** **

**U.S.SECURITIES AND EXCHANGE COMMISSION**WASHINGTON,D.C.  20549

 

# **FORM 10-Q**

 

| **(Mark  One)**                                                                                                                                         |   |                                                                                          |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                                    |   |                                                                                          |
| **ý**                                                                                                                                              |   | **Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange Act of 1934**  |
|                                                                                                                                                    |   |                                                                                          |
| **For the quarterly period ended  March 29, 2002 or**                                                                                                   |
|                                                                                                                                                    |   |                                                                                          |
| **o**                                                                                                                                                   |   | **Transition report pursuant to Section 13 or 15(d) of the Securities  Exchange Act of 1934** |
|                                                                                                                                                    |   |                                                                                          |
| **For the period from             to            /** |
|                                                                                                                                                    |   |                                                                                          |
| **Commission file number: 000-30575**                                                                                                                   |

 

 

**AVOCENT CORPORATION**(Exact Name ofRegistrant as Specified in Its Charter)

 

| **Delaware**                                                    |   | **91-2032368**                           |
|-----------------------------------------------------------------|--------|------------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) |   | (I.R.S. Employer  Identification Number) |
|                                                            |   |                                     |
| **4991  Corporate Drive   Huntsville, Alabama**                 |   | **35805**                                |
| (Address of Principal  Executive Offices)                       |   | (Zip Code)                               |

 

**256-430-4000**(Registrant’sTelephone Number, Including Area Code)

 

                Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934, as amended, duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.

 

ý Yes o No

 

As of May 7, 2002, the number ofoutstanding shares of the Registrant’s Common Stock was 44,952,194.

 

 

 

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**AVOCENT CORPORATION**

**FORM 10-Q**

**March 29, 2002**

 

**INDEX**

 
|       |                  |
|------------|-----------------------|
| Part I     | Financial Information |
|       | Item 1.               | Financial Statements |
|       |                  | Condensed  Consolidated Statements of Operations (unaudited)   for the Three Months Ended March 29, 2002 and March 30, 2001 |
|       |                  | Condensed  Consolidated Balance Sheets at March 29, 2002   (unaudited) and December 31, 2001 (audited) |
|       |                  | Condensed  Consolidated Statements of Cash Flows (unaudited)   for the Three Months Ended March 29, 2002 and March 30, 2001 |
|       |                  | Notes  to Condensed Consolidated Financial Statements (unaudited) |
|       | Item  2.              | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
|       | Item  3.              | Quantitative  and Qualitative Disclosures about Market Risks |
| Part II    | Other Information     |
|       | Item 1.               | Legal Proceedings |
|       | Item 6.               | Exhibits and  Reports on Form 8-K. |
|       |                  |
| Signatures |                  |
|            |                       |  |  |

 

 

2

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**PARTI —FINANCIAL INFORMATION**

 

Item 1. Financial Statements

 

**AVOCENT CORPORATIONCONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS**(In thousands,except per share data)

#### ** **

|                                                                      |   | **For the  three months ended** |   |
|---------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                      |   | **March 29,**                   |   | **March 30,** |   |
|                                                                      |   | **2002**                        |   | **2001** |   |
|                                                                      |   | **(unaudited)**                 |   | **(unaudited)** |   |
| Net sales                                                                 |   | $                               | 62,103 |   | $ | 73,174 |   |
| Cost of sales                                                             |   | 31,840                          |   | 37,340 |   |
| Gross profit                                                              |   | 30,263                          |   | 35,834 |   |
|                                                                      |   |                            |   |   |   |
| Research and  development expenses                                        |   | 6,437                           |   | 5,693 |   |
| In-process  research and development expenses and other acquisition costs |   | —                          |   | 4,570 |   |
| Selling, general  and administrative expenses                             |   | 19,923                          |   | 19,641 |   |
| Amortization of  intangible assets                                        |   | 5,297                           |   | 33,060 |   |
| Total operating  expenses                                                 |   | 31,657                          |   | 62, 964 |   |
|                                                                      |   |                            |   |   |   |
| Loss from  operations                                                     |   | (1,394                          | )      | (27,130 | ) |
| Other income,  net                                                        |   | 1,364                           |   | 1,300 |   |
|                                                                      |   |                            |   |   |   |
| Loss before  income taxes                                                 |   | (30                             | )      | (25,830 | ) |
| Provision for  (benefit from) income taxes                                |   | (333                            | )      | 2,293 |   |
|                                                                      |   |                            |   |   |   |
| Net income  (loss)                                                        |   | $                               | 303    |   | $ | (28,123 | ) |
|                                                                      |   |                            |   |   |   |
| Earnings (loss)  per share:                                               |   |                            |   |   |   |
| Basic                                                                     |   | $                               | 0.01   |   | $ | (0.64 | ) |
|                                                                      |   |                            |   |   |   |
| Diluted                                                                   |   | $                               | 0.01   |   | $ | (0.64 | ) |
|                                                                      |   |                            |   |   |   |
| Weighted average  shares used in computing earnings (loss) per share:     |   |                            |   |   |   |
| Basic                                                                     |   | 44,828                          |   | 43,982 |   |
|                                                                      |   |                            |   |   |   |
| Diluted                                                                   |   | 45,698                          |   | 43,982 |   |

 

See notes accompanyingthese condensed consolidated financial statements.

 

3

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**AVOCENT CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

(In thousands)

 
|                                                                                                                                                                         |   | **March 29,**   |    | **December  31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|---------|-------------------|--------|
|                                                                                                                                                                         |   | **2002**        |    | **2001**          |   |
|                                                                                                                                                                         |   | **(unaudited)** |    | **(audited)**     |   |
| **ASSETS**                                                                                                                                                                   |   |            |    |              |   |
| Current assets:                                                                                                                                                              |   |            |    |              |   |
| Cash and cash  equivalents                                                                                                                                                   |   | $               | 54,955  |              | $      | 80,506 |   |
| Investments  maturing within one year                                                                                                                                        |   | 128,049         |    | 84,270            |   |
| Accounts  receivable, net                                                                                                                                                    |   | 40,738          |    | 49,091            |   |
| Income taxes  receivable                                                                                                                                                     |   | 1,054           |    | 2,330             |   |
| Other  receivables, net                                                                                                                                                      |   | 1,188           |    | 2,115             |   |
| Inventories, net                                                                                                                                                             |   | 22,666          |    | 27,155            |   |
| Other current  assets                                                                                                                                                        |   | 2,597           |    | 2,134             |   |
| Deferred tax  assets                                                                                                                                                         |   | 11,747          |    | 10,839            |   |
| Total current  assets                                                                                                                                                        |   | 262,994         |    | 258,440           |   |
| Investments                                                                                                                                                                  |   | 10,410          |    | 7,718             |   |
| Property held  for lease, net                                                                                                                                                |   | 1,869           |    | 1,919             |   |
| Property and  equipment, net                                                                                                                                                 |   | 21,861          |    | 21,343            |   |
| Other intangible  assets, net                                                                                                                                                |   | 62,326          |    | 71,014            |   |
| Goodwill                                                                                                                                                                     |   | 188,147         |    | 186,147           |   |
| Other assets                                                                                                                                                                 |   | 814             |    | 617               |   |
|                                                                                                                                                                         |   | $               | 548,421 |              | $      | 547,198 |   |
|                                                                                                                                                                         |   |            |    |              |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                               |   |            |    |              |   |
| Current  liabilities:                                                                                                                                                        |   |            |    |              |   |
| Accounts payable                                                                                                                                                             |   | $               | 7,477   |              | $      | 8,579 |   |
| Accrued wages  and commissions                                                                                                                                               |   | 4,957           |    | 4,727             |   |
| Accrued  liabilities                                                                                                                                                         |   | 11,346          |    | 15,496            |   |
| Income taxes  payable                                                                                                                                                        |   | 9,392           |    | 7,016             |   |
| Other accrued  expenses                                                                                                                                                      |   | 758             |    | 719               |   |
| Total current  liabilities                                                                                                                                                   |   | 33,930          |    | 36,537            |   |
| Deferred tax  liability                                                                                                                                                      |   | 21,972          |    | 24,053            |   |
|                                                                                                                                                                         |   | 55,902          |    | 60,590            |   |
| Stockholders’  equity:                                                                                                                                                  |   |            |    |              |   |
| Preferred stock,  $0.001 par value; 5,000 shares   authorized, no shares issued and outstanding as of March 29, 2002, and  December 31, 2001, respectively              |   | —          |    | —            |   |
| Common stock,  $0.001 par value; 200,000 shares authorized, 44,895 and 44,650 shares issued  and outstanding as of March 29, 2002 and   December 31, 2001, respectively |   | 45              |    | 45                |   |
| Additional  paid-in capital                                                                                                                                                  |   | 928,731         |    | 926,746           |   |
| Accumulated  other comprehensive gain (loss)                                                                                                                                 |   | 83              |    | (42               | )      |
| Deferred  compensation                                                                                                                                                       |   | (13,466         | )       | (16,964           | )      |
| Accumulated  deficit                                                                                                                                                         |   | (422,874        | )       | (423,177          | )      |
| Total  stockholders’ equity                                                                                                                                             |   | 492,519         |    | 486,608           |   |
|                                                                                                                                                                         |   | $               | 548,421 |              | $      | 547,198 |   |

 

See notes accompanyingthese condensed consolidated financial statements.

 

4

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**AVOCENT CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

(In thousands)

 
|                                                                                      |   | **For the  three months ended** |       |
|-------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                      |   | **March 29,**                   |       | **March 30,** |   |
|                                                                                      |   | **2002**                        |       | **2001** |   |
|                                                                                      |   | **(unaudited)**                 |       | **(unaudited)** |   |
| Cash flows from  operating activities:                                                    |   |                            | * *   |   | * * |
| Net income  (loss)                                                                        |   | $                               | 303        |   | $ | (28,123 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities: |   |                            |       |   |   |
| Depreciation                                                                              |   | 1,078                           |       | 1,195 |   |
| Amortization of  intangible assets                                                        |   | 5,297                           |       | 33,060 |   |
| Stock-based  compensation                                                                 |   | 5,493                           |       | 4,806 |   |
| Purchased  in-process research and development expenses                                   |   | —                          |       | 4,570 |   |
| Amortization of  discounts on investments                                                 |   | 373                             |       | 17 |   |
| Changes in  operating assets and liabilities:                                             |   |                            |       |   |   |
| Accounts  receivable, net                                                                 |   | 8,353                           |       | 6,892 |   |
| Other  receivables, net                                                                   |   | 1,061                           |       | 10,800 |   |
| Inventories, net                                                                          |   | 4,489                           |       | (14,292 | ) |
| Other assets                                                                              |   | 781                             |       | 572 |   |
| Accounts payable                                                                          |   | (1,102                          | )          | (2,161 | ) |
| Accrued  compensation                                                                     |   | 230                             |       | (924 | ) |
| Other accrued  expenses                                                                   |   | (4,111                          | )          | (1,361 | ) |
| Income taxes,  current and deferred                                                       |   | (1,275                          | )          | 1,293 |   |
| Total  adjustments                                                                        |   | 20,667                          |       | 44,467 |   |
| Net cash  provided by operating activities                                                |   | 20,970                          |       | 16,344 |   |
|                                                                                      |   |                            | ** ** |   | ** ** |
| Cash flows from  investing activities:                                                    |   |                            | ** ** |   | ** ** |
| Purchase of  Equinox Systems Inc., net of cash and investments                            |   | —                          |       | (31,725 | ) |
| Purchases of  property and equipment                                                      |   | (1,596                          | )          | (1,198 | ) |
| Purchases of  investments                                                                 |   | (58,416                         | )          | (14,571 | ) |
| Maturities of  investments                                                                |   | 11,396                          |       | 20,644 |   |
| Proceeds from  sales of investments                                                       |   | 305                             |       | 19,654 |   |
| Net cash  provided by (used in) investing activities                                      |   | (48,311                         | )          | (7,196 | ) |
|                                                                                      |   |                            | ** ** |   | ** ** |
| Cash flows from  financing activities:                                                    |   |                            | ** ** |   | ** ** |
| Proceeds from issuance  of short-term debt                                                |   | —                          |       | 45,000 |   |
| Repayment of  short-term debt                                                             |   | —                          |       | (45,000 | ) |
| Proceeds from  issuance of common stock                                                   |   | 1,794                           |       | 2,691 |   |
| Net cash  provided by financing activities                                                |   | 1,794                           |       | 2,691 |   |
|                                                                                      |   |                            |       |   |   |
| Effect of  exchange rate changes on cash and cash equivalents                             |   | (4                              | )          | (41 | ) |
|                                                                                      |   |                            |       |   |   |
| Net increase  (decrease) in cash and cash equivalents                                     |   | (25,551                         | )          | 11,798 |   |
| Cash and cash  equivalents at beginning of period                                         |   | 80,506                          |       | 44,106 |   |
| Cash and cash  equivalents at end of period                                               |   | $                               | 54,955     |   | $ | 55,904 |   |

 

Non-cash transaction:

 

                During the firstquarter of 2002, 318 shares valued at $8,333 were surrendered to satisfy acashless exercise of stock options. These shares were immediately retired andavailable for issuance.

 

See notes accompanyingthese condensed consolidated financial statements.

 

 

5

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**AVOCENT CORPORATION**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Unaudited, in thousands)

 

Note 1.   Basisof presentation

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inconformity with generally accepted accounting principles and reflect alladjustments consisting of normal recurring adjustments which, in the opinion ofmanagement, are necessary for a fair presentation of the results for theperiods shown.  The results ofoperations for these periods are not necessarily indicative of the resultsexpected for the full fiscal year or for any future periods.  The preparation of financial statements inconformity with generally accepted accounting principles requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates and assumptions.  Certain reclassifications have been made tothe prior year financial statements to conform to the current yearpresentation.

 

The accompanyingunaudited condensed consolidated financial statements should be read inconjunction with the audited consolidated financial statements and the relatednotes contained in our Annual Report on Form 10-K for the year ended December31, 2001, which is on file with the Securities and Exchange Commission.

 

We report ourannual results based on years ending December 31.  We report our quarterly results for the first three interimperiods based on 13 week periods ending on Fridays and for the fourth interimperiod ending on December 31.

 

Our financialstatements are consolidated and include the accounts of Avocent Corporation(“Avocent” or the “Company”) and its wholly owned subsidiaries.  Significant intercompany transactions andbalances have been eliminated in consolidation.

 

Note 2.   Inventories

 

Inventories consisted ofthe following at:

 

|             |   | **March 29,   2002** |   | **December  31,   2001** |   |
|------------------|--------|----------------------|--------|--------------------------|--------|
|             |   | **(unaudited)**      |   | **(audited)**            |   |
| Raw materials    |   | $                    | 9,964  |                     | $      | 13,034 |   |
| Work-in-process  |   | 1,111                |   | 446                      |   |
| Finished goods   |   | 11,591               |   | 13,675                   |   |
| Inventories, net |   | $                    | 22,666 |                     | $      | 27,155 |   |

 

Note 3.   Stock options anddeferred compensation

 

                Deferredcompensation — We recorded $41,165 of deferred compensation related to Cybexemployee stock options at the time of the merger of Apex and Cybex on July 1,2000.  Additionally, we recorded $2,752of deferred compensation related to the Equinox employee stock options at thetime of the acquisition on January 3, 2001. The deferred compensation is being amortized over the vesting period ofthe options for which it was recorded.

 

                Stockoption exercises — Options to purchase 219 shares of our Common Stock wereexercised during the quarter ended March 29, 2002.  Additionally, 29 shares of our Common Stock were issued duringthe three months ending March 29, 2002 under our Employee Stock PurchasePlan.  In addition, we allowed sharesissued upon the exercise of certain stock options by a former executive of theCompany to be traded as payment for the cost of the options and relatedtaxes.  Under applicable accountingrules, this cashless exercise required variable plan accounting for theseoptions.  As a result, we recorded $2.0million of compensation expense in the first quarter of 2002.

 

6

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Note 4.   Accumulated othercomprehensive loss

 

We record unrealized gains and losseson our foreign currency translation adjustments and unrealized holding gains orlosses on our available-for-sale securities as accumulated other comprehensiveincome (loss), which is included as a separate component of stockholders’equity.  For the three months endedMarch 29, 2002 and March 30, 2001, total other comprehensive income amounted to$125 and $73, respectively.  As of March29, 2002 and March 30, 2001, total accumulated other comprehensive gain (loss)was $ 83 and ($2,808), respectively.

 

Note 5.   Earnings (loss) pershare, (*unaudited*)

 
|                                                                 |   | **Income (loss) (Numerator)** |       | **Shares   (Denominator)** |       | **Per-Share   Amount** | ** ** |
|----------------------------------------------------------------------|--------|-------------------------------|------------|----------------------------|------------|------------------------|------------|
|                                                                 |   |                          | ** ** |                       | ** ** |                   | ** ** |
| **For the three months ended March 29, 2002**                        |   |                          |       |                       |       |                   |       |
| **Basic EPS**                                                        |   |                          |       |                       |       |                   |       |
| Net income available to common stockholders                          |   | $                             | 303        |                       | 44,828     |                   | $          | 0.01 |   |
| **Effect of Dilutive Securities**                                    |   |                          |       |                       |       |                   |       |
| Stock options                                                        |   |                          |       | 870                        |       |                   |       |
| **Diluted EPS**                                                      |   |                          |       |                       |       |                   |       |
| Net income available to common stockholders and assumed  conversions |   | $                             | 303        |                       | 45,698     |                   | $          | 0.01 |   |
|                                                                 |   |                          |       |                       |       |                   |       |
| **For the three months ended March 30, 2001**                        |   |                          |       |                       |       |                   |       |
| **Basic EPS**                                                        |   |                          |       |                       |       |                   |       |
| Net loss available to common stockholders                            |   | $                             | (28,123    | )                          | 43,982     |                   | $          | (0.64 | ) |
| **Effect of Dilutive Securities**                                    |   |                          |       |                       |       |                   |       |
| Stock options                                                        |   |                          |       | —                     |       |                   |       |
| **Diluted EPS**                                                      |   |                          |       |                       |       |                   |       |
| Net loss available to common stockholders and assumed  conversions   |   | $                             | (28,123    | )                          | 43,982     |                   | $          | (0.64 | ) |

 

Note 6.   Sales by Geographic Region

** **

Avocent reportsoperations as a single operating segment. The Company, however, reports sales by geographic region.  Following is a presentation of sales bygeographic region for the periods ended March 29, 2002 and March 30, 2001:

 

** **

|               |   | **For the  three months ended** | ** ** |
|--------------------|--------|---------------------------------|------------|
|               |   | **March 29,   2002**            | ** ** | **March 30,   2001** | ** ** |
|               |   | **(unaudited)**                 |       | **(unaudited)** |   |
| Net sales:         |   |                            |       |   |   |
| United States      |   | $                               | 37,346     |   | $ | 44,127 |   |
| Rest of the  World |   | 24,757                          |       | 29,047 |   |
|               |   | $                               | 62,103     |   | $ | 73,174 |   |

** **

**As of March 29, 2002, long-lived assets totaled $274,203,which includes $272,048 held in the U.S. and $2,155 held outside of theU.S.  As of December 31, 2001, long-livedassets totaled $280,423, which includes $278,118 held in the U.S. and $2,305held outside of the U.S.**

** **

**Note 7.   ForwardContracts**

** **

**The Company uses forward contracts toreduce its foreign currency exposure related to the net cash flows from its Europeanoperations. The majority of these contracts are short-term contracts (threemonths or less) and are marked-to-market each quarter and included in tradepayables, with the offsetting gain or loss included in other revenues in theaccompanying statements of operations. At March 29, 2002, we had one openforward contract, maturing in the second quarter of 2002, to purchase $869 inforeign currency. The fair value of the contract at March 29, 2002 wasapproximately $877.**

** **

** **

**7**

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** **

**Note 8.   Goodwill andOther Intangible Assets**

** **

**Effective January 1, 2002, theCompany adopted Statement of Financial Accounting Standard No. 142, *Goodwill andIntangible Asset*s and No. 141, *Business Combinations*, which were issuedby the Financial Accounting Standards Board in July 2001.  Under these standards, the Company ceasedamortizing goodwill totaling $188 million (including $2.0 million, net of $1.4million accumulated amortization, classified as other intangible assets as ofDecember 31, 2001) as of January 1, 2002. Adoption of the new standards resulted in not recognizing $27.7 millionin amortization expense for the quarter ended March 29, 2002 that would havebeen recognized had the previous standards been in effect.  The same quarter last year included $27.7million in amortization expense under the old standards.**

** **

**The following table presents theimpact of the new standards on operating income (loss), net income (loss) andearnings (loss) per share, as if they had been in effect for the quarter endedMarch 30, 2001.**

** **

|                               |   | **March 29,   2002   As Reported** | ** ** | **March 30,   2001   As Reported** | ** ** | **March 30,   2001   As Adjusted** | ** ** |
|------------------------------------|--------|------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|
| Operating loss                     |   | $                                  | (1,394     | )                                  | $          | (27,130                            | )          | $ | 563 |   |
| Net income  (loss)                 |   | $                                  | 303        |                               | $          | (28,123                            | )          | $ | (457 | ) |
| Basic earnings  (loss) per share   |   | $                                  | 0.01       |                               | $          | (0.64                              | )          | $ | (0.01 | ) |
| Diluted earnings  (loss) per share |   | $                                  | 0.01       |                               | $          | (0.64                              | )          | $ | (0.01 | ) |

** **

**Acquired other intangible assetssubject to amortization were as follows:**

** **

|                             |   | **March 29,  2002**         |   | **December  31, 2001**        |   |
|----------------------------------|--------|-----------------------------|--------|-------------------------------|--------|
|                             |   | **Gross  Carrying Amounts** |   | **Accumulated  Amortization** |   | **Gross  Carrying Amounts** |   | **Accumulated  Amortization** |   |
| Developed  technology            |   | $                           | 65,740 |                          | $      | 23,166 |   | $ | 65,740 |   | $ | 19,931 |   |
| Patents and  trademarks          |   | 13,098                      |   | 3,196                         |   | 14,548 |   | 2,716 |   |
| Customer base  and certification |   | 19,500                      |   | 10,958                        |   | 19,500 |   | 9,333 |   |
| Assembled  workforce             |   | —                      |   | —                        |   | 3,400 |   | 1,400 |   |
| Other                            |   | 1,508                       |   | 200                           |   | 1,418 |   | 212 |   |
|                             |   | $                           | 99,846 |                          | $      | 37,520 |   | $ | 104,606 |   | $ | 33,592 |   |

** **

**For the three months ended March 29,2002 and March 30, 2001, amortization expense for other intangible assets was$5.3 million and $5.4 million, respectively. The approximate estimated annual amortization for other intangibles isas follows:**

** **

| **Years ending December 31:** |   |   |   |
|-------------------------------|--------|--------|--------|
| 2002                          |   | $      | 21,200 |   |
| 2003                          |   | $      | 18,500 |   |
| 2004                          |   | $      | 14,900 |   |
| 2005                          |   | $      | 8,900  |   |
| 2006                          |   | $      | 1,600  |   |

** **

**In accordance with these standards,the Company completed a transitional impairment test of all goodwill andintangible assets as of January 1, 2002.**  The test concludedthat no adjustment was required upon adoption. The Company will test goodwill at least annually for impairment, asprescribed by these standards.

** **

**8**

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** **

** **

**The Company expensed $2.7 million inlegal fees during the quarter ended March 29, 2002.  Approximately $1.8 million of these fees were deferred from previousperiods (which were included as other intangible assets at December 31, 2001)and $900 thousand of fees were incurred during the quarter ended March 29,2002. These fees related to the Company’s patent infringement lawsuit broughtagainst a competitor challenging the use of on-screen technology in thecompetitor’s switches.  A court decisionwas reached in February 2002 that found no infringement of the three Avocentpatents involved in the lawsuit.  Whilethe judgment is currently on appeal and the Company intends to continue topursue the lawsuit, Avocent’s management decided to expense these costs due tothe uncertainty of litigation.**

** **

**Note 9.   RecentlyIssued Accounting Standards**

 

In August 2001, theFinancial Accounting Standards Board issued SFAS No. 143, *Accounting for Asset RetirementObligations (“ARO”)*, which has an effective date for financialstatements for fiscal years beginning after June 15, 2002.  This statement addresses the diversity inpractice for recognizing asset retirement obligations and requires thatobligations associated with the retirement of a tangible long-lived asset berecorded as a liability when those obligations are incurred, with the amount ofthe liability initially measured at fair value.  Upon initially recognizing a liability for an ARO, an entity mustcapitalize the cost by recognizing an increase in the carrying amount of therelated long-lived asset.  Over time,the liability is accreted to its present value each period, and the capitalizedcost is depreciated over the useful life of the related asset.  Upon settlement of the liability, an entityeither settles the obligation for its recorded amount or incurs a gain or lossupon settlement.  The impact of SFAS No.143 on the Company’s financial statements is not expected to be material.

 

**In October 2001, the Financial Accounting Standards Boardissued SFAS No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets*, which has an effective date for financialstatements for fiscal years beginning after December 15, 2001.  This statement, which supercedes SFAS No.121, *Accountingfor the Impairment of Long-Lived Assets and for Long-Lived Assets to beDisposed Of*, requires that long-lived assets that are to be disposedof by sale be measured at the lower of book value or fair value less cost tosell.  Additionally, this statementexpands the scope of discontinued operations to include all components of anentity with operations that (1) can be distinguished from the rest of theentity and (2) will be eliminated from the ongoing operations of the entity ina disposal transaction.  The Companyadopted SFAS No. 144 effective January 1, 2002.  The impact of SFAS No. 144 was not material to the Company’sfinancial statements as of March 29, 2002.**

** **

** **

**9**

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** **

**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

 

*THE INFORMATION IN THIS ITEM 2 “MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS” CONTAINS FORWARD-LOOKINGSTATEMENTS, INCLUDING, WITHOUT LIMITATION, STATEMENTS RELATING TO OUR FUTUREBUSINESS PROSPECTS AND ECONOMIC CONDITIONS IN GENERAL, STATEMENTS REGARDING OURENGINEERING AND DESIGN ACTIVITIES, PRODUCT DEVELOPMENT, AND NEW PRODUCT INTRODUCTIONS,STATEMENTS RELATING TO FUTURE PRODUCT DEMAND AND OUR FUTURE SALES, EARNINGS,GROSS PROFIT, INCOME, AND EXPENSES, STATEMENTS REGARDING INTERNATIONAL SALES,STATEMENTS REGARDING MERGER ACCOUNTING, ACQUISITION, AND TRANSACTION COSTS ANDADJUSTMENTS, STATEMENTS ABOUT THE RATIO OF SALES AMONG OUR DISTRIBUTIONCHANNELS, STATEMENTS REGARDING FUTURE INVENTORY LEVELS, AND STATEMENTS RELATINGTO ANTICIPATED CAPITAL NEEDS.*

 

*THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TOCERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFERMATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCEINCLUDE, BUT ARE NOT LIMITED TO, THE RISKS ASSOCIATED WITH GENERAL ECONOMICCONDITIONS, RISKS ATTRIBUTABLE TO FUTURE PRODUCT DEMAND, SALES, AND EXPENSES,RISKS ASSOCIATED WITH PRODUCT DESIGN EFFORTS, RISKS ASSOCIATED WITH RELIANCE ONA LIMITED NUMBER OF COMPONENT SUPPLIERS AND SINGLE SOURCE COMPONENTS, THE LOSSOF ONE OF OUR OEM CUSTOMERS, A REDUCTION OR FLUCTUATIONS IN SALES OF OUR OEM ORBRANDED PRODUCTS, INTENSE COMPETITION AND NEW PRODUCTS AND TECHNOLOGIES FROMEXISTING AND NEW COMPETITORS, RISKS RELATED TO PROTECTING OUR INTELLECTUALPROPERTY RIGHTS, FLUCTUATIONS IN FOREIGN CURRENCIES, RISKS RELATED TO MERGERINTEGRATION, AND OTHER RISKS DETAILED IN OUR ANNUAL REPORT ON FORM 10-K, WHICH WAS FILED WITH THE SECURITIES ANDEXCHANGE COMMISSION ON MARCH 29, 2002.*

** **

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**Overview**

 

We design, manufacture, and sellanalog and digital console switching systems, serial connectivity devices, andextension and remote access products for the computer industry. Data centermanagers and network administrators have increasingly complex and growingserver populations, and our analog, digital, and serial switching solutions, aswell as our extension and remote access products, help them manage multipleservers and serially controlled devices from one or more local or remote consoles consisting of a keyboard, videomonitor, and mouse.  Specifically, ourproducts can provide significant cost reductions including lower initialinvestment, reduced utility costs, and space savings, as well as more efficienttechnical support capabilities.

 

We provide “plug and play”switching systems for many network administration, management, and storageproblems faced by corporate customers, data centers, and server farms. Ourswitching solutions include products sold under the Avocent, Apex, Cybex, andEquinox brands, including our *AutoViewTM, DS SeriesTM, OutLook®,* and *XP®4000 Series* products. Our switchingproducts help facilities managers and network administrators access multipleservers and serially controlled devices from one or more centralized or remoteconsoles, consolidate hardware requirements, and provide direct hardwiredconnections between the switch and the attached servers to facilitate access tothose servers, even when the network is down. Our Equinox branded products add high-performance,reliable, and affordable server-based products for serial and dial accessapplications.  The Equinox *SuperSerial*product line provides serial communications for security, commercialpoint-of-sale, process control, industrial automation, data collection, remoteaccess, fax servers, Internet access, and custom applications.  We recently announced two new powermanagement solutions, the *SPC*TM*800* and *SPC*TM*1600*, which expand our DSSeries of products. When combined with Avocent’s *CPS*TM**serial-based network appliances,data center managers can securely control almost any connected device in thedata center.

 

Our revenue is derived (i) from sales to a limitednumber of original equipment server manufacturers, or OEMs, who purchase ourswitching systems on a private-label or branded basis for integration and salewith the their own products, (ii) from sales through our reseller anddistributor network, and (iii) from sales to a limited amount of directcustomers. For the three months ended March 29, 2002, sales to our reseller anddistributor network were 53% of net sales, sales to our OEM customers were 45%of net sales, and sales to our direct customers were 2% of net sales. We do nothave contracts with many of these customers, and in general, they are onlyobligated to purchase products from us pursuant to binding purchaseorders.  The merger between Compaq andHewlett-Packard will result in a further concentration of sales with a singleOEM customer. The loss of, or material decline in orders from, our OEMcustomers would have a material adverse effect on our business, financialcondition, results of operation, and cash flow.  We sell products to dealers, end-users and OEMs in the UnitedStates, Canada, Europe and Asia as well as in other foreign markets.  Sales within the United States accounted forapproximately 60% of first quarter 2002 sales, while sales outside the UnitedStates accounted for the remaining 40% of sales.

 

With recent industry-wideinitiatives to reduce all channel inventories and to shorten lead times, trendswith our major customers are, generally, to reduce the number of weeks offorward–committed firm orders. This trend is currently affecting ourbusiness with certain OEMs and other server manufacturers, and we believethat it will make our sales more difficult to predict and inventory levels moredifficult to manage.

 

Weare currently experiencing increased price competition in the market for all ofour products, and we 

 

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expectthat pricing pressures will continue to increase in the future.  In addition, general economic conditions are not asfavorable as they were in prior years, and our revenue growth rate hasslowed.  Depending on future generaleconomic conditions and other factors, our revenue could decline in the future.

 

**CriticalAccounting Policies**

 

Managementbelieves the following critical accounting policies, among others, affect themore significant judgments and estimates used in the preparation of itsconsolidated financial statements:

 

•                                          We review customer contracts to determineif all of the requirements for revenue recognition have been met prior torecording revenues from sales transactions. We generally record sales revenue upon shipment of our products, net ofany discounts, since we generally do not have significant post deliveryobligations, the product price is fixed and determinable, collection of theresulting receivable is probable, and product returns are reasonablyestimable.  We generally ship productsupon receipt of a purchase order from a customer.  Shipping terms are evaluated, and revenue on products shipped FOBdestination is recorded when the customer takes possession of the goods.

 

•                                          We maintain allowances for doubtfulaccounts for estimated losses resulting from the inability of our customers tomake required payments.  If thefinancial condition of our customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances may berequired.

 

•                                          We provide for the estimated cost ofproduct warranties at the time revenue is recognized.  While we engage in extensive product quality programs andprocesses, including actively monitoring and evaluating the quality of ourcomponent suppliers, our warranty obligation is affected by product failurerates, failure rates of purchased components integrated into our products,material usage, and other rework costs incurred in correcting a productfailure.  Should actual product failurerates, material usage, or other rework costs differ from our estimates, revisionsto our estimated warranty liability may be required.

 

•                                          We write down our inventory for estimatedobsolescence or unmarketable inventory equal to the estimated market valuebased upon assumptions about future demand and market conditions.  If actual future demand or market conditionsare less favorable than those projected by management, additional inventorywrite-downs may be required.

 

•                                          We hold minority interests in companieshaving operations or technology in areas within or adjacent to our strategicfocus, some of which are in publicly traded companies with share prices thatare volatile and some of which are in non-publicly traded companies with valuesthat are difficult to determine.  Werecord an investment impairment charge when we believe an investment hasexperienced a decline in value that is other than temporary.  Future adverse changes in market conditionsor poor operating results of underlying investments could result in losses oran inability to recover the carrying value of the investments that may not bereflected in an investments current carrying value, thereby possibly requiringan impairment charge in the future.

 

•                                          We estimate allowances for sales returns based on our experiences fromhistorical customer returns.  If actualfuture customer returns are less favorable than those projected by management,additional sales return expenses may be required.

 

•                                          Effective January 1, 2002, we adopted SFAS No. 142.  Our initial test for goodwill impairment asof January 1, 2002 determined that no adjustment for impairment wasrequired.  If economic conditionsdeteriorate and indicators of impairment become present, an adjustment to thecarrying value of goodwill may be required.

 

 

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#### **Resultsof Operations**

 

                The following table sets forth,for the periods indicated, selected statement of operations data expressed as apercentage of net sales:

 
|                                                                      |   | **Three Months Ended** |   |
|---------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                      |   | **March 29,   2002**   |   | **March 30,   2001** |   |
| Net sales                                                                 |   | 100.0                  | %      | 100.0 | % |
| Cost of sales                                                             |   | 51.3                   |   | 51.0 |   |
| Gross profit                                                              |   | 48.7                   |   | 49.0 |   |
| Operating expenses:                                                       |   |                   |   |   |   |
| Research and development expenses                                         |   | 10.4                   |   | 7.8 |   |
| In-process research and development expenses and other  acquisition costs |   | —                 |   | 6.2 |   |
| Selling, general and administrative expenses                              |   | 32.0                   |   | 26.8 |   |
| Amortization of intangible assets                                         |   | 8.5                    |   | 45.2 |   |
| Total operating expenses                                                  |   | 50.9                   |   | 86.0 |   |
|                                                                      |   |                   |   |   |   |
| Loss from operations                                                      |   | (2.2                   | )      | (37.0 | ) |
| Other income, net                                                         |   | 2.2                    |   | 1.8 |   |
| Loss before income taxes                                                  |   | (0.0                   | )      | (35.2 | ) |
| Provision for (benefit from) income taxes                                 |   | (0.5                   | )      | 3.1 |   |
|                                                                      |   |                   |   |   |   |
| Net income (loss)                                                         |   | 0.5                    | %      | (38.3% | ) |

** **

 

*Netsales.*  Our net sales consist of sales of consoleswitching systems, digital connectivity solutions, serial connectivity devices,and extension and remote-access products. Net sales decreased 15% to $62.1 million for the first quarter of 2002from $73.2 million for the first quarter of 2001.  The decrease in sales resulted from the general weakness in thetechnology sector of the economy when compared to the first quarter of last year.  Sequentially, our sales decreased less than$500 thousand from the fourth quarter of 2001. The sequential decline in sales was due to lower OEM sales, whichdeclined 9% from the fourth quarter of 2001 and is consistent with our prioryear’s first quarter OEM sequential sales decline. The sequential decline inOEM sales was nearly offset by an improvement in our branded business, whichincreased 19% from the fourth quarter of 2001. Sales through our reseller and distributor channel decreased 22% from$42.0 million in the first quarter of 2001 to $32.8 million in the firstquarter of 2002. Direct sales decreased 55% from $3.3 million in the firstquarter of 2001 to $1.5 million in the first quarter of 2002. OEM salesdecreased less than 1% from $27.9 million in the first quarter of 2001 to $27.8million in the first quarter of 2002. Reseller and distributor sales were 53%of sales for the first quarter of 2002, compared to 57% of sales for the firstquarter of 2001.  OEM sales were 45% ofsales for the first quarter of 2002, compared to 38% of sales for the firstquarter of 2001.  Direct sales were 2%of sales for the first quarter of 2002, compared to 5% of sales for the firstquarter of 2001.  The decline in saleswas consistent between sales within the United States as compared to sales tothe rest of the world. Sales within the United States decreased 15% from $44.1million in the first quarter of 2001 to $37.3 million in the first quarter of2002.  Rest of the world sales decreased14% from $29.1 million in the first quarter of 2001 to $24.8 million in thefirst quarter of 2002.  Sales within theUnited States were 60% of sales for the first quarter of both 2001 and 2002,and rest-of-world sales were 40% of sales for the first quarter of both 2001and 2002.

 

*                Grossprofit.* Gross profit is affected by a variety of factors,including: the ratio of sales among our distribution channels, as our OEM salestypically have lower gross margins than our reseller and distributor sales andour directs sales; varying absorption of fixed costs as sales levels fluctuate;product mix, raw materials and labor costs; new product introductions by us andby our competitors; and the level of our outsourcing of manufacturing andassembly services.  Gross profit wasrelatively flat in the first quarter 2002 when compared to the first quarter of2001, despite a 15% decline in revenue. The primary reasons for maintaining margins were cost reductions onseveral products and increased volume for our digital products. Our digital familyof products has higher gross margins than our other branded products andaccounted for 19% of total sales for the first quarter of 2002, compared to 5%of sales for the first quarter of 2001. We expect our OEM sales to return toprevious levels in the second quarter of 2002, as a result, we expect grossmargins to decline slightly.

 

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                *Research and development expenses.*  Research and development expenses includecompensation for engineers, support personnel, and materials costs and areexpensed as they are incurred.  Researchand development expenses were $6.4 million, or 10.4% of net sales, in the firstquarter of 2002 compared to $5.7 million, or 7.8% of net sales, for the firstquarter of 2001.  The large increase inthe amount spent on research and development can be attributed to the increasedcost in materials, certification, and testing of new products to be releasedduring 2002. We believe that thetimely development of innovative products and enhancements to existing productsis essential to maintaining our competitive position.  We expect research and development expenditures to remain at thefirst quarter level for the second quarter of 2002 and to trend downward overthe second half of 2002.

 

                *In-process research and development expense.*Thein-process research and development expense of $4.6 million in the firstquarter of 2001 is comprised solely of the acquisition costs of Equinoxattributable to in-process technologies. The charge for Equinox in-process technologies is non-recurring.

 

***Selling, generaland administrative expenses.*** Selling, general and administrative expenses include some merger relatedexpenses, personnel costs for administration, finance, human resources, salesand marketing and general management, as well as rent, utilities and legal andaccounting expenses, advertising, promotional material, trade show expenses andrelated travel costs.  Selling, generaland administrative expenses were $19.9 million, or 32.0% of net sales, for thefirst quarter of 2002 compared to $19.6 million, or 26.8% of net sales, for thefirst quarter of 2001.  The increase inselling, general and administrative expenses was affected by ourdecision to expense $2.7 million in legal fees during the first quarter of2002.  Approximately $1.8 million ofthese fees were deferred from previous periods and $900 thousand of fees wereincurred during the first quarter of 2002. These fees related to the patentinfringement lawsuit we brought against one of our competitors challenging theuse of on-screen technology in the competitor’s switches.  A court decision was reached in February2002 that found no infringement of the three patents involved in the lawsuit.  The judgment is currently on appeal, and weintend to continue to vigorously pursue the lawsuit.  Nevertheless, we decided to expense these legal fees due to theuncertainty of litigation.  In addition,we recorded $2.0 million of compensation expense in the first quarter of 2002as the result of a cashless option exercise. We allowed shares issued upon the exercise of certain options by aformer executive to be traded as payment for the cost of these options and therelated taxes.  Under applicableaccounting rules, this cashless exercise required variable plan accounting forthese options.  We have no other optionsoutstanding subject to variable accounting. We expect selling, general and administrative expenditures, in dollarsand as a percentage of sales, to decline from the level we experienced in thefirst quarter of 2002.

 

***Amortization ofintangible assets.*** Amortization of intangible assets for the first quarter of 2002 iscomprised of the amortization of the amounts allocated to the identifiableintangible assets that were in excess of the purchase price over the fair valueof the Cybex assets and liabilities acquired by Apex in the merger transaction.Also included is the amortization of similar assets created as a result of theacquisition of Equinox. The first quarter of 2001 includes the amortization ofthese same assets as well as amortization of goodwill created at the merger andthe acquisition.  Effective January 1,2002, we adopted Statement of Financial Accounting Standard No. 142, *Goodwill andIntangible Asset*s, and No. 141, *Business Combinations*, which were issuedby the Financial Accounting Standards Board in July 2001.  Under these standards, the Company ceasedamortizing goodwill of approximately $188 million as of January 1, 2002.  Amortization of other identifiableintangible assets was $5.3 million or 8.5% of net sales for the first quarterof 2002, while amortization of other identifiable intangible assets andgoodwill was $33.1 million, including $27.7 million related toamortization of goodwill, or 45.2% of net sales, for the first quarter of 2001.

 

                *Other income, net.*  Other income was $1.4 million for thefirst quarter of 2002, up slightly from $1.3 million for the first quarter of2001. Although we have more cash and marketable securities than the firstquarter of 2001, interest income declined by approximately $300 thousand due tolower interest rates.  The higherinterest income last year was offset by the interest expense incurred in thefirst quarter of 2001 related to the acquisition of Equinox.

 

                *Provision for (benefit from) incometaxes.*  The benefit fromincome taxes was approximately $367 thousand for 2002, compared to aprovision for income taxes of $2.3 million in 2001. Excluding mergerrelated adjustments to federal taxes, the effective tax rate for the firstquarter of 2002 was a provision for income taxes of approximately 24.1%,compared to 29.6% for the first quarter of 2001, primarily due to the mix ofour pre-tax profit among our U.S. and international companies.  Shifting shipments to our internationalwarehouses from Redmond to Shannon leveraged the 10% tax rate in Ireland. Weexpect our effective tax rate for the rest of the year to be between 24% and26%, depending primarily on the mix of pre-tax profit between the U.S.locations and Ireland.

 

*                Net income (loss).*  Our net income for the first quarter of 2002was $303 thousand compared to a net loss of 

 

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$28.1 millionfor the first quarter of 2001, as a result of the above factors, including theamortization of other identifiable intangibles and discontinuing goodwillamortization upon the adoption of SFAS No. 142 on January 1, 2002.  Net income as a percentage of sales for thefirst quarter of 2002 was 0.5%, compared to a net loss as a percentage of salesfor the first quarter of 2001 of 38.4%.

 

**Liquidity andCapital Resources**

 

                Asof March 29, 2002, our principal sources of liquidity consisted of over $193 million in cash, cashequivalents, and investments.  In addition, we have a bank line of credit forborrowings of $2.0 million at LIBOR + 2.25% with a maturity date of mid May2002, which we expect to renew for an additional year.  There were no amounts outstanding under thiscredit facility at March 29, 2002.

 

                Ouroperating activities generated cash of approximately $21 million in the firstthree months of 2002, compared to approximately $16 million in the first threemonths of 2001.  After adjusting netincome for merger and acquisition related items, the increase in cash flow fromoperations for the first three months of 2002 compared to the first threemonths of 2001 resulted primarily from the decrease in accounts receivable andinventory. Receivables declined to $41 million at March 29, 2002 from $49million at December 31, 2001.  Thisdecline in receivables is a result of the timing of sales and our increasedcollection efforts and increased reserves for receivables to ensure accountsreceivable are carried at their realizable value. Inventory levels decreased by$4 million in the first quarter of 2002 due to our concerted efforts to consumeexisting supplies and due to increases in reserve and valuation accounts.  The inventory levels should continue todecline this year as we extend our efforts to expend inventories on-hand.

 

                We believe that ourexisting cash balances, investments, cash generated from operations and thefunds available to us under credit facilities will be sufficient to fund ouroperations through 2002.

 

**Investments**

 

Our investments consist of corporate bonds, commercial paper, mortgagebacked securities guaranteed by U.S. government agencies, and common stock.Debt securities that we have the positive intent and ability to hold tomaturity are classified as held-to-maturity securities and are reported atamortized cost. Debt and equity securities not classified as eitherheld-to-maturity securities or trading securities and that have readilydeterminable fair values are classified as available-for-sale securities andare reported at fair value, with unrealized gains and losses excluded fromearnings and reported as a separate component of stockholders’ equity. Weperiodically review our investment portfolio for investments considered to havesustained an other-than-temporary decline in value.   Upon review of our investment portfolio as of March 29, 2002, noinvestment was considered to have sustained an other-than-temporary decline,and no charge was recorded.

 

 

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**Item3.****Quantitative and QualitativeDisclosures About Market Risks.**

 

Our primary market risk is thepotential loss arising from changes in interest rates, which could have anadverse impact on the fair value of our investment securities. Our investmentpolicy is to manage our investment portfolio to preserve principal and liquiditywhile maximizing the return on the investment portfolio through the investmentof available funds. We diversify the investment portfolio by investing in avariety of highly–rated investment–grade securities and through theuse of different investment managers. Our investment securities portfolio isprimarily invested in securities with maturities (or interest rate resets) oftwo years or less with at least an investment grade rating to minimize interestrate and credit risk as well as to provide for an immediate source of funds.Market risk is estimated as the potential change in fair value in theinvestment portfolio resulting from a hypothetical 10 percent change ininterest rates, and was not material at March 29, 2002. We generally hold investmentsecurities until maturity and carry the securities at amortized cost, whichapproximates fair value.

 

We are also exposed to equity price risks on ourinvestments in publicly traded equity securities. These investments aregenerally in companies having operations or technology in areas within ourstrategic focus. We do not attempt to reduce or eliminate our market exposureon these securities. As of December 31, 2001, the fair value of ouravailable–for–sale equity investments was $658 thousand. A twentypercent adverse change in equity prices would result in a decrease ofapproximately $132 thousand in the fair value of our available–for–saleequity securities as of March 29, 2002.

 

We also face foreign currency exchange rate riskto the extent that the value of certain foreign currencies relative to the U.S.dollar affects our financial results. Our international operations transact aportion of our business in currencies other than the U.S. dollar, and changesin exchange rates may positively or negatively affect our revenues, grossmargins, operating expenses, and retained earnings since these transactions areexpressed in U.S. dollars. We engage in some hedging programs aimed at limitingthe impact of currency fluctuations. These hedging activities provide onlylimited protection against currency exchange risks, and there can be noassurance that such an approach will be successful, especially if a significantand sudden decline occurs in the value of local currencies.

 

 

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### **PART II — OTHERINFORMATION**

 

**Item 1.    Legal Proceedings.**

 

In May 2001, Apex (ourwholly-owned subsidiary) filed a complaint for patent infringement in theUnited States District Court for the Southern District of New York againstRaritan Computer Inc. The Raritan complaint sought injunctive relief, damages,attorneys’ fees and costs under three Apex patents.  After a seven day bench trial in New York in January of 2002, U.S. DistrictJudge Milton Pollack found that there was no infringement of three Apex patentsby Raritan and ordered that judgment be entered in favor of Raritan.  We are in the process of appealing thejudgment.

 

**Item6.    Exhibits and Reports on Form 8-K.**

(a) Exhibits

10.30.1            AmendmentAgreement among Avocent Corporation, Avocent Employment Services Co., CybexComputer Products Corporation, and Stephen F. Thornton.

(b) Reports on Form 8-K

None

 

ITEMS 2, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.

 

 

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### **SIGNATURES**

 

                Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   |         | AVOCENT CORPORATION.                                |   |
|--------|--------------|-----------------------------------------------------|--------|
|   |         | (Registrant)                                        |
|   |         |                                                |
|   |         |                                                |
|   |         |                                                |
| Date:  | May 13, 2002 | /s/ Douglas E. Pritchett                            |   |
|   |         | Douglas E. Pritchett                                |
|   |         | Senior Vice President of Finance, Chief Financial   |
|   |         | Officer and Treasurer (Principal Financial Officer) |

 

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