Exhibit 99.7
Avocent Reports First Quarter Results
HUNTSVILLE, Ala.--(BUSINESS WIRE)--April 18, 2007--Avocent Corporation
(NASDAQ:AVCT) today reported financial results for the first quarter ended March
30, 2007. Net sales for the first quarter increased 41.7% to $134 million,
consistent with the expected range provided on April 9, 2007, compared with
$94.5 million reported for the first quarter of 2006.
"As we detailed on April 9, 2007, Avocent's first quarter sales were below
our expectations due to softness in IT spending, project delays by some
customers and a lower level of economic activity than we had forecast," stated
John R. Cooper, chairman and chief executive officer of Avocent Corporation. "As
a result, our growth in sales from the first quarter of 2006 was due primarily
to the contributions from our acquisitions of Cyclades and LANDesk last year."
"Our product suites are very competitive, and we remain positive about the
outlook for Avocent. The addition of Cyclades extended our markets for
serial-based management products and the LANDesk acquisition adds a new market
for Avocent with a suite of IT management software products and strength in
desktop management. We expect to leverage our combined products lines to expand
future growth opportunities," continued Mr. Cooper.
First Quarter Results
First quarter 2007 operational income, which is income prior to intangible
amortization, stock compensation and acquired in-process research and
development expenses, was $12.7 million, or $0.25 per diluted share, compared
with $17.4 million, or $0.35 per diluted share, in the first quarter of 2006.
(See "Use of Non-GAAP Financial Measures" discussion below.)
GAAP net income for the first quarter of 2007 was $746,000, or $0.01 per
diluted share. This compares with GAAP net income of $12.9 million, or $0.26 per
diluted share, in the first quarter of 2006. Net adjustments to reconcile
operational income to GAAP net income were $12.0 million in the first quarter of
2007, including $11.6 million in intangible amortization, $3.7 million in stock
compensation expenses and $4.1 million in related income tax benefits. Net
adjustments to reconcile to GAAP net income were $4.5 million in the first
quarter of 2006, including $2.4 million in intangible amortization, $2.1 million
in acquired in-process research and development, $0.8 million in stock
compensation expenses and $1.0 million in related income tax benefits.
Branded sales increased 79% from the first quarter of 2006 and accounted
for 64.1% of total first quarter 2007 sales. Growth in branded sales was due
largely to the acquisitions of Cyclades and LANDesk. OEM sales increased 3.3%
from the first quarter of 2006 and accounted for 35.9% of total first quarter
2007 sales. U.S. sales increased 42% to $74.2 million and international sales
rose 42% to $59.7 million compared with the first quarter of 2006.
Gross profit for the first quarter of 2007 increased 51.2% to $84.7 million
with a gross margin of 63.2%. This compared with gross profit of $56.0 million
and a gross margin of 59.3% in the first quarter of 2006. The increase in gross
margin was due to higher sales and improved product mix, including increased
sales of digital products and the addition of LANDesk's software revenues.
Research and development expenses increased 53.1% to $19.8 million ($20.9
million on a GAAP basis, which includes stock-based compensation of $1.1
million), or 14.8% of sales, compared with $12.9 million, or 13.7% of sales, in
the first quarter of 2006. "Our R&D spending increased from last year due
primarily from the addition of LANDesk and Cyclades teams," continued Mr.
Cooper. "Our focus remains on integrating the Avocent and LANDesk software
platforms and bringing new technologies to market while improving the
performance and cost of existing products and services."
Selling, general and administrative expenses increased to $46.3 million
($48.7 million on a GAAP basis, which includes stock-based compensation of $2.4
million) compared with $22.7 million in the first quarter of 2006. The increase
in SG&A expenses was due primarily to the addition of Cyclades and LANDesk and
additional marketing expenditures for recently introduced products. Total
employee count increased to approximately 1,800 primarily as a result of the
Cyclades and LANDesk acquisitions.
Avocent's cash flow from operations was approximately $18.8 million for the
first quarter of 2007. At the end of the first quarter, Avocent's cash, cash
equivalents and investments totaled approximately $109 million. Avocent
repurchased approximately 486,000 shares during the first quarter at a total
cost of approximately $15.4 million.
First Quarter Division Results
Revenues from the Management Systems Division advanced to $105.1 million in
the first quarter of 2007 from $90.5 million in the first quarter of 2006,
primarily as a result of the Cyclades acquisition, while operating income from
this division increased to $25.9 million in the first quarter of 2007.
The LANDesk Division produced revenues of $23.9 million in the first
quarter of 2007 with an operating loss of $0.5 million. LANDesk was acquired by
Avocent effective August 31, 2006.
Revenues from the two emerging businesses increased to $4.2 million in the
first quarter of 2007 from $3.0 million in the first quarter of 2006, while
operating losses from these divisions increased to $3.1 million in the first
quarter of 2007 from $2.7 million in the first quarter of 2006.
Use of Non-GAAP Financial Measures
Income prior to intangible amortization, stock compensation and acquired
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 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 and Additional Information
Avocent will provide an on-line, real-time webcast and rebroadcast of its
first quarter results conference call to be held April 19, 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 first 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 outlook for future sales, the expanded markets
and growth opportunities resulting from the integration of Cyclades serial-based
management products and LANDesk's management suite into Avocent products, and
our continued focus on integrating software platforms and bringing new
technologies to market while improving the performance and cost of our existing
products and services. 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
1, 2007. 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 March 30, 2007
Stock
Operational Compensation(1) Adjustments(2) GAAP
----------- ---------------- -------------- ---------
Net sales $133,932 $(781) $133,151
Cost of sales 49,274 $179 2,683 52,136
----------- ---------------- -------------- ---------
Gross profit 84,658 (179) (3,464) 81,015
Research and
development
expenses 19,765 $1,116 20,881
Selling, general
and
administrative
expenses 46,282 2,366 12 48,660
Amortization of
intangible
assets - - 8,962 8,962
----------- ---------------- -------------- ---------
Operating
income 18,611 (3,661) (12,438) 2,512
Other income
(expense), net (1,672) - - (1,672)
----------- ---------------- -------------- ---------
Income before
provision for
income taxes 16,939 (3,661) (12,438) 840
Provision for
income taxes 4,226 (1,005) (3,127) 94
----------- ---------------- -------------- ---------
Net income $12,713 $(2,656) $(9,311) $746
=========== ================ ============== =========
Earnings per
share:
Basic $0.25 $0.01
Diluted $0.25 $0.01
Weighted average
shares and
common
equivalents
outstanding:
Basic 50,733 - - 50,733
Diluted 51,886 - - 51,886
For the Quarter Ended March 31, 2006
Stock
Operational Compensation(1) Adjustments(2) GAAP
----------- ---------------- -------------- ---------
Net sales $94,512 $94,512
Cost of sales 38,505 $50 38,555
----------- ---------------- -------------- ---------
Gross profit 56,007 (50) 55,957
Research and
development
expenses 12,908 $301 13,209
Acquired in-
process research
and development
expenses - - $2,100 2,100
Selling, general
and
administrative
expenses 22,743 490 151 23,384
Amortization of
intangible
assets - 2,351 2,351
----------- ---------------- -------------- ---------
Operating
income 20,356 (841) (4,602) 14,913
Other income
(expense), net 3,016 - - 3,016
----------- ---------------- -------------- ---------
Income before
provision for
income taxes 23,372 (841) (4,602) 17,929
Provision for
income taxes 5,952 (262) (694) 4,996
----------- ---------------- -------------- ---------
Net income $17,420 $(579) $(3,908) $12,933
=========== ================ ============== =========
Earnings per
share:
Basic $0.35 $0.26
Diluted $0.35 $0.26
Weighted average
shares and
common
equivalents
outstanding:
Basic 49,095 - - 49,095
Diluted 50,109 - - 50,109
(1) Stock Compensation relates to expensing of stock options,
restricted stock units, and performance shares. 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.
(2) Adjustments related to acquired in-process research and
development expense from the Cyclades acquisition, 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)
March 30, December 31,
2007 2006
------------- -------------
Cash, cash equivalents and short-term
investments $108,939 $107,165
Accounts receivable, net 109,192 126,471
Inventories, net 40,137 41,765
Other current assets 17,900 17,269
Deferred income tax 8,705 7,355
------------- -------------
Total current assets 284,873 300,025
Investments - 987
Property and equipment, net 38,087 38,004
Goodwill 606,787 607,488
Intangible assets, net 199,235 209,674
Other assets 2,370 2,676
------------- -------------
Total assets $1,131,352 $1,158,854
============= =============
Accounts payable and other accrued expenses $31,381 $41,771
Income tax payable 20,340 17,364
Deferred revenue 45,144 44,453
Other current liabilities 24,756 29,754
------------- -------------
Total current liabilities 121,621 133,342
Line of credit obligation 150,000 150,000
Deferred income taxes 28,137 30,377
Deferred revenue, net of current portion 9,593 10,070
Other non-current liabilities 872 1,222
------------- -------------
Total liabilities 310,223 325,011
Total stockholders' equity 821,129 833,843
------------- -------------
Total liabilities and stockholders' equity $1,131,352 $1,158,854
============= =============
AVOCENT CORPORATION
Additional Financial Information
(Unaudited, in thousands)
Quarter Ended
------------------------------------
March 30, March 31, March 31,
2007 2006 2006
As if
Actual Combined
----------- ----------- ------------
Revenue by Distribution Channel
- ----------------------------------
Branded $85,825 $47,955 $81,643
OEM 48,107 46,557 49,265
----------- ----------- ------------
Total $133,932 $94,512 $130,908
=========== =========== ============
Revenue by Division
- ----------------------------------
Management Systems $105,104 $90,498 $104,453
LANDesk 23,854 - 22,441
Other business units 4,224 3,021 3,021
Corporate and unallocated 750 993 993
----------- ----------- ------------
Total $133,932 $94,512 $130,908
=========== =========== ============
Management Systems Division
Revenue by Product Line
- ----------------------------------
KVM $80,688 $77,975 $78,680
Serial Management 11,286 993 11,921
Embedded Software and Solutions 7,577 6,133 6,133
Other 5,553 5,397 7,719
----------- ----------- ------------
Total $105,104 $90,498 $104,453
=========== =========== ============
LANDesk Division Revenues by Type
- ----------------------------------
Licenses and royalties $13,371 $- $13,748
Maintenance and services 10,483 - 8,693
----------- ----------- ------------
Total $23,854 $- $22,441
=========== =========== ============
Operating Profit (Loss) by
Division
- ----------------------------------
Management Systems $25,911 $25,783
LANDesk (536) -
Other business units (3,149) (2,698)
Corporate and unallocated (3,615) (2,729)
----------- -----------
Total $18,611 $20,356
=========== ===========
Cash Flow Highlights
- ----------------------------------
Cash provided by operations $18,804 $16,564
Depreciation expense 2,354 1,774
Capital expenditures 2,651 1,689
Purchase of treasury shares 15,437 26,952
CONTACT: Avocent Corporation
Edward H. Blankenship
Senior Vice President of Finance and
Chief Financial Officer
256-217-1301