EX-99.6 2 a4685898ex996.txt PRESS RELEASE EXHIBIT 99.6 Avocent Reports 24% Increase in Second Quarter Sales HUNTSVILLE, Ala.--(BUSINESS WIRE)--July 22, 2004--Avocent Corporation (NASDAQ:AVCT) today reported higher sales and operating income for the second quarter and six months ended July 2, 2004. "Avocent's sales rose 24.3% in the second quarter to a record $87.8 million as demand increased across almost all markets, product lines and customer segments," stated John R. Cooper, president and chief executive officer of Avocent Corporation. "Our newer products and technologies are producing a solid return on our investments in research and development. We expect to further expand our markets and increase our sales in these markets as we add more functionality and control for servers and server room devices with new products and technologies. "We completed the acquisition of OSA Technologies early in the second quarter and are very excited about accelerating our development of embedded management technologies. We anticipate OSA's revenues will begin to ramp up next quarter as certain OEMs begin shipping IPMI-enabled server lines with embedded OSA technology. Avocent's R&D team is also working closely with OSA to develop a new product family that will complement our existing KVM products. We expect the acquisitions of OSA, Crystal Link, and Soronti to have a positive impact on expanding market opportunities for Avocent. "Research and development expenses increased to $11.2 million in the second quarter. The increased funding is focused on expanding our market potential within the data center through new products and technologies and developing the products and technologies acquired over the past year," continued Mr. Cooper. Second Quarter Results Income prior to intangible amortization and merger-related expenses rose 18.8% to $15.3 million, or $0.30 per diluted share, compared with income prior to intangible amortization and merger-related expenses of $12.9 million, or $0.27 per diluted share, in the second quarter of 2003. (See "Use of Non-GAAP Financial Measures" discussion below.) Net adjustments to reconcile to GAAP income were $28.7 million in the second quarter of 2004, including $6.4 million in intangible amortization and a $21.7 million charge for acquired in-process research and development expense related to OSA. In addition, the adjustments included a $1.7 million tax benefit. Net adjustments to reconcile GAAP income were $5.6 million in the second quarter of 2003, which consisted primarily of intangible amortization. GAAP net loss for the second quarter of 2004 was $13.4 million, or $0.27 per diluted share. This compares with a GAAP net income of $7.3 million, or $0.16 per diluted share, in the second quarter of 2003. Net sales for the second quarter rose 24.3% to $87.8 million compared with sales of $70.6 million in the second quarter of 2003. Branded sales rose 28.6% from the second quarter of 2003 and accounted for 56.9% of sales. OEM sales rose 19.2% from the second quarter of 2003 and accounted for 43.1% of total second quarter 2004 sales. U.S. sales increased 19.7% to $52.9 million and international sales rose 32.1% to $34.9 million compared with the second quarter of 2003. The 2004 results include the operations of OSA Technologies from April 6, 2004. Gross profit for the second quarter of 2004 rose 24.4% to $50.6 million with a gross margin of 57.6%. This compared with gross profit of $40.7 million and a gross margin of 57.6% in the second quarter of 2003. The increase in gross profit was due to higher sales compared with the second quarter of 2003. Research and development expenses increased 46.7% to $11.2 million, or 12.8% of sales, compared with $7.6 million, or 10.8% of sales, in the second quarter of 2003. The increase was due to higher expenses related to the development of embedded technologies and the addition of R&D teams from OSA, Soronti and Crystal Link since last year. Selling, general and administrative expenses rose 21.6% to $22.0 million compared with $18.1 million in the second quarter of 2003. The increase was due to higher costs related to the addition of the Soronti, Crystal Link and OSA sales and marketing teams, the expansion of certain sales and marketing programs, increased trade show activity, intellectual property defense costs and Sarbanes-Oxley Act compliance costs. Avocent's balance sheet and cash position remained strong as of July 2, 2004. The Company's cash flow from operations was approximately $19 million for the second quarter of 2004 with almost $291 million in cash, cash equivalents and investments at the quarter's end. The Company's cash and investments position reflects the payment of approximately $53 million in cash as part of its purchase of OSA Technologies. Avocent had no short-term or long-term debt at the end of the second quarter. 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 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 second quarter results conference call to be held July 22, 2004. The live broadcast will be available on-line at www.avocent.com as well as http://phx.corporate-ir.net/playerlink.zhtml?c=116576&s=wm&e=916463 and 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, the future effect of past acquisitions (including expected revenues and market opportunities), 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 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 12, 2004. 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 July 2, 2004 Operational Adjustments(a) GAAP ----------- ------------- -------- Net sales $ 87,796 $ 87,796 Cost of sales 37,101 $ 95 37,196 ---------- ------------- -------- Gross profit 50,695 (95) 50,600 Research and development expenses 10,337 889 11,226 Acquired in-process research and development expense - 21,720 21,720 Selling, general and administrative expenses 20,721 1,316 22,037 Amortization of intangible assets - 6,412 6,412 ---------- ------------- -------- Operating income (loss) 19,637 (30,432) (10,795) Other income (expense), net 859 (15) 844 ---------- ------------- -------- Income (loss) before income taxes 20,496 (30,447) (9,951) Provision for income taxes 5,158 (1,717) 3,441 ---------- ------------- -------- Net income (loss) $ 15,338 $ (28,730) $(13,392) ========== ============= ======== Earnings (loss) per share: Basic $ 0.31 $ (0.27) Diluted $ 0.30 $ (0.27) Weighted average shares and common equivalents outstanding: Basic 49,065 - 49,065 Diluted 50,823 (1,758) 49,065 For the Quarter Ended June 27, 2003 Operational Adjustments(a) GAAP ------------ ------------- -------- Net sales $ 70,612 $ 70,612 Cost of sales 29,711 $ 216 29,927 ---------- ------------- -------- Gross profit 40,901 (216) 40,685 Research and development expenses 7,264 390 7,654 Selling, general and administrative expenses 16,937 1,187 18,124 Amortization of intangible assets - 6,156 6,156 ---------- ------------- -------- Operating income 16,700 (7,949) 8,751 Other income (expense), net 1,060 (16) 1,044 ---------- ------------- -------- Income before income taxes 17,760 (7,965) 9,795 Provision for income taxes 4,846 (2,396) 2,450 ---------- ------------- -------- Net income $ 12,914 $ (5,569) $ 7,345 ========== ============= ======== Earnings per share: Basic $ 0.28 $ 0.16 Diluted $ 0.27 $ 0.16 Weighted average shares and common equivalents outstanding: Basic 45,917 - 45,917 Diluted 47,479 (118) 47,361 (a) Note: Adjustments relate to acquired in-process research and development expense from the OSA Technologies Inc. acquisition and amortization of deferred compensation (from the capitalization of the value of stock options assumed) and intangibles recorded as the result of the merger of Apex and Cybex in July 2000, the acquisition of Equinox in January 2001, the acquisition of 2C in August 2002, the acquisition of Soronti in December 2003, the acquisition of Crystal Link in January 2004 and the acquisition of OSA in April 2004. 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. AVOCENT CORPORATION Condensed Consolidated Statements of Operations (Unaudited, in thousands, except per share data) For the Six Months Ended July 2, 2004 Operational Adjustments(a) GAAP ------------ ------------- -------- Net sales $ 173,881 $173,881 Cost of sales 72,989 $ 190 73,179 ------------ ------------- -------- Gross profit 100,892 (190) 100,702 Research and development expenses 19,591 1,063 20,654 Acquired in-process research and development expense - 28,210 28,210 Selling, general and administrative expenses 40,446 1,926 42,372 Amortization of intangible assets 11,174 11,174 ----------- ------------- -------- Operating income (loss) 40,855 (42,563) (1,708) Other income (expense), net 2,011 (30) 1,981 ---------- ------------- -------- Income (loss) before income taxes 42,866 (42,593) 273 Provision for income taxes 11,412 (6,290) 5,122 ---------- ------------- -------- Net income (loss) $ 31,454 $ (36,303) $ (4,849) ========== ============= ======== Earnings (loss) per share: Basic $ 0.64 $ (0.10) Diluted $ 0.62 $ (0.10) Weighted average shares and common equivalents outstanding: Basic 48,958 - 48,958 Diluted 50,785 (1,827) 48,958 For the Six Months Ended June 27, 2003 Operational Adjustments(a) GAAP ------------ ------------- -------- Net sales $ 141,774 $141,774 Cost of sales 61,043 $ 449 61,492 ---------- ------------- -------- Gross profit 80,731 (449) 80,282 Research and development expenses 13,598 868 14,466 Selling, general and administrative expenses 32,508 2,275 34,783 Amortization of intangible assets - 12,312 12,312 ---------- ------------- -------- Operating income 34,625 (15,904) 18,721 Other income (expense), net 1,908 (30) 1,878 ---------- ------------- -------- Income before income taxes 36,533 (15,934) 20,599 Provision for income taxes 9,879 (4,792) 5,087 ---------- ------------- -------- Net income $ 26,654 $ (11,142) $ 15,512 ========== ============= ======== Earnings per share: Basic $ 0.58 $ 0.34 Diluted $ 0.57 $ 0.33 Weighted average shares and common equivalents outstanding: Basic 45,671 - 45,671 Diluted 47,162 (136) 47,026 (a) Note: Adjustments relate to acquired in-process research and development expense from both the Crystal Link Technologies and OSA Technologies Inc. acquisitions. Adjustments also include the amortization of deferred compensation (from the capitalization of the value of stock options assumed) and intangibles recorded as the result of the merger of Apex and Cybex in July 2000, the acquisition of Equinox in January 2001, the acquisition of 2C in August 2002, the acquisition of Soronti in December 2003, the acquisition of Crystal Link in January 2004 and the acquisition of OSA in April 2004. 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. AVOCENT CORPORATION Condensed Consolidated Balance Sheets (Dollars in thousands) July 2, December 31, 2004 2003 (Unaudited) ----------- ------------- Cash, cash equivalents and short-term investments $ 224,633 $ 223,392 Accounts receivable, net 48,688 45,011 Current and deferred income tax receivable 7,010 5,031 Other receivables, net 395 225 Inventories, net 22,025 21,324 Other current assets 3,224 4,251 ---------- ------------- Total current assets 305,975 299,234 Investments 66,149 84,410 Property and equipment, net 39,624 38,473 Goodwill, net 262,798 206,037 Intangible assets, net 43,880 31,889 Other assets 3,522 720 ---------- ------------- Total assets $ 721,948 $ 660,763 ========== ============= Accounts payable and other accrued expenses $ 15,020 $ 19,154 Income tax payable 12,274 6,702 Other current liabilities 17,502 16,866 ---------- ------------- Total current liabilities 44,796 42,722 Non-current liabilities 12,522 10,884 Total stockholders' equity 664,630 607,157 ----------- ------------- Total liabilities and stockholders' equity $ 721,948 $ 660,763 ========== ============= CONTACT: Avocent Corporation, Huntsville Dusty Pritchett, 256-217-1300 www.avocent.com