AVOCENT REPORTS FIRST QUARTER RESULTS
HUNTSVILLE, Ala. (April 21, 2005) - Avocent Corporation (NASDAQ:AVCT) today reported revenue of $76.8 million for the first quarter ended April 1, 2005.
“Avocent’s first quarter results were consistent with the revised revenue estimates provided in mid-March,” stated John R. Cooper, chairman and chief executive officer of Avocent Corporation. “Sales to OEMs increased over
last year, however, sales of our U.S. branded products were lower than we originally expected due to a number of factors we previously discussed in March. Sales activity increased later in the quarter and we are pleased
with the recovery in our branded sales, which have moved closer to more normal levels in recent weeks.
“We continued to invest in research and development in the first quarter to support new product introductions and
products under development. We recorded our first design wins that combined embedded KVM and IPMI solutions during the quarter and believe this area holds excellent promise for Avocent in the future. We remain
positive about our new product pipeline and the impact it will have on future sales.”
First Quarter Results
Income prior to intangible amortization and merger-related expenses was $7.3 million, or
$0.14 per diluted share, compared with income prior to intangible amortization and merger-related expenses of $16.1 million, or $0.33 per diluted share, in the first 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 first quarter of 2005, including $6.6 million in intangible amortization and a $1.8 million tax
benefit. Net adjustments to reconcile to GAAP net income were $7.6 million in the first quarter of 2004, including $4.8 million in amortization of intangible assets, $6.5 million in acquired in-process R&D expenses and
a $4.6 million tax benefit.
GAAP net income for the first quarter of 2005 was $1.8 million, or $0.04 per diluted share. This compares with a GAAP net income of $8.5 million, or $0.17 per diluted share, in the first
quarter of 2004.
Net sales for the first quarter declined 10.8% to $76.8 million compared with sales of $86.1 million in the first quarter of 2004. Branded sales declined 27.6% from the first quarter of 2004
and accounted for 47.8% of total sales. OEM sales rose 13.3% from the first quarter of 2004 and accounted for 52.2% of total first quarter 2005 sales. U.S. sales declined 21.9% to $40.0 million and international sales
rose 5.6% to $36.8 million compared with the first quarter of 2004.
“OEM sales benefited from the contribution of embedded products,” continued Mr. Cooper. “We believe our
opportunities in this area will continue to expand as we strengthen our embedded product suite. International sales also increased, reflecting the investments we made in our sales infrastructure in certain European and
Asian countries.”
Gross profit for the first quarter of 2005 declined 13.0% to $43.6 million with a gross margin of 56.7%. This compared with gross profit of $50.1 million and a gross margin of 58.2% in the first
quarter of 2004. The decrease in gross profit was due to the lower sales volume.
Research and development expenses increased 53.4% to $14.5 million, or 18.8% of sales, compared with $9.4 million, or 11.0% of sales,
in the first quarter of 2004. This increase was due primarily to increased investments in new products, supporting new product introductions and an increase in R&D staff to support these efforts.
Selling,
general and administrative expenses rose 9.6% to $22.3 million compared with $20.3 million in the first quarter of 2004. The increase included higher legal costs in the first quarter to support patent litigation
scheduled for trial in the second quarter.
Avocent’s balance sheet and cash position remained strong as of April 1, 2005. The Company’s cash flow from operations was approximately $10 million for the first quarter
of 2005 with over $325 million in cash, cash equivalents and investments at the quarter’s end. Avocent had no long-term debt as of April 1, 2005.
“We used our strong cash position to repurchase approximately
700,000 shares of Avocent’s stock during the first quarter,” continued Mr. Cooper. “We have repurchased approximately one million shares to date under the two million share repurchase authorization announced in November
2004.”
Use of Non-GAAP Financial Measures
Income prior to intangible amortization 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, 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 first quarter results conference call to be held April 21, 2005. The live
broadcast will be available on-line at www.avocent.com as well as www.vcall.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), and engineering and design activities. 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.