WEST KINGSTON, R.I., Oct. 26 /PRNewswire-FirstCall/ -- American Power
Conversion Corporation (Nasdaq: APCC) (APC) today reported financial results
for the third quarter 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20031003/NEAPCLOGO )
Revenue for the third quarter 2005 was $512.3 million, up 16 percent from
$441.7 million in the third quarter 2004 and up 7 percent sequentially from
$480.6 million in the second quarter 2005. Net income for the third quarter
2005 was $48.7 million or $0.24 per diluted share, a decrease of 28 percent
from $67.2 million or $0.34 per diluted share in the third quarter 2004 and up
16 percent sequentially from $41.9 million or $0.21 per diluted share in the
second quarter 2005.
On a non-GAAP basis, net income for the third quarter 2005 decreased 11
percent year-over-year. Net income for the third quarter of 2004 included 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 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 third quarter
of 2004 was $55.0 million or $0.28 per share.
Third Quarter 2005 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q3 2005 Q3 2004 Change Q2 2005 Change
Net Sales $512.3 $441.7 16 % $480.6 7 %
Operating
Income $58.2 $59.3 (2)% $49.9 17 %
Net Income $48.7 $67.2 (28)% $41.9 16 %
Diluted EPS $0.24 $0.34 (28)% $0.21 16 %
"APC's strong top line sales momentum continued in the third quarter, with
the ninth consecutive quarter of double digit year-over-year revenue growth as
well as double-digit growth in all reporting segments and growth in all major
geographies," said Rodger B. Dowdell, Jr., APC's president and chief executive
officer. "We are very pleased with the progress we are making relative to
growing our business, in particular in the network-critical physical
infrastructure (NCPI) space, but we are disappointed with our earnings
performance."
"During our quarterly close process, we learned that in addition to
pricing and product mix, higher operational costs, particularly within the
global supply chain and logistics areas, ultimately impacted gross margins
year-over-year," continued Dowdell. "While these costs are associated with
long-term objectives to drive higher levels of customer satisfaction and
reduce manufacturing costs, the short-term impact has been negative to our
bottom line and is not acceptable. We are focusing our efforts on improving
the execution of our processes."
Segment and Geographic Review
For the third quarter 2005, APC experienced year-over-year revenue growth
in all segments and major geographic regions. Large Systems segment revenue
of $100.4 million, consisting primarily of 3-phase uninterruptible power
supplies (UPSs), APC Global Services, precision cooling and ancillary products
for data centers, facilities and communication applications, grew 28 percent
year-over-year while declining 4 percent sequentially. The Large Systems
segment was 20 percent of the company's third quarter revenue.
InfraStruXure(TM), APC's revolutionary architecture for on-demand data
centers, and the products and services that make up the solution, remain the
leading driver of growth in this segment increasing more than 60 percent year-
over-year.
The Small Systems segment, which provides power protection, UPS and
management products for the PC, server and networking markets, grew 14 percent
year-over-year and 10 percent sequentially to $390.3 million. As a percentage
of APC quarterly product revenue, the Small Systems segment was 76 percent in
the quarter. APC's desktop UPSs, network UPSs, particularly higher kVA and
on-line Smart-UPS(R), and InfraStruXure related products drove continued
growth in this core piece of the business.
Geographically, APC posted solid revenue growth across all major regions.
The Americas region (North and Latin America) represented 52 percent of third
quarter revenue and increased 19 percent year-over-year and 4 percent
sequentially. In Europe, the Middle East and Africa (EMEA), third quarter
revenue represented 29 percent of total APC quarterly revenue. The EMEA
region increased 8 percent year-over-year and 6 percent sequentially.
Finally, third quarter revenue in Asia was 19 percent of total company revenue
in the quarter. Asia grew 22 percent year-over-year and 15 percent
sequentially. Currency did not have a notable impact on overall year-over-
year growth.
Business Outlook
"Although the quarter came with some disappointments, I want to reiterate
that overall we are pleased with our performance and the progress we are
making toward our goals," explained Dowdell. "While we are happy to see some
leverage in our investments as revenue growth outpaced operating expense
growth, we are not backing down from spending and our plans call for continued
investments in this area to meet our long-term objectives and drive our top
line. We are also focused on identifying ways to help drive waste and excess
expense out of our operations, and while this is not something that will
happen overnight, we are committed to operating as cost-effectively and
efficiently as possible. Some factors, including product and segment mix,
material costs, and currency, will continue to be unpredictable but I believe
we can do a better job with the areas within our control.
"Finally, as an example of the strategic investments we are making to
build our business, we recently expanded our NCPI offerings with the purchase
of NetBotz, Inc.," continued Dowdell. "The technology NetBotz brings to APC
is a perfect fit for enhancing security and management of NCPI applications,
key platforms we have identified as essential components of a complete NCPI
solution. This acquisition is an example of the commitment we have to
continuously deliver increased value to our customers with the industry's most
complete and innovative offerings, and we have already uncovered incremental
potential opportunities."
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 third
quarter 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 charge for excess
inventories and the reduction in income tax recorded during the third quarter
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 third quarter 2005 earnings announcement, APC
management is hosting a conference call to discuss the Company's results as
well as current expectations regarding future performance. This conference
call will be held today, October 26, at 5:00 PM Eastern time and will be
available live and archived, in its entirety, to the public via the Company's
Web site at http://investor.apcc.com or live by dialing 913-981-5522. A
replay will be accessible via telephone at approximately 8:00 PM on October 26
by dialing 719-457-0820 and entering the access code 2734657 and will continue
through November 2 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; 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. The Company cautions readers not
to place undue reliance on any such forward-looking statements, which speak
only as of the date they are made. The Company disclaims any obligation to
publicly update or revise any such statements to reflect any change in Company
expectations or in events, conditions, or circumstances on which any such
statements may be based, or that may affect the likelihood that actual results
will differ from those set forth in the forward-looking statements.
About American Power Conversion
Founded in 1981, American Power Conversion (Nasdaq: APCC) is a leading
provider of global, end-to-end infrastructure availability solutions. 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.
Headquartered in West Kingston, Rhode Island, APC reported sales of $1.7
billion for the year ended December 31, 2004, and is a Fortune 1000, Nasdaq
100 and S&P 500 Company. Additional information about APC and its global end-
to-end solutions can be found at http://www.apc.com or by calling 800-877-
4080. All trademarks are the property of their owners.
For more information contact:
Investors:
Richard Thompson, chief financial officer,
401-789-5735, ext. 2325, Richard.thompson@apcc.com
Debbie Hancock, director, investor relations,
401-789-5735, ext. 2994, Debbie.hancock@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
Third Quarter 2005 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q3 2005 Q3 2004 Change Q2 2005 Change
Net Sales $512.3 $441.7 16 % $480.6 7 %
Operating
Income $58.2 $59.3 (2)% $49.9 17 %
Net Income $48.7 $67.2 (28)% $41.9 16 %
Diluted EPS $0.24 $0.34 (28)% $0.21 16 %
Third Quarter 2005 Segment Summary
YOY QOQ
Q3 2005 Q3 2004 Change Q2 2005 Change
Revenue (In millions)
Small Systems $390.3 $343.6 14 % $356.2 10 %
% of revenue 76 % 78 % 75 %
Large Systems $100.4 $78.2 28 % $104.9 (4)%
% of revenue 20 % 18 % 22 %
Other $18.5 $16.8 10 % $16.4 13 %
% of revenue 4 % 4 % 3 %
Shipping and
Handling $3.1 $3.1 $3.1
Net Sales $512.3 $441.7 16 % $480.6 7 %
YOY Basis QOQ Basis
Q3 2005 Q3 2004 Point Change Q2 2005 Point Change
Gross Margin Percentage
Small Systems 44.8 % 49.1 % (430) 45.2 % (40)
Large Systems 16.4 % 22.3 % (590) 18.3 % (190)
Other 60.3 % 66.2 % (590) 56.5 % 380
Third Quarter 2005 Geographic Summary
YOY QOQ
Q3 2005 Q3 2004 Change Q2 2005 Change
Revenue (In millions)
Americas $268.3 $226.1 19 % $257.8 4 %
% of revenue 52 % 51 % 54 %
EMEA $148.9 $137.7 8 % $140.2 6 %
% of revenue 29 % 31 % 29 %
Asia $95.1 $77.9 22 % $82.6 15 %
% of revenue 19 % 18 % 17 %
Net Sales $512.3 $441.7 16 % $480.6 7 %
Note: YOY = year-over-year
QOQ = quarter-over-quarter
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED)
SEPTEMBER 25, 2005 DECEMBER 31, 2004
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $161,501 $72,721
SHORT TERM INVESTMENTS 622,902 642,853
ACCOUNTS RECEIVABLE, NET 386,101 327,547
INVENTORIES 487,224 465,927
PREPAID EXPENSES AND
OTHER CURRENT ASSETS 53,817 39,294
DEFERRED INCOME TAXES 57,597 57,018
TOTAL CURRENT ASSETS 1,769,142 1,605,360
PROPERTY, PLANT & EQUIPMENT 442,396 420,102
LESS: ACCUMULATED DEPRECIATION
AND AMORTIZATION 287,996 265,251
NET PROPERTY, PLANT & EQUIPMENT 154,400 154,851
LONG TERM INVESTMENTS 493 5,542
GOODWILL 7,179 7,179
OTHER INTANGIBLES, NET 30,752 39,627
DEFERRED INCOME TAXES 36,750 28,687
OTHER ASSETS 5,637 2,626
TOTAL ASSETS $2,004,353 $1,843,872
CURRENT LIABILITIES
ACCOUNTS PAYABLE 142,831 $132,213
ACCRUED EXPENSES 198,303 182,621
INCOME TAXES PAYABLE 18,874 11,330
TOTAL CURRENT LIABILITIES 360,008 326,164
DEFERRED TAX LIABILITY 16,350 15,449
TOTAL LIABILITIES 376,358 341,613
SHAREHOLDERS' EQUITY
COMMON STOCK 1,953 1,921
ADDITIONAL PAID-IN CAPITAL 117,973 60,081
RETAINED EARNINGS 1,506,155 1,437,691
ACCUMULATED OTHER
COMPREHENSIVE INCOME 1,914 2,566
TOTAL SHAREHOLDERS' EQUITY 1,627,995 1,502,259
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,004,353 $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
SEPTEMBER 25, 2005 SEPTEMBER 26, 2004
NET SALES $512,289 $441,671
COST OF GOODS SOLD 323,633 264,985
GROSS PROFIT 188,656 176,686
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 108,276 95,623
RESEARCH AND DEVELOPMENT 22,200 21,762
TOTAL OPERATING EXPENSES 130,476 117,385
OPERATING INCOME 58,180 59,301
OTHER INCOME, NET 5,448 2,475
EARNINGS BEFORE INCOME TAXES 63,628 61,776
INCOME TAXES 14,953 (5,390)
NET INCOME $48,675 $67,166
DILUTED EARNINGS PER SHARE $0.24 $0.34
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 200,740 199,208
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 third quarter of 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 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 third quarter of 2004 was $55.0 million or $0.28 per
share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of these items:
FOR THE THREE MONTHS ENDED
SEPTEMBER 26, 2004
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income,
excluding charges $73,276 $54,957 $0.28
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 $61,776 $67,166 $0.34
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 25, 2005 SEPTEMBER 26, 2004
NET SALES $1,400,898 $1,189,085
COST OF GOODS SOLD 869,526 713,785
GROSS PROFIT 531,372 475,300
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 314,474 276,455
RESEARCH AND DEVELOPMENT 65,175 61,611
TOTAL OPERATING EXPENSES 379,649 338,066
OPERATING INCOME 151,723 137,234
OTHER INCOME, NET 14,431 6,463
EARNINGS BEFORE INCOME TAXES 166,154 143,697
INCOME TAXES 39,559 15,090
NET INCOME $126,595 $128,607
DILUTED EARNINGS PER SHARE $0.63 $0.63
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 199,686 203,472
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 first nine months of 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 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 first nine months of 2004 was $116.4
million or $0.57 per share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of these items:
FOR THE NINE MONTHS ENDED
SEPTEMBER 26, 2004
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income,
excluding charges $155,197 $116,398 $0.57
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 $143,697 $128,607 $0.63
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
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AP Archive: http://photoarchive.ap.org PRN Photo Desk
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CONTACT:
Richard Thompson, Chief Financial Officer,
+1-401-789-5735, ext. 2325, Richard.thompson@apcc.com, or Debbie
Hancock, Director, Investor Relations, +1-401-789-5735, ext.
2994, Debbie.hancock@apcc.com, or Chet Lasell, Director, Public
Relations, +1-800-788-2208 ext. 2693, chet.lasell@apcc.com, all
of American Power Conversion
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