Avocent Issues 3Q Results

Avocent, an IT operations management solution provider, reported results for the third quarter and nine months ended September 30.

In a release dated October 21, the company stated:

- The company reported net sales of $137.6 million for the third quarter of 2009, compared to $128.6 million for the second quarter of 2009. Operational earnings per diluted share was $0.45 compared to $0.32 in the second quarter of 2009 while GAAP net income per diluted share was $0.16 compared to a net loss of $0.08 in the second quarter of 2009.

- Avocent's third quarter sales increased sequentially from the second quarter of 2009 by approximately $9.0 million. Sales, however, declined 25 percent to $137.6 million compared with $183.0 million in the third quarter of 2008 due to ongoing weaker IT spending, particularly for our server-linked products. Total branded product sales were $100.5 million for the third quarter of 2009, a decrease of 19 percent from $124.6 million in the third quarter 2008. Branded product sales rose to 73 percent of total third quarter 2009 net sales compared with 68 percent in the third quarter of 2008. Total OEM product sales were $37.1 million for the third quarter of 2009, a decrease of 36 percent from $58.4 million in the third quarter 2008. OEM product sales represented 27 percent of third quarter 2009 net sales compared with 32 percent in the third quarter of 2008. U.S. sales declined 21 percent to $74.9 million and international sales were down 29 percent to $62.7 million compared with the third quarter of 2008.

"As we expected, our third quarter revenue increased from the second quarter due primarily to higher government product sales, and we continued to experience a soft market for our server-linked products," said Mike Borman, Avocent's CEO.

- Third quarter 2009 operational net income, which is income prior to acquired in-process research and development, intangible amortization, restructuring and integration costs, and stock compensation expenses, decreased 34 percent to $20.1 million, or $0.45 per diluted share, compared with operational net income of $30.4 million, or $0.67 per diluted share, in the third quarter of 2008.

- GAAP net income for the third quarter of 2009 was $7.1 million, or $0.16 per diluted share, compared with GAAP net income of $11.0 million, or $0.24 per diluted share, in the third quarter of 2008. Net adjustments to reconcile operational net income to GAAP net income were $13.1 million in the third quarter of 2009, compared to $19.5 million in the third quarter of 2008.

- Operational gross profit for the third quarter of 2009 was $89.3 million compared with $118.6 million in the third quarter of 2008. Operational gross margin rose to 64.9 percent in the third quarter of 2009 compared with 64.8 percent in the third quarter of 2008. GAAP gross profit for the third quarter of 2009 was $84.6 million compared with $114.0 million in the third quarter of 2008. GAAP gross margin was 61.5 percent in the third quarter of 2009 compared with 62.3 percent in the third quarter of 2008.

- Research and development expenses excluding stock-based compensation, were down 18.3 percent to $18.7 million ($19.6 million on a GAAP basis, which includes stock-based compensation of $869,000), or 13.6 percent of sales, compared with $22.9 million ($24.4 million on a GAAP basis, which includes stock based compensation of $1.5 million), or 12.5 percent of sales, in the third quarter of 2008.

- Selling, general and administrative expenses, excluding stock-based compensation declined 16.5 percent to $47.0 million ($52.2 million on a GAAP basis, which includes stock-based compensation of $5.2 million), or 34.2 percent of sales, compared with $56.3 million ($60.3 million on a GAAP basis, which includes stock-based compensation of $4.0 million), or 30.7 percent of sales, in the third quarter of 2008.

- Operational operating income, excluding restructuring and integration costs, stock-based compensation and intangible asset amortization, was $23.7 million in the third quarter of 2009 compared with $19.2 million in the second quarter of 2009 and $39.4 million in the third quarter of 2008. GAAP operating income was $2.3 million in the third quarter of 2009 compared with $693,000 in the second quarter of 2009 and $13.8 million in the third quarter of 2008.

"Our operating income benefited from the restructuring programs we implemented earlier in 2009," said Borman.

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