EX-99.4 2 a5345599ex994.txt EXHIBIT 99.4 Exhibit 99.4 Avocent Revises Fourth Quarter Results Does Not Expect to Pay Contingent Consideration on LANdesk Acquisition HUNTSVILLE, Ala.--(BUSINESS WIRE)--March 1, 2007--Avocent Corporation (NASDAQ: AVCT) announced today that it was revising previously reported fourth quarter revenue for its LANDesk Division to reduce revenue by $2.8 million and consolidated operational income by $1.9 million. Together with a reduction in tax expense discussed below, consolidated GAAP net income was reduced by $0.7 million. Avocent also announced that it now does not expect to pay the previously accrued contingent consideration of $27 million relating to the LANDesk acquisition. "We became aware that several previously recorded transactions did not meet the stringent revenue recognition criteria for sales of software and that certain royalties earned by LANDesk should have been recorded prior to the closing date of the acquisition," stated Edward H. Blankenship, Avocent's chief financial officer. "These revenue adjustments were partially offset by lower management bonus accruals, and we will continue to evaluate certain other costs, primarily commissions, related to these transactions. We also determined that certain tax benefits relating to Avocent stock options exercised in 2006, which were assumed in prior acquisitions, should be included in the determination of net income instead of equity for GAAP purposes." As revised, Avocent's fourth quarter consolidated revenue increased 55% to $166.1 million in 2006 from $106.8 million in 2005 and fourth quarter operational income per diluted share increased to $0.59 in 2006 from $0.49 in 2005. Revised consolidated revenue for the year ended December 31, 2006 increased 41% to $520.9 million from $369.9 million in 2005. Revised operational income per diluted share increased to $1.96 in 2006 from $1.31 in 2005. "We remain very excited and optimistic about the many opportunities we have with LANDesk and the joint product development activities we have underway," added John Cooper, Avocent's chairman and chief executive officer. "Over the past few weeks I have talked with several key channel partners and LANDesk sales force members, and I am quite encouraged by the strength and depth of our relationships with these key contributors and the pipeline of potential deals we have to pursue." A summary of the revised results for the fourth quarter of 2006 follows at the end of this release. More information on the 2006 results can be found in Avocent's Annual Report on Form 10-K filed with the Securities and Exchange Commission today. Use of Non-GAAP Financial Measures Income prior to intangible amortization, stock compensation and 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 many 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. 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 our opportunities and joint product development activities with LANDesk, the pipeline for future LANDesk deals, and the contingent consideration not earned or payable to former LANDesk shareholders. 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 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 today. 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 December 31, 2006 Stock Operational Compensation(a) Adjustment(b) GAAP ----------- ------------------------------- --------- Net sales $166,070 $(1,206) $164,864 Cost of sales 56,292 $475 2,683 59,450 ----------- ---------------- -------------- --------- Gross profit 109,778 (475) (3,889) 105,414 Research and development expenses 18,203 2,130 - 20,333 Selling, general and administrative expenses 49,955 3,823 151 53,929 Acquisition integration expenses 331 - - 331 Amortization of intangible assets - - 9,207 9,207 ----------- ---------------- -------------- --------- Operating income 41,289 (6,428) (13,247) 21,614 Other income (expense), net (1,283) - - (1,283) ----------- ---------------- -------------- --------- Income before income taxes 40,006 (6,428) (13,247) 20,331 Provision for income taxes 9,404 (2,546) (2,995) 3,863 ----------- ---------------- -------------- --------- Net income $30,602 $(3,882) $(10,252) $16,468 =========== ================ ============== ========= Earnings per share: Basic $0.60 $0.32 Diluted $0.59 $0.32 Weighted average shares and common equivalents outstanding: Basic 50,826 - - 50,826 Diluted 52,110 - - 52,110 For the Year Ended December 31, 2006 Stock Operational Compensation(a) Adjustments(b) GAAP ----------- ------------------------------- --------- Net sales $520,881 $(1,686) $519,195 Cost of sales 192,869 $977 3,577 197,423 ----------- ---------------- -------------- --------- Gross profit 328,012 (977) (5,263) 321,772 Research and development expenses 59,564 4,302 - 63,866 Acquired in- process research and development expenses - - 20,700 20,700 Selling, general and administrative expenses 138,435 9,307 603 148,345 Acquisition integration expenses 3,904 - - 3,904 Amortization of intangible assets - - 23,049 23,049 ----------- ---------------- -------------- --------- Operating income 126,109 (14,586) (49,615) 61,908 Other income (expense), net 3,784 - - 3,784 ----------- ---------------- -------------- --------- Income before income taxes 129,893 (14,586) (49,615) 65,692 Provision for income taxes 32,748 (4,862) (7,726) 20,160 ----------- ---------------- -------------- --------- Net income $97,145 $(9,724) $(41,889) $45,532 =========== ================ ============== ========= Earnings per share: Basic $2.00 $0.94 Diluted $1.96 $0.92 Weighted average shares and common equivalents outstanding: Basic 48,548 - - 48,548 Diluted 49,475 - - 49,475 (a) 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. (b) Adjustments related to acquired in-process research and development expense from the Cyclades and LANDesk acquisitions, 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) December 31, 2006 December 31, 2005 ----------------- ----------------- Cash, cash equivalents and short- term investments $107,165 $293,903 Accounts receivable, net 126,471 68,712 Inventories, net 41,765 21,178 Other current assets 17,269 10,524 Deferred income tax 7,355 4,054 ----------------- ----------------- Total current assets 300,025 398,371 Investments 987 51,939 Property and equipment, net 38,004 36,801 Goodwill 607,488 269,992 Other intangible assets, net 209,674 15,763 Other assets 2,676 885 ----------------- ----------------- Total assets $1,158,854 $773,751 ================= ================= Accounts payable and other accrued expenses $41,771 $23,569 Income tax payable 17,364 11,270 Deferred revenue 44,453 1,702 Other current liabilities 29,754 17,206 ----------------- ----------------- Total current liabilities 133,342 53,747 Line of credit obligation 150,000 - Deferred income taxes 30,377 2,564 Deferred revenue, net of current portion 10,070 1,065 Other non-current liabilities 1,222 1,053 ----------------- ----------------- Total liabilities 325,011 58,429 Total stockholders' equity 833,843 715,322 ----------------- ----------------- Total liabilities and stockholders' equity $1,158,854 $773,751 ================= ================= Additional Financial Information (Unaudited, in thousands) Quarter Ended Year Ended December 31, 2006 December 31, 2006 ----------------- ----------------- Revenue by Distribution Channel ---------------------------------- Branded $108,050 $313,567 OEM 58,020 207,314 ----------------- ----------------- Total $166,070 $520,881 ================= ================= Revenue by Division ---------------------------------- Management Systems $124,259 $426,412 LANDesk 26,846 40,368 Embedded Software and Solutions 9,437 33,766 Other business units 4,704 16,658 Corporate and unallocated 824 3,677 ----------------- ----------------- Total $166,070 $520,881 ================= ================= LANDesk Division Revenues by Type ---------------------------------- Licenses and royalties $16,792 $27,049 Maintenance and services 10,054 13,319 ----------------- ----------------- Total $26,846 $40,368 ================= ================= Operating Profit (Loss) by Division (Excludes stock-based compensation expense) ---------------------------------- Management Systems $41,869 $129,906 LANDesk 1,993 7,897 Embedded Software and Solutions 4,018 12,816 Other business units (3,163) (13,240) Corporate and unallocated (3,428) (11,270) ----------------- ----------------- Total $41,289 $126,109 ================= ================= CONTACT: Avocent Corporation Edward H. Blankenship, 256-217-1301 Senior Vice President of Finance and Chief Financial Officer