-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UAn2skL6JqqRVw+h7cUQYaSTzi/0BW1N8X++n7OetY2YXK6EtO760unuVM3LitlL Fgp4nM8X9wVwQs56Q3VPzA== 0001157523-06-004415.txt : 20060502 0001157523-06-004415.hdr.sgml : 20060502 20060502080023 ACCESSION NUMBER: 0001157523-06-004415 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060502 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060502 DATE AS OF CHANGE: 20060502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVOCENT CORP CENTRAL INDEX KEY: 0001109808 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 912032368 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30575 FILM NUMBER: 06797199 BUSINESS ADDRESS: STREET 1: 4991 CORPORATE DRIVE CITY: HUNTSVILLIE STATE: AL ZIP: 35805 BUSINESS PHONE: 2564304000 MAIL ADDRESS: STREET 1: 4991 CORPORATE DRIVE CITY: HMTSVILLE STATE: AL ZIP: 35805 FORMER COMPANY: FORMER CONFORMED NAME: AEGEAN SEA INC DATE OF NAME CHANGE: 20000323 8-K 1 a5137900.txt AVOCENT CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 2, 2006 ------------------------------- AVOCENT CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 000-30575 91-2032368 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 4991 CORPORATE DRIVE HUNTSVILLE, AL 35805 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (256) 430-4000 ----------------------------- n/a - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 7.01 Regulation FD Disclosure. On May 2, 2006, Avocent Corporation prepared a list of answers to frequently asked questions received from its investors regarding its acquisition of Cyclades Corporation and its proposed acquisition of LANDesk Group Limited. The prepared list of frequently asked questions and responses is incorporated herein by reference and furnished as Exhibit 99.13 hereto. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. Exhibit Number Description of Exhibit -------------- ---------------------- 99.13 Frequently asked questions regarding Cyclades and LANDesk SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AVOCENT CORPORATION Date: May 2, 2006 By: /s/ Edward H. Blankenship ----------------------------------------- Edward H. Blankenship Senior Vice President of Finance and Chief Financial Officer EXHIBIT INDEX ------------- Exhibit Description - ------- ----------- 99.13 Frequently asked questions regarding Cyclades and LANDesk EX-99.13 2 a5137900ex99_13.txt EXHIBIT 99.13 EXHIBIT 99.13 Avocent Corporation ------------------- Frequently Asked Questions Following April 27, 2006 Conference Call with Investors Avocent Corporation's Proposed Acquisition of LANDesk Group Limited ------------------------------------------------------------------- 1. Question: How did Avocent Corporation determine the purchase price paid for LANDesk? Answer: The price was negotiated by us with LANDesk and its major shareholders. We based our valuation primarily on multiples of past and projected revenues as well as expected future profit margins given that LANDesk has been in a high growth mode of operation. If LANDesk reaches its projected revenues of $112 million for 2006, we will pay out the full $60 million earn-out (see table below) and the purchase price will represent a multiple of 4.2 times the 2006 LANDesk revenues. 2. Question: What is the earn-out provision related to the LANDesk acquisition based on?
Answer: ------------------------------------------------------------------------------------------------------- 2006 LANDesk Revenue Growth Rate Over 2005 LANDesk Revenue: Earn-out Consideration: ------------------------------------------------------------------------------------------------------- Less than 20% None ------------------------------------------------------------------------------------------------------- Greater than 20% but less than 25% Pro-rated between $20 and $35 million ------------------------------------------------------------------------------------------------------- Greater than 25% but less than 30% Pro-rated between $35 and $50 million ------------------------------------------------------------------------------------------------------- Greater than 30% but less than 32.5% Pro-rated between $50 and $60 million ------------------------------------------------------------------------------------------------------- Greater than 32.5% $60 million -------------------------------------------------------------------------------------------------------
The 2006 revenue is to be determined in accordance with US GAAP applied on a basis consistent with previous years as set forth in LANDesk's revenue recognition policies agreed to by us and LANDesk. 3. Question: How did Avocent calculate the expected 2006 operational EPS accretion related to its proposed LANDesk acquisition? Answer: The following assumptions were used to calculate the potential 2006 operational EPS accretion: o LANDesk forecast revenues, July through December 2006, $63.1 million o LANDesk forecast operational income (net of tax) July through December 2006, $9.9 million o Avocent foregone investment income, $4.1 million o Additional operating expenses, $500,000 o Avocent income tax benefit from deducting purchase price amortization, $4.2 million o Additional weighted average shares issued at assumed share price of $31, outstanding for 6 months, 3.2 million shares 1 4. Question: Please provide 2005 LANDesk quarterly revenues and EBITDA. Answer:
--------------------------------------------------------------------------------------------------------------- Un-audited Qtr 1 2005 Qtr 2 2005 Qtr 3 2005 Qtr 4 2005 Qtr 1 2006 In 000's --------------------------------------------------------------------------------------------------------------- Revenue $17,643 $20,368 $20,959 $24,768 $22,096 --------------------------------------------------------------------------------------------------------------- EBITDA $ (350) $1,242 $1,971 $4,299 $1,055 --------------------------------------------------------------------------------------------------------------- EBITDA margin (2)% 6% 9% 17% 5% ---------------------------------------------------------------------------------------------------------------
5. Question: Is there a floor or collar to the equity component of the purchase price? Answer: There is a formula for the calculation of a floor price for our stock for purposes of calculating the equity component of our purchase price. The formula specifies that, after the issuance of all Avocent Common Stock to be issued by us and after the assumed exercise of all Avocent Options to be granted by us to holders of unvested LANDesk stock options, legacy Avocent shareholders must own at least 80.1% of all the outstanding shares of Avocent Common Stock following the closing. Based on the number of shares currently outstanding and the number of shares we presently expect to issue in connection with the LANDesk transaction, the floor price for our stock for purposes of this calculation is approximately $22.50. Avocent Corporation's Acquisition of Cyclades Corporation - --------------------------------------------------------- 1. Question: Please provide 2005 Cyclades quarterly revenues and annual operating margin. Answer: For the year ended December 31, 2005, Cyclades achieved an operating profit of $1.7 million or an operating margin of 3.6%. Revenues by quarter for 2005 are as follows:
------------------------------------------------------------------------------------------- Un-audited Qtr 1 2005 Qtr 2 2005 Qtr 3 2005 Qtr 4 2005 In 000's ------------------------------------------------------------------------------------------- Revenue $13,253 $13,545 $15,124 $18,058 -------------------------------------------------------------------------------------------
2. Question: Please explain the timing and size of the Cyclades headcount reduction. Answer: We initiated a Reduction in Force related to the Cyclades acquisition early in the second quarter of 2006 and anticipate reducing our workforce by approximately 100 individuals over the next four quarters, with most of these occurring by the end of September 2006. 3. Question: How will future quarters be affected by severance costs and what is the affect of the salary savings? Answer: We anticipate severance cost accruals to be almost $1.0 million in Q2 2006, $600,000 in Q3 2006, and $100,000 in Q4 2006. We anticipate retention bonus costs to be approximately $650,000 over each of the remaining quarters of 2006. Somewhat offsetting these costs, will be the expected salary and benefit savings, which we expect to be $500,000 in Q2 2006, $800,000 in Q3 2006, and $1.0 million in Q4 2006. These savings exclude indirect costs foregone such as travel, training, office space, minor equipment, etc. 2 4. Question: How much revenue did Cyclades have in Q1 2006? Answer: $15.6 million, of which Avocent recognized $1.5 million in our Q1 revenue. Cyclades Q1 was adversely impacted by the acquisition announcement and integration planning activities, as customers postponed purchasing decisions and the Cyclades sales force was distracted by the integration planning process. Forward-Looking Statements - -------------------------- This FAQ contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include (i) with respect to our proposed acquisition of LANDESK, statements regarding LANDesk's projected revenue, profit margins, and operational income for 2006, Avocent's investment income, operating expenses, tax benefits from purchase price amortization, and weighted average of shares, the expected closing of, and accretion related to, the proposed LANDesk acquisition, and the expected number of Avocent shares of Common Stock to be issued and the floor price for our stock in the LANDesk closing, and (ii) with respect to the Cyclades acquisition, statements regarding the expected headcount reduction, severance costs, retention bonus costs, and salary and benefits savings in the future from the Cyclades acquisition and the results of operations of the combined businesses. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risk that the LANDesk acquisition may not close, risks associated with the acquisition and subsequent integration of businesses and technologies, 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 6, 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. 3 -----END PRIVACY-ENHANCED MESSAGE-----