Avocent Reports Fourth Quarter Results
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HUNTSVILLE, Ala., Feb. 14 /PRNewswire-FirstCall/ -- Avocent Corporation (Nasdaq: AVCT) today reported its results for the fourth quarter ended December 31, 2001.
``Fourth quarter sales were $62.6 million, a 14% sequential increase from the third quarter,'' stated Stephen F. Thornton, president and chief executive officer of Avocent Corporation. ``We experienced stronger sales in the U.S. and in the rest of world than in the third quarter of 2001, including a 22% sequential increase in sales to our resellers and distributors and a 4% increase in sales to OEMs.
``Compared with the fourth quarter of 2000, sales to OEM customers grew 5% to $31 million, or 49% of total sales for the quarter. Since last year, we have expanded the number of products we sell to OEMs, and we are working closely with major OEMs on new products ideas to further expand our sales to OEMs in the future.
``Although we are pleased with the sales growth we saw in the fourth quarter, we believe the weak economy is still affecting us. Sales to resellers and distributors were below last year's levels, and compared with the fourth quarter of 2000, were down 37% to $28 million. We believe this reduction was related to the soft economy and to reduced buying. We expect to see some recovery from these customers when the economy improves,'' continued Mr. Thornton.
Income, excluding merger related expenses and non-recurring charges, was $7.2 million, or $0.16 per diluted share, compared with $16.9 million, or $0.37 per diluted share, in the fourth quarter of 2000. The decline in profitability was due to lower margins related to increased overhead absorption on lower sales, a $3 million pre-tax inventory charge, increased R&D expenses, and lower interest income.
``We continue to invest in R&D. We remain focused on new product development and improving our manufacturing efficiencies for existing product lines,'' noted Mr. Thornton. ``We expect to announce several new products in the coming months that will solidify our position as the leader in analog and digital switching solutions.''
The Company reported a net loss of $226 million, or $5.07 per share, compared with a net loss of $19.7 million, or $0.45 per share, in the fourth quarter of 2000. The loss for the fourth quarter of 2001 included $35 million of intangible amortization, a $195 million write-down for goodwill impairment and a $3.3 million non-recurring charge related to an other-than-temporary decline in the fair value of the Company's investment portfolio. The 2000 fourth quarter results included $36.7 million of intangible amortization and merger-related expenses.
The $195 million impairment charge recorded in the fourth quarter of 2001 related to the carrying value of goodwill in accordance with Statement of Financial Accounting Standards (``SFAS'') No. 121 ``Accounting for the Impairment of Long-Lived Assets and for Assets to be Disposed Of.'' SFAS Nos. 141 and 142, ``Business Combinations,'' and ``Goodwill and Other Intangible Assets,'' became effective for Avocent on January 1, 2002. Under SFAS No. 142, goodwill will no longer be subject to amortization beginning in 2002, but instead will be tested for impairment at least annually. Amortization of goodwill for the fourth quarter and year ended December 31, 2001, totaled $33 million and $133 million, respectively. As of December 31, 2001, the Company had remaining $186 million of goodwill reflected on the balance sheet.
SFAS No. 142 requires periodic analysis Avocent to determine if there has been a further impairment of goodwill. Based on an analysis at January 1, 2002 no additional write-down of goodwill is presently required under SFAS No. 142.
``Avocent's balance sheet remains very strong with $174 million in cash and investments and no debt at the end of the quarter,'' Mr. Thornton added. ``Our receivables position strengthened from the third quarter, as days sales outstanding declined by an average of 10 days from the third quarter to 71 days. Our cash position also improved $20 million from the third quarter through higher cash earnings and decreases in inventories. We believe our strong financial position is an important part in building shareholder value for the future.''
Fourth Quarter Results
Net sales for the fourth quarter were $62.6 million compared with net sales of $80.5 million in the fourth quarter a year ago. Sales in the U.S. accounted for 59%, or $37 million of fourth quarter sales; and rest-of-world sales totaled $26 million, or 41% of fourth quarter sales. U.S. sales declined 22.9% and rest-of-world sales were down 21.2% from the fourth quarter of 2000.
Gross profit for the fourth quarter was $26.6 million with a gross margin of 42.6%, compared with gross profit of $41.3 million in the fourth quarter of 2000. The decline in gross margin was due to the lower absorption of overhead due to lower sales and a $3 million inventory charge. Operating income for the fourth quarter was $8.6 million compared with operating income of $22.3 million in the fourth quarter a year ago.
Research and development expenses rose 11% to $4.4 million for the fourth quarter and represented 7% of sales. Selling, general and administrative (SG&A) expenses decreased 9% to $13.6 million, reflecting extensive cost control efforts. Interest income declined 39% to $1.3 million primarily due to lower interest income related to falling interest rates.
The Company's fourth quarter tax rate declined to 28% in 2001 from 31% in the prior year due to a higher proportion of sales through the Company's Shannon, Ireland, facility that are subject to a 10% tax rate. |
