Fourth Quarter Revenues Increase 13% and Contribute to Record Revenues in 2005
GAAP Earnings per Share of $0.09 Include $0.10 Additional Tax Expense
Board of Directors Approves $200 Million Stock Repurchase Plan
WEST KINGSTON, R.I., Feb. 2 /PRNewswire-FirstCall/ -- American Power
Conversion Corporation (Nasdaq: APCC) (APC) today reported financial results
for the fourth quarter and full year ended December 31, 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20031003/NEAPCLOGO )
Revenue for the fourth quarter 2005 was a record $578.6 million, up 13
percent from $510.8 million in the fourth quarter 2004, the tenth consecutive
quarter of double-digit revenue growth, and up 13 percent from $512.3 million
in the third quarter 2005. Net income for the fourth quarter 2005 was $17.5
million or $0.09 per diluted share, down 67 percent from $52.8 million or
$0.27 per diluted share in the fourth quarter 2004 and a decrease of 64
percent from $48.7 million or $0.24 per diluted share in the third quarter
2005.
Net income for the fourth quarter 2005 includes $19.9 million or $0.10 per
diluted share in additional income tax expense associated with the
repatriation of $500 million in cash from our foreign subsidiaries under the
American Jobs Creation Act. Excluding the incremental tax expense, non-GAAP
net income for the fourth quarter 2005 was $37.3 million or $0.19 per diluted
share. On a non-GAAP basis, fourth quarter 2005 net income decreased 29
percent from fourth quarter 2004 net income and 23 percent from the third
quarter 2005.
Fourth Quarter 2005 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q4 2005 Q4 2004 Change Q3 2005 Change
Revenue $578.6 $510.8 13 % $512.3 13 %
Operating Income $35.2 $67.2 (48)% $58.2 (39)%
Net Income $17.5 $52.8 (67)% $48.7 (64)%
EPS $0.09 $0.27 (68)% $0.24 (64)%
Full Year 2005 Results
Revenue for the twelve months ended December 31, 2005 was a record $1.98
billion, an increase of 16 percent from $1.70 billion in 2004. Net income for
the year 2005 was $144.1 million or $0.72 per diluted share, down 21 percent
from $181.5 million or $0.90 per diluted share in 2004.
Non-GAAP net income for 2005, which excludes the aforementioned
incremental tax charge associated with the repatriation of cash, was $163.9
million or $0.82 per diluted share. Net income for 2004 includes a net tax
credit of approximately $20.8 million or $0.10 per diluted share associated
with the reversal of income tax provisioning resulting from the favorable
outcome of tax audits by U.S. federal and state taxing authorities, partially
offset by a charge for excess inventory of $11.5 million or $0.04 per diluted
share after-tax. Excluding these items, non-GAAP net income for 2004 was
$169.2 million or $0.84 per diluted share. On a non-GAAP basis, full year
2005 net income decreased 3 percent year-over-year.
Full Year 2005 Financial Summary
(In millions, except per share amounts)
YOY
2005 2004 Change
Revenue $1,979.5 $1,699.9 16 %
Operating Income $187.0 $204.4 (9)%
Net Income $144.1 $181.5 (21)%
EPS $0.72 $0.90 (20)%
"We are pleased that the investments we have made in innovative products
and service offerings for our customers and partners continued to drive
double-digit revenue growth in the fourth quarter," said Rodger B. Dowdell,
Jr., APC's president and chief executive officer. "We experienced growth
across all of our product lines and we are particularly proud of the 60% year-
over-year revenue growth for InfraStruXure, our core NCPI solution. We are
also investing to re-architect our supply chain to drive higher levels of
customer satisfaction and reduce product costs, while simultaneously investing
in the start up of new product lines as well as new factories. While we are
realizing some benefits of higher volume on our manufacturing costs, as well
as leverage on our operating expenses, we are incurring additional costs to
implement the improvements in our manufacturing and supply chain, which
impacted our gross margin in the quarter."
Segment Review
For the fourth quarter and full year 2005, APC reported record revenue in
the Large Systems segment, consisting primarily of 3-phase uninterruptible
power supplies (UPSs), APC Global Services, precision cooling and ancillary
products for data centers, facilities and communication applications. Fourth
quarter revenue of $143.1 million increased 33 percent year-over-year and 43
percent sequentially. Full year 2005 Large Systems segment revenue of $429
million was up 33 percent from 2004.
The Company also reported record Small Systems segment revenue for the
fourth quarter and full year 2005. Fourth quarter revenue in the Company's
Small Systems segment, which provides power protection, UPS and management
products for the PC, server and networking markets, was $413 million, up 9
percent year-over-year and up 6 percent sequentially. For the full year, the
Small Systems segment increased 13 percent to approximately $1.5 billion.
Business Outlook
Dowdell continued, "As we implement initiatives to transform APC into a
lean, ambidextrous, customer-centric enterprise, we expect to begin to see the
benefits of the improvements in our global supply chain, distribution, and
manufacturing operations throughout the year. We believe that now is the time
to invest in continuing the momentum that is building in our ISX business and,
as this business grows, we will continue to work on optimizing our margins.
For 2005, growing our top line at approximately three times the growth rate of
the global IT market implies we are effectively addressing our customers' real
problems. Most importantly, we are investing to win InfraStruXure customers
today in order to benefit from their follow-on business tomorrow."
Common Stock Repurchase Program
The Company announced that its Board of Directors approved a stock
repurchase program authorizing up to $200 million to repurchase outstanding
shares of APC's common stock. The purchases would be made on the open market
based on market and business factors. The duration of the repurchase program
is two years but may be suspended or discontinued at any time without prior
notice. "The actions taken by our Board of Directors to authorize a stock
buyback program demonstrate our confidence in APC's future," said Dowdell.
Non-GAAP Results
The Company believes that the non-GAAP results, i.e., results excluding
certain charges or one-time events, described in this release for the fourth
quarter 2005 and full year 2005 and 2004, are useful for an understanding of
its ongoing operations because GAAP (generally accepted accounting principles)
results include financial results not expected to be part of the Company's
ongoing business. Specifically, the Company does not currently believe the
charges and one-time events items outlined in this release for the fourth
quarter 2005, full year 2005 and full year 2004 will recur in future quarters.
The Company cautions that non-GAAP results are not a substitute for GAAP
results. A comparison and reconciliation from non-GAAP to GAAP results is
included in the financial statements accompanying this release.
Conference Call and Webcast
In conjunction with the fourth quarter and full year 2005 earnings
announcement, APC management is hosting a conference call to discuss the
Company's results. This conference call will be held today, February 2, at
5:00 p.m. Eastern time and will be available live and archived, in its
entirety, to the public via the Company's Web site at investor.apcc.com or
live by dialing 913-981-4901. A replay will be accessible via telephone at
approximately 8:00 p.m. on February 2 by dialing 719-457-0820 and entering the
access code 2840317 and will continue through February 9 at midnight Eastern
Time.
Safe Harbor Provision
This press release contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. All
statements in this press release that do not describe historical facts, such
as statements concerning the Company's future plans or prospects and those
contained in the "Business Outlook" section of the press release, are forward-
looking statements. All forward-looking statements are not guarantees and are
subject to risks and uncertainties that could cause actual results to differ
from those projected. The factors that could cause actual results to differ
materially include the following: the Company's ability to improve the
execution of its operations processes and eliminate operational waste and
excess expense; depending on market circumstances, the Company may not start
or complete the stock repurchase program; costs to maintain compliance with
the provisions of the Sarbanes-Oxley Act of 2002 are greater than currently
anticipated; the impact of increasing competition which could adversely affect
the Company's revenues and profitability; the impact of foreign currency
exchange rate fluctuations; the impact on demand, component availability and
pricing, and logistics, and the disruption of manufacturing operations that
result from labor disputes, war, acts of terrorism or political instability;
ramp up, expansion, transfer and rationalization of global manufacturing
capacity; the potential impact of complying with changing environmental
regulations; impact on order management and fulfillment, financial reporting
and supply chain management processes as a result of the Company's reliance on
a variety of computer systems, including Oracle 11i which is periodically
upgraded; the discovery of a latent defect in any of the Company's products;
the Company's ability to effectively align operating expenses and production
capacity with the current demand environment; general worldwide economic
conditions, and, in particular, the possibility that the PC and related
markets decline; growth rates in the power protection industry and related
industries; product mix changes and the potential negative impact on gross
margins from such changes; changes in the seasonality of demand patterns;
inventory risks due to shifts in market demand; component constraints,
shortages, pricing and quality; risk of nonpayment of accounts receivable; the
uncertainty of the litigation process including risk of an unexpected,
unfavorable result of current or future litigation; and the risks described
from time to time in the Company's filings with the Securities and Exchange
Commission.
About American Power Conversion
Founded in 1981, American Power Conversion (Nasdaq: APCC) (APC) is a
leading provider of global, end-to-end solutions for real-time infrastructure.
APC's comprehensive products and services for home and corporate environments
improve the availability, manageability and performance of sensitive
electronic, network, communication and industrial equipment of all sizes. APC
offers a wide variety of products for network-critical physical infrastructure
including InfraStruXure(TM), its revolutionary architecture for on-demand data
centers, as well as physical threat management products through the company's
NetBotz(R) division. These products and services help companies increase the
availability and reliability of their IT systems. Headquartered in West
Kingston, Rhode Island, APC reported sales of $2.0 billion for the year ended
December 31, 2005, and is a Fortune 1000, Nasdaq 100 and S&P 500 Company. All
trademarks are the property of their owners. Additional information about APC
and its global end-to-end solutions is available at http://www.apc.com or by
calling 800-877-4080.
For more information contact:
Investors: Richard Thompson, chief financial officer, 401-789-5735, ext.
2325, Richard.thompson@apcc.com
Media: Chet Lasell, APC director, public relations-North America, 800-788-
2208 ext. 2693, chet.lasell@apcc.com
Supplemental Financial Information for American Power Conversion Corporation
Fourth Quarter 2005 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q4 2005 Q4 2004 Change Q3 2005 Change
Revenue $578.6 $510.8 13 % $512.3 13 %
Operating Income $35.2 $67.2 (48)% $58.2 (39)%
Net Income $17.5 $52.8 (67)% $48.7 (64)%
EPS $0.09 $0.27 (68)% $0.24 (64)%
Fourth Quarter Segment Summary
YOY QOQ
Q4 2005 Q4 2004 Change Q3 2005 Change
Revenue (In millions)
Small Systems $413.2 $380.0 9 % $390.3 6 %
% of revenue 72 % 75 % 76 %
Large Systems $143.1 $107.7 33 % $100.4 43 %
% of revenue 25 % 21 % 20 %
Other $18.3 $19.3 (6)% $18.5 (2)%
% of revenue 3 % 4 % 4 %
Shipping and
Handling $4.0 $3.8 $3.1
Net Sales $578.6 $510.8 13 % $512.3 13 %
YOY Basis QOQ Basis
Q4 2005 Q4 2004 Point Change Q3 2005 Point Change
Gross Margin Percentage
Small Systems 40.2 % 48.1 % (790) 44.8 % (460)
Large Systems 20.9 % 23.8 % (290) 16.4 % 450
Other 56.9 % 54.8 % 210 60.4 % (340)
Fourth Quarter Geographic Summary
YOY QOQ
Q4 2005 Q4 2004 Change Q3 2005 Change
Revenue (In millions)
Americas $291.4 $241.9 21 % $268.3 9 %
% of revenue 50 % 48 % 52 %
EMEA $185.6 $179.8 3 % $148.9 25 %
% of revenue 32 % 35 % 29 %
Asia $101.6 $89.1 14 % $95.1 7 %
% of revenue 18 % 17 % 19 %
Net Sales $578.6 $510.8 13 % $512.3 13 %
Note: YOY = year-over-year
QOQ = quarter-over-quarter
Full Year 2005 Financial Summary
(In millions, except per share amounts)
YOY
2005 2004 Change
Revenue $1,979.5 $1,699.9 16 %
Operating Income $187.0 $204.4 (9)%
Net Income $144.1 $181.5 (21)%
EPS $0.72 $0.90 (20)%
Full Year 2005 Segment Summary
YOY
2005 2004 Change
Revenue (In millions)
Small Systems $1,467.2 $1,300.2 13 %
% of revenue 75 % 77 %
Large Systems $429.0 $322.1 33 %
% of revenue 22 % 19 %
Other $70.5 $66.0 7 %
% of revenue 3 % 4 %
Shipping and
Handling $12.8 $11.6
Net Sales $1,979.5 $1,699.9 16 %
YOY Basis
2005 2004 Point Change
Gross Margin Percentage
Small Systems 44.2 % 48.2 % (400)
Large Systems 19.4 % 19.7 % (30)
Other 58.3 % 61.2 % (290)
Full Year 2005 Geographic Summary
YOY
2005 2004 Change
Revenue (In millions)
Americas $1,021.8 $843.0 21 %
% of revenue 52 % 50 %
EMEA $591.4 $547.2 8 %
% of revenue 30 % 32 %
Asia $366.3 $309.7 18 %
% of revenue 18 % 18 %
Net Sales $1,979.5 $1,699.9 16 %
Note: YOY = year-over-year
QOQ = quarter-over-quarter
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
2005 2004
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $262,414 $72,721
SHORT TERM INVESTMENTS 511,181 642,853
ACCOUNTS RECEIVABLE, NET 374,694 327,547
INVENTORIES 541,823 465,927
PREPAID EXPENSES AND
OTHER CURRENT ASSETS 59,181 39,294
DEFERRED INCOME TAXES 72,864 57,018
TOTAL CURRENT ASSETS 1,822,157 1,605,360
PROPERTY, PLANT & EQUIPMENT 459,736 420,102
LESS: ACCUMULATED DEPRECIATION
AND AMORTIZATION 293,692 265,251
NET PROPERTY, PLANT & EQUIPMENT 166,044 154,851
LONG TERM INVESTMENTS 562 5,542
GOODWILL 15,781 7,179
OTHER INTANGIBLES, NET 36,115 39,627
DEFERRED INCOME TAXES 29,702 28,687
OTHER ASSETS 5,101 2,626
TOTAL ASSETS $2,075,462 $1,843,872
CURRENT LIABILITIES
ACCOUNTS PAYABLE $176,345 $132,213
ACCRUED EXPENSES 204,702 182,621
INCOME TAXES PAYABLE 39,755 11,330
TOTAL CURRENT LIABILITIES 420,802 326,164
DEFERRED TAX LIABILITY 14,911 15,449
TOTAL LIABILITIES 435,713 341,613
SHAREHOLDERS' EQUITY
COMMON STOCK 1,958 1,921
ADDITIONAL PAID-IN CAPITAL 131,862 60,081
RETAINED EARNINGS 1,504,093 1,437,691
ACCUMULATED OTHER
COMPREHENSIVE INCOME 1,836 2,566
TOTAL SHAREHOLDERS' EQUITY 1,639,749 1,502,259
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,075,462 $1,843,872
Note: The data reported above are based on an unaudited balance sheet, but
include all adjustments that the Company considers necessary for a
fair presentation of financial condition for this period.
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2005 2004
NET SALES $578,634 $510,792
COST OF GOODS SOLD 390,881 304,196
GROSS PROFIT 187,753 206,596
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 127,166 115,374
RESEARCH AND DEVELOPMENT 25,345 24,007
TOTAL OPERATING EXPENSES 152,511 139,381
OPERATING INCOME 35,242 67,215
OTHER INCOME, NET 7,446 3,248
EARNINGS BEFORE INCOME TAXES 42,688 70,463
INCOME TAXES 25,202 17,615
NET INCOME $17,486 $52,848
DILUTED EARNINGS PER SHARE $0.09 $0.27
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 200,316 196,456
Note: The data reported above are based on unaudited statements of income,
but include all adjustments that the Company considers necessary for
a fair presentation of results for these periods.
Net income for the fourth quarter of 2005 includes income tax
expense of approximately $19.9 million or $0.10 per share associated
with the American Jobs Creation Act. Excluding this item, non-GAAP
net income for the fourth quarter of 2005 was $37.3 million or $0.19
per share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of this item:
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2005
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income, excluding charges $42,688 $37,346 $0.19
Items excluded from non-GAAP
results:
American Jobs Creation Act
Income tax expense -- (19,860) (0.10)
GAAP income, including charges $42,688 $17,486 $0.09
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2005 2004
NET SALES $1,979,532 $1,699,877
COST OF GOODS SOLD 1,260,407 1,017,981
GROSS PROFIT 719,125 681,896
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 441,640 391,829
RESEARCH AND DEVELOPMENT 90,520 85,618
TOTAL OPERATING EXPENSES 532,160 477,447
OPERATING INCOME 186,965 204,449
OTHER INCOME, NET 21,877 9,711
EARNINGS BEFORE INCOME TAXES 208,842 214,160
INCOME TAXES 64,761 32,705
NET INCOME $144,081 $181,455
DILUTED EARNINGS PER SHARE $0.72 $0.90
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 199,798 201,658
Note: The data reported above are based on unaudited statements of income,
but include all adjustments that the Company considers necessary for
a fair presentation of results for these periods.
Net income for the year ended December 31, 2005 includes income tax
expense of approximately $19.9 million or $0.10 per share associated
with the American Jobs Creation Act. Excluding this item, non-GAAP
net income for the year of 2005 was $163.9 million or $0.82 per
share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of this item:
FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 2005
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income, excluding charges $208,842 $163,941 $0.82
Items excluded from non-GAAP
results:
American Jobs Creation Act
Income tax expense -- (19,860) (0.10)
GAAP income, including charges $208,842 $144,081 $0.72
Net income for the year ended December 31, 2004 includes a net tax credit
of approximately $20.8 million or $0.10 per share associated with the reversal
of income tax provisioning resulting from the favorable outcome of recent tax
audits by U.S. federal and state taxing authorities, partially offset by a
charge for excess inventory of $11.5 million, or $0.04 per share after-tax.
Excluding these items, non-GAAP net income for the year of 2004 was $169.2
million or $0.84 per share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of these items:
FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 2004
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income, excluding charges $225,660 $169,246 $0.84
Items excluded from non-GAAP
results:
Charge for excess inventory in COGS (11,500) (8,625) (0.04)
Tax reserve adjustment -- 20,834 0.10
GAAP income, including charges $214,160 $181,455 $0.90
SOURCE American Power Conversion
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Related links:
http://www.apc.com
Company News On-Call:
http://www.prnewswire.com/comp/046187.html
CONTACT:
Investors: Richard Thompson, chief financial
officer, +1-401- 789-5735, ext. 2325, Richard.thompson@apcc.com,
or Media: Chet Lasell, APC director, public relations-North
America, +1-800-788-2208, ext. 2693, chet.lasell@apcc.com, both
of American Power Conversion
Photo: http://www.newscom.com/cgi-bin/prnh/20031003/NEAPCLOGO AP
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