AVOCENT REPORTS RECORD SALES AND HIGHER NET INCOME
FOR FOURTH QUARTER
HUNTSVILLE, Ala. (February 3, 2004) - Avocent Corporation (NASDAQ:AVCT) today reported record sales and higher net income for the fourth quarter ended December 31, 2003.
“Avocent’s sales and operating earnings accelerated in the fourth quarter due to strong demand across most product lines, distribution channels and geographic markets,” stated John R. Cooper, president and chief executive
officer of Avocent Corporation. “Sales increased 21% to $86.0 million and income prior to intangible amortization and merger-related expenses (see “Use of Non-GAAP Financial Measures” discussion below) was a record
$17.4 million, or $0.36 per diluted share, up 36% compared with the fourth quarter of 2002.”
GAAP net income for the fourth quarter of 2003 was $9.6 million, or $0.20 per diluted share. This compares with a
GAAP net income of $7.2 million, or $0.16 per share, in the fourth quarter of 2002.
“Sales of branded products remained strong in the fourth quarter with excellent growth from our proprietary digital, AMX and
Switchview products. OEM sales increased sequentially 24% from the third quarter of 2003. We also introduced the industry’s first wireless KVM switch late in the fourth quarter, further extending our branded
product line. Avocent’s sales were up across all domestic and international customer segments. International sales were up 22% to $39.2 million compared with the fourth quarter of 2002. U.S. sales increased
21% to $46.8 million compared with the fourth quarter of 2002. Our earnings benefited from improved leverage of our higher sales base and increased gross margins.
“We continue to invest in new technologies and
product development to maintain our leadership position in the industry,” continued Mr. Cooper. “We completed the acquisitions of Soronti, Inc. in November 2003 and Crystal Link Technologies in early
January 2004. Soronti enhanced our expertise in embedded solutions for server management and Crystal Link added key technology related to wireless devices. We also increased research and development expenses 19% to
$8.2 million, or 9.6% of sales, in the fourth quarter. Our R&D efforts remain focused on developing new products, enhancing existing products and improving our manufacturing efficiencies.”
Fourth Quarter Results
Net sales for the fourth quarter rose 21% to $86.0 million compared with sales of $71.0 million in the fourth quarter of 2002. Branded sales rose 25% from the fourth quarter of 2002 and
accounted for 52.0% of sales. OEM sales rose 17% from the fourth quarter of 2002 and accounted for 48.0% of total fourth quarter 2003 sales.
Gross profit for the fourth quarter rose 31% to $48.0 million with a
gross margin of 55.8% compared with gross profit of $36.6 million and a gross margin of 51.6% in the fourth quarter of 2002. Higher margins benefited from an improved product mix, including higher sales of digital and
branded products, increased leverage of expenses and lower manufacturing costs for certain key products.
Income prior to intangible amortization and merger-related expenses rose to $17.4 million, or $0.36 per
diluted share, compared with income prior to intangible amortization and merger-related expenses of $12.8 million, or $0.28 per diluted share, in the fourth quarter of 2002. Net adjustments to reconcile to GAAP income
were $7.9 million in the fourth quarter of 2003, including $4.0 million in intangible amortization and merger-related expenses and a $3.9 million charge for in-process research and development expense acquired from
Soronti. Net adjustments to reconcile to GAAP income were $5.6 million in the fourth quarter of 2002, including intangible amortization and merger-related expenses.
Avocent’s balance sheet and cash position
remained strong as of December 31, 2003. The Company’s cash flow from operations was approximately $28 million for the fourth quarter of 2003 with $308 million in cash, cash equivalents and investments at the
quarter’s end.
Year-End Results
Net sales for 2003 rose 17% to $304.2 million compared with sales of $260.6 million in 2002. OEM sales rose 17% from 2002 and accounted for 45.9% of total 2003
sales. Branded sales rose 17% from 2002 and accounted for 54.1% of sales. Sales in the U.S. accounted for 59.9%, or $182.1 million, of 2003 sales. International sales were $122.1 million, or 40.1%, of total
2003 sales.
Gross profit for 2003 was $171.8 million with a gross margin of 56.5% compared with gross profit of $131.7 million and a gross margin of 50.5% in 2002.
Income prior to intangible
amortization, merger-related expenses and a gain on sale of certain investment securities rose to $59.4 million, or $1.24 per diluted share, compared with income prior to intangible amortization and merger-related expenses
of $42.3 million, or $0.92 per diluted share, in 2002. Net adjustments to reconcile to GAAP income were $20.8 million in 2003, including $18.9 million of intangible amortization and merger-related expenses, and
a $3.9 million one-time charge for in-process research and development expenses related to Soronti, offset by a $2.1 million gain on sale of investment securities. Net adjustments to reconcile to GAAP income were $31.6
million in 2002, including $25.6 million of intangible amortization and merger-related expenses and a $6.0 million one-time charge for in-process research and development expenses related to the acquisition of 2C Computing, Inc.
Cash flow from operations was over $82 million in 2003 compared with approximately $71 million in 2002.
GAAP net income for 2003 was $38.5 million, or $0.81 per diluted share, compared with $10.7 million, or
$0.24 per share, in 2002.
Use of Non-GAAP Financial Measures
Income prior to intangible amortization, merger-related expenses and gain on sale of certain investment securities, 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 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 February 3, 2004. The live broadcast will be available on-line at www.avocent.com and at www.firstcallevents.com/service/ajwz397696227gf12.html 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. Our products include
switching, extension, 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 and introduction of new products
and technologies, the size and growth of the potential markets for these products and technologies in the future, engineering and design activities, and manufacturing efficiencies in the future. 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 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 27, 2003. 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.