourth quarter of 2006 was $17.1 million,
or $0.33 per diluted share, compared to GAAP net income of $19.1
million, or $0.38 per diluted share, in the fourth quarter of 2005.
Net adjustments to reconcile operational income to GAAP net income
were $15.3 million in the fourth quarter of 2006, including $11.9
million in intangible amortization and $6.4 million in stock
compensation expenses. 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.
Sales Increase 58% to a Record $168.9 Million
Branded sales increased 91.8% from the fourth quarter of 2005 and
accounted for 64.9% of total fourth quarter 2006 sales. The
significant growth in branded sales benefited from the addition of
Cyclades and LANDesk products, most of which are included in Avocent's
branded product sales. Sales of Avocent's branded KVM products also
enjoyed continued growth due to contributions from newer products. OEM
sales increased 19.3% from the fourth quarter of 2005 and accounted
for 35.1% of total fourth quarter 2006 sales. Digital product sales
accounted for 50.3% of total sales and embedded product revenues
climbed to $9.4 million, an increase of 35% compared with the fourth
quarter of 2005. U.S. sales increased 57% to $94.6 million and
international sales rose 59% to $74.3 million compared with the fourth
quarter of 2005.
"The acquisitions of Cyclades and LANDesk in 2006 contributed to a
significant change in our product mix," continued Mr. Cooper. "As a
result, our core KVM products accounted for 58% of fourth quarter 2006
sales compared with 84% in the fourth quarter of last year. We expect
this trend to continue in 2007 due to the fast growing markets for
Cyclades and LANDesk products. We are expanding Cyclades penetration
of the Linux server and networking infrastructure markets with
complimentary technology provided by Avocent. LANDesk provides a new
market for Avocent with their suite of IT management software products
and we expect to leverage our joint markets to accelerate their growth
opportunities," stated Mr. Cooper.
Operating Results
Gross profit for the fourth quarter of 2006 increased 70% to
$112.6 million ($108.2 million on a GAAP basis) compared with
$65.1 million in the fourth quarter of 2005. Gross margin was a record
66.7% (64.5% on a GAAP basis) in the fourth quarter of 2006 compared
with 60.9% in the fourth quarter of 2005. The addition of LANDesk's
software revenues was a major contributor to the growth in gross
profit and margins. In addition, margin benefited from increased sales
and improved product mix of Avocent products, including higher sales
of digital products and embedded products.
Research and development expenses were $18.2 million ($20.3
million on a GAAP basis, which includes stock-based compensation of
$2.1 million), or 10.8% of sales, compared with $13.1 million, or
12.3% of sales, in the fourth quarter of 2005. "We benefited from
improved leverage of our R&D investments due to our larger sales base
and a full quarter of cost savings from the Cyclades integration
activities," continued Mr. Cooper. "We remain focused on bringing new
technologies to market while improving the performance of existing
products and services. During the fourth quarter, we introduced new
products through our emerging technologies divisions, including our
first desktop/extension over IP product from our Desktop Solutions
Division and our first wired and wireless media extender, the
Emerge(TM) MPX1000, for managing AV extension networks from our
Connectivity and Control Division. We also integrated our mobile
device technology with LANDesk's management suite to expand this
solution set to include mobile devices."
Selling, general and administrative expenses increased to $50.2
million ($54.2 million on a GAAP basis, which includes stock-based
compensation of $3.8 million), or 29.7% of sales, compared with
$22.9 million in the fourth quarter of 2005. Avocent had higher
expenses in the fourth quarter of 2006 related to the increase in
sales, the addition of Cyclades and LANDesk, and additional marketing
expenditures for recently introduced products. The acquisitions added
approximately 800 employees to Avocent's headcount.
Interest expense related to debt incurred with the acquisition of
LANDesk was $2.3 million in the fourth quarter of 2006. There was no
interest expense in the fourth quarter of 2005.
Weighted average shares outstanding increased 5% over the prior
year to 52.1 million in the fourth quarter of 2006 due to the issuance
of shares to LANDesk shareholders in the third quarter, offset by
Avocent's repurchase of shares under its previously-announced stock
repurchase programs.
Fourth Quarter Division Results
Revenues from the Management Systems Division advanced 31% to
$124.3 million in the fourth quarter of 2006 from $95.0 million in the
fourth quarter of 2005, while operating income from this division
increased to $40.2 million in the fourth quarter of 2006 from
$33.5 million in the fourth quarter of 2005. The Management Systems
Division benefited from growth in the Company's core KVM product line,
the addition of Cyclades and the increase in revenues from the digital
product lines.
The LANDesk Division produced revenues of $29.7 million in the
fourth quarter of 2006 and had an operating loss of $1.2 million for
the quarter. LANDesk, acquired on August 31, 2006, reported sales of
$24.8 million for their fourth quarter of 2005.
Revenues for the Embedded Software and Solutions Division grew 35%
to $9.4 million in the fourth quarter of 2006 from $7.0 million in the
fourth quarter of 2005, while operating income increased to $3.6
million in the fourth quarter of 2006 from $635,000 in the fourth
quarter of 2005.
Revenues from the three emerging businesses increased to $4.7
million in the fourth quarter of 2006 from $3.7 million in the fourth
quarter of 2005, while operating losses from these divisions decreased
to $3.8 million in the fourth quarter of 2006 from $4.0 million in the
fourth quarter of 2005. After the fourth quarter the operations of the
Mobile Solutions Division were integrated into the LANDesk division.
Balance Sheet
The Company's cash flow from operations was approximately $13
million for the fourth quarter of 2006 with approximately $108 million
in cash, cash equivalents and investments at the quarter's end. At the
end of the quarter Avocent had $150 million of debt outstanding.
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 fourth quarter results conference call to be held January 25,
2007. 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 fourth
quarter results simultaneously with this release on a Form 8-K filed
with the SEC and on its website.
About Avocent Corporation
Avocent delivers IT operations and infrastructure management
solutions for enterprises worldwide, helping customers to reduce costs
and simplify complex IT environments via integrated, centralized
in-band and out-of-band hardware and software. Through LANDesk,
Avocent also is a leading provider of systems, security, and process
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 the new markets and
accelerated growth opportunities (including the penetration of the
Linux server and networking infrastructure markets) resulting from the
integration of Avocent technology into Cyclades products and LANDesk's
management suite into Avocent products, the changing nature of our
product mix due to the fast growing markets for Cyclades and LANDesk
products, and our continued focus on bringing new technologies to
market and improving the performance of our existing products and
technologies. 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 reports on
Form 10-Q filed with the SEC on May 10, 2006, August 4, 2006 and
November 7, 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 Income
(Unaudited, in thousands, except per share data)
For the Quarter Ended December 31, 2006
Operational Stock Adjustments GAAP
Compensation (b)
(a)
----------- ------------- ----------- ---------
Net sales $168,904 $(1,206) $167,698
Cost of sales 56,292 $475 2,683 59,450
----------- ------------- ----------- ---------
Gross profit 112,612 (475) (3,889) 108,248
Research and
development expenses 18,203 2,130 - 20,333
Selling, general and
administrative
expenses 50,227 3,823 151 54,201
Acquisition integration
expenses 331 - - 331
Amortization of
intangible assets - - 9,207 9,207
----------- ------------- ----------- ---------
Operating income 43,851 (6,428) (13,247) 24,176
Other income (expense),
net (1,283) - - (1,283)
----------- ------------- ----------- ---------
Income before income
taxes 42,568 (6,428) (13,247) 22,893
Provision for income
taxes 10,083 (1,340) (2,995) 5,748
----------- ------------- ----------- ---------
Net income $32,485 $(5,088) $(10,252) $17,145
=========== ============= =========== =========
Earnings per share:
Basic $0.64 $0.34
Diluted $0.62 $0.33
Weighted average shares
and common equivalents
outstanding:
Basic 50,826 - - 50,826
Diluted 52,110 - - 52,110
For the Quarter Ended December 31, 2005
Operational Stock Adjustments GAAP
Compensation (b)
(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 22,916 219 $151 23,286
Amortization of
intangible assets - - 2,533 2,533
----------- ------------- ----------- ---------
Operating income 29,077 (485) (2,684) 25,908
Other income (expense),
net 2,316 - 727 3,043
----------- ------------- ----------- ---------
Income before income
taxes 31,393 (485) (1,957) 28,951
Provision for income
taxes 6,818 - 3,082 9,900
----------- ------------- ----------- ---------
Net income $24,575 $(485) $(5,039) $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
(a) Stock Compensation relates to expensing of stock options,
restricted stock units and performance shares and amortization of
deferred compensation (from 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. 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.
(b) Adjustments relate to depreciation and amortization of the
purchase accounting adjustment to deferred revenue and intangibles
recorded as the result of acquisitions.
AVOCENT CORPORATION
Condensed Consolidated Statements of Income
(Unaudited, in thousands, except per share data)
For the Year Ended December 31, 2006
Operational Stock Adjustments GAAP
Compensation (b)
(a)
----------- ------------- ----------- ---------
Net sales $523,715 $(1,686) $522,029
Cost of sales 192,869 $977 3,577 197,423
----------- ------------- ----------- ---------
Gross profit 330,846 (977) (5,263) 324,606
Research and
development expenses 59,564 4,302 - 63,866
Acquired in-process
research and
development expenses - 20,700 20,700
Selling, general and
administrative
expenses 138,707 9,307 603 148,617
Acquisition
integration expenses 3,904 - - 3,904
Amortization of
intangible assets - - 23,049 23,049
----------- ------------- ----------- ---------
Operating income 128,671 (14,586) (49,615) 64,470
Other income
(expense), net 3,784 - - 3,784
----------- ------------- ----------- ---------
Income before income
taxes 132,455 (14,586) (49,615) 68,254
Provision for income
taxes 33,427 (3,656) (7,726) 22,045
----------- ------------- ----------- ---------
Net income $99,028 $(10,930) $(41,889) $46,209
=========== ============= =========== =========
Earnings per share:
Basic $2.04 $0.95
Diluted $2.00 $0.93
Weighted average
shares and common
equivalents
outstanding:
Basic 48,548 - - 48,548
Diluted 49,475 - - 49,475
For the Year Ended December 31, 2005
Operational Stock Adjustments GAAP
Compensation (b)
(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 88,861 876 $617 90,354
Amortization of
intangible assets - - 18,509 18,509
----------- ------------- ----------- ---------
Operating income 74,237 (2,014) (19,126) 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 (2,014) (18,444) 67,086
Provision for income
taxes 21,743 - (3,006) 18,737
----------- ------------- ----------- ---------
Net income $65,801 $(2,014) $(15,438) $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
(a) Stock Compensation relates to expensing of stock options,
restricted stock units and performance shares and amortization of
deferred compensation (from 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. 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.
(b) Adjustments related to acquired in-process research and
development expense from the Cyclades and LANDesk acquisitions,
depreciation and amortization of the purchase accounting adjustment
to deferred revenue and intangibles recorded as the result of
acquisitions.
AVOCENT CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
December 31, 2006 December 31, 2005
----------------- -----------------
Cash, cash equivalents
and short-term investments $107,165 $293,903
Accounts receivable, net 127,457 68,712
Inventories, net 41,765 21,178
Other current assets 17,990 10,524
Deferred income tax 2,299 4,054
----------------- -----------------
Total current assets 296,676 398,371
Investments 987 51,939
Property and equipment, net 38,004 36,801
Goodwill 633,185 269,992
Other intangible assets, net 209,673 15,763
Other assets 2,676 885
----------------- -----------------
Total assets $1,181,201 $773,751
================= =================
Accounts payable and other accrued
expenses $42,043 $23,569
Payable to former LANDesk
shareholders 27,013 -
Income tax payable 19,249 11,270
Deferred revenue 43,444 -
Other current liabilities 28,783 18,908
----------------- -----------------
Total current liabilities 160,532 53,747
Line of credit obligation 150,000 -
Deferred income taxes 24,708 -
Deferred revenue, net of current
portion 10,070 -
Other non-current liabilities 1,371 4,682
----------------- -----------------
Total liabilities 346,681 58,429
Total stockholders' equity 834,520 715,322
----------------- -----------------
Total liabilities and stockholders'
equity $1,181,201 $773,751
================= =================
AVOCENT CORPORATION
Additional Financial Information
(Unaudited, in thousands)
Quarter Ended Year Ended
December December December December
31, 31, 31, 31,
2006 2005 2006 2005
--------- --------- --------- ---------
Revenue by Distribution Channel
- -------------------------------
Branded $109,590 $57,139 $315,107 $191,900
OEM 59,314 49,698 208,608 177,988
--------- --------- --------- ---------
Total $168,904 $106,837 $523,715 $369,888
========= ========= ========= =========
Revenue by Division
- -------------------------------
Management Systems $124,259 $95,027 $426,412 $330,213
LANDesk 29,680 - 43,202 -
Embedded Software and Solutions 9,437 6,983 33,766 21,882
Other business units 4,704 3,727 16,658 14,532
Corporate and unallocated 824 1,100 3,677 3,261
--------- --------- --------- ---------
Total $168,904 $106,837 $523,715 $369,888
========= ========= ========= =========
Management Systems Division
Revenue by Product Line
- -------------------------------
KVM $98,797 $90,107 $351,298 $311,734
Serial Management 15,844 1,423 46,533 4,124
Other 9,618 3,497 28,581 14,355
--------- --------- --------- ---------
Total $124,259 $95,027 $426,412 $330,213
========= ========= ========= =========
LANDesk Division Revenues by
Type
- -------------------------------
Licenses and royalties $19,443 $- $29,700 $-
Maintenance and services 10,237 - 13,502 -
--------- --------- --------- ---------
Total $29,680 $- $43,202 $-
========= ========= ========= =========
Operating Profit (Loss) by
Division (includes stock-based
compensation expense)
- -------------------------------
Management Systems $40,162 $33,477 $124,969 $94,382
LANDesk (1,156) - 4,379 -
Embedded Software and Solutions 3,634 635 11,673 26
Other business units (3,788) (4,036) (14,706) (11,340)
Corporate and unallocated (1,429) (1,484) (12,230) (10,845)
--------- --------- --------- ---------
Total $37,423 $28,592 $114,085 $72,223
========= ========= ========= =========
Cash Flow Highlights
- -------------------------------
Cash provided by operations $12,935 $18,255 $65,666 $70,986
Depreciation expense 2,693 1,224 8,506 7,037
Capital expenditures 2,671 1,719 4,750 3,798
Purchase of treasury shares 30,701 10,188 188,318 76,279
CONTACT: Avocent Corporation
Senior Vice President of Finance and
Chief Financial Officer:
Edward H. Blankenship, 256-217-1301