EXHIBIT 99.1
For Immediate Release
American Power Conversion Reports Second Quarter 2005 Financial Results
Net Income Increases 56 Percent Year-over-Year
WEST KINGSTON, R.I. — July 25, 2005 — American Power Conversion Corporation (Nasdaq: APCC) (APC) today reported financial results for the second quarter 2005.
Revenue for the second quarter 2005 was $480.6 million, up 21 percent from $395.7 million in the second quarter 2004 and up 18 percent from $408.0 million in the first quarter 2005. Net income for the second quarter 2005 was $41.9 million or $0.21 per diluted share, an increase of 56 percent from $26.8 million or $0.13 per diluted share in the second quarter 2004 and an increase of 16 percent from $36.0 million or $0.18 per diluted share in the first quarter 2005.
“As evidenced by our eighth consecutive quarter of double digit year-over-year revenue growth, and the highest year-over-year growth rate since the fourth quarter 1999, APC experienced very strong demand during the second quarter,” said Rodger B. Dowdell, Jr., APC’s chief executive officer. “Demand was strong across all operating segments and can be attributed to what we believe is an attractive macro-economic environment for IT spending and the success of our continued strategic investments to establish APC as a global leader in the market for network-critical physical infrastructure (NCPI). Against this strong top-line backdrop and normal pricing patterns, product mix issues and increased costs negatively impacted gross margins in the quarter. With our strong revenue growth outpacing our continuing increased investment in product development and demand-generating activities, we are pleased with the overall progress we achieved in the second quarter.”
Segment and Geographic Review
For the second quarter 2005, APC experienced year-over-year growth in all segments and major geographic regions. Large Systems segment revenue of $104.9 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 35 percent year-over-year and 30 percent sequentially. The Large Systems segment was 22 percent of the company’s second quarter revenue. Customer demand for the company’s on-demand data center
architecture, InfraStruXure, drove the growth in the Large Systems segment performance. Additionally, our engineered-to-order industrial systems were also a solid contributor to the segment’s year-over-year and sequential performance.
The Small Systems segment, which provides power protection, UPS and management products for the PC, server and networking markets, posted second quarter revenue growth of 18 percent year-over-year and 16 percent sequentially to $356.2 million. As a percentage of APC quarterly product revenue, the Small Systems segment was 74 percent in the quarter. Growth in the Small Systems segment benefited from healthy demand for APC’s desktop and networking UPS families, as well as from InfraStruXure related products.
Geographically, APC posted solid revenue growth across all major geographic regions. The Americas region (North and Latin America) represented 54 percent of second quarter revenue and was up 22 percent year-over-year and 26 percent sequentially. In Europe, the Middle East and Africa (EMEA), first quarter revenue represented 29 percent of total APC quarterly revenue. The EMEA region increased 18 percent year-over-year and 20 percent sequentially. Finally, second quarter revenue in Asia was 17 percent of total company revenue in the quarter. Asia was up 26 percent year-over-year and down five percent sequentially.
Business Outlook
“It is clear that our investments in new products and sales and marketing programs are translating into revenue growth. Demand generation is healthy for both APC’s InfraStruXure data center solutions as well as our core offerings,” continued Dowdell. “To further capitalize on our progress thus far, we must continue to invest in these areas. Our progress has been strong as we continue to establish a new way to design, build and operate data centers, thereby solving our customers NCPI needs. We expect to continue to make the investments necessary to consolidate and expand our position in this exciting new market.”
Conference Call and Webcast
In conjunction with the second 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, July 25, 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
investor.apcc.com or live by dialing 913-981-4910. A replay will be accessible via telephone at approximately 8:00 PM on July 25 by dialing 719-457-0820 and entering the access code 4228083 and will continue through August 1 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: 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 Asian manufacturing operations that result from labor disputes, war, acts of terrorism or political instability; ramp up, expansion 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, including but not limited to the PC, server, networking, telecommunications and enterprise hardware industries; competitive factors and pricing pressures; 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 www.apc.com or by calling 800-877-4080.
# # #
For more information contact:
Investors:
Richard Thompson, chief financial officer, 401-789-5735, ext. 2325
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
Second Quarter 2005 Financial Summary
(In millions, except per share amounts)
|
| Q2 2005 |
| Q2 2004 |
| YOY |
| Q1 2005 |
| QOQ |
| |||
Net Sales |
| $ | 480.6 |
| $ | 395.7 |
| 21 | % | $ | 408.0 |
| 18 | % |
Operating Income |
| $ | 49.9 |
| $ | 33.4 |
| 49 | % | $ | 43.6 |
| 14 | % |
Net Income |
| $ | 41.9 |
| $ | 26.8 |
| 56 | % | $ | 36.0 |
| 16 | % |
Diluted EPS |
| $ | 0.21 |
| $ | 0.13 |
| 61 | % | $ | 0.18 |
| 15 | % |
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Second Quarter 2005 Segment Summary |
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| Q2 2005 |
| Q2 2004 |
| YOY |
| Q1 2005 |
| QOQ |
| |||
Revenue (In millions) |
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Small Systems |
| $ | 356.2 |
| $ | 301.2 |
| 18 | % | $ | 307.5 |
| 16 | % |
% of revenue |
| 74 | % | 77 | % |
|
| 76 | % |
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| |||
Large Systems |
| $ | 104.9 |
| $ | 77.9 |
| 35 | % | $ | 80.7 |
| 30 | % |
% of revenue |
| 22 | % | 20 | % |
|
| 20 | % |
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Other |
| $ | 16.4 |
| $ | 13.7 |
| 19 | % | $ | 17.3 |
| (6 | )% |
% of revenue |
| 3 | % | 3 | % |
|
| 4 | % |
|
| |||
Shipping and Handling |
| $ | 3.1 |
| $ | 2.9 |
|
|
| $ | 2.5 |
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Net Sales |
| $ | 480.6 |
| $ | 395.7 |
| 21 | % | $ | 408.0 |
| 18 | % |
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| Q2 2005 |
| Q2 2004 |
| YOY Basis |
| Q1 2005 |
| QOQ Basis |
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Gross Margin Percentage |
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Small Systems |
| 45.2 | % | 45.8 | % | (60 | ) | 47.7 | % | (250 | ) | |||
Large Systems |
| 18.3 | % | 15.7 | % | 260 |
| 21.6 | % | (330 | ) | |||
Other |
| 56.5 | % | 59.1 | % | (260 | ) | 59.2 | % | (270 | ) | |||
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Second Quarter 2005 Geographic Summary |
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|
| Q2 2005 |
| Q2 2004 |
| YOY |
| Q1 2005 |
| QOQ |
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Revenue (In millions) |
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Americas |
| $ | 257.8 |
| $ | 211.1 |
| 22 | % | $ | 204.2 |
| 26 | % |
% of revenue |
| 54 | % | 53 | % |
|
| 50 | % |
|
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EMEA |
| $ | 140.2 |
| $ | 119.2 |
| 18 | % | $ | 116.7 |
| 20 | % |
% of revenue |
| 29 | % | 30 | % |
|
| 29 | % |
|
| |||
Asia |
| $ | 82.6 |
| $ | 65.4 |
| 26 | % | $ | 87.1 |
| (5 | )% |
% of revenue |
| 17 | % | 17 | % |
|
| 21 | % |
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Net Sales |
| $ | 480.6 |
| $ | 395.7 |
| 21 | % | $ | 408.0 |
| 18 | % |
Note: YOY = year-over-year
QOQ = quarter-over-quarter
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED)
|
| JUNE 26, 2005 |
| DECEMBER 31, 2004 |
| ||
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CURRENT ASSETS |
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CASH AND CASH EQUIVALENTS |
| $ | 122,119 |
| $ | 72,721 |
|
SHORT TERM INVESTMENTS |
| 638,950 |
| 642,853 |
| ||
ACCOUNTS RECEIVABLE, NET |
| 358,209 |
| 327,547 |
| ||
INVENTORIES |
| 470,556 |
| 465,927 |
| ||
PREPAID EXPENSES AND OTHER CURRENT ASSETS |
| 47,765 |
| 39,294 |
| ||
DEFERRED INCOME TAXES |
| 52,979 |
| 57,018 |
| ||
TOTAL CURRENT ASSETS |
| 1,690,578 |
| 1,605,360 |
| ||
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PROPERTY, PLANT & EQUIPMENT |
| 431,677 |
| 420,102 |
| ||
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION |
| 279,901 |
| 265,251 |
| ||
NET PROPERTY, PLANT & EQUIPMENT |
| 151,776 |
| 154,851 |
| ||
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LONG TERM INVESTMENTS |
| 487 |
| 5,542 |
| ||
GOODWILL |
| 7,179 |
| 7,179 |
| ||
OTHER INTANGIBLES, NET |
| 33,700 |
| 39,627 |
| ||
DEFERRED INCOME TAXES |
| 37,114 |
| 28,687 |
| ||
OTHER ASSETS |
| 4,832 |
| 2,626 |
| ||
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TOTAL ASSETS |
| $ | 1,925,666 |
| $ | 1,843,872 |
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CURRENT LIABILITIES |
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ACCOUNTS PAYABLE |
| 135,500 |
| $ | 132,213 |
| |
ACCRUED EXPENSES |
| 179,617 |
| 182,621 |
| ||
INCOME TAXES PAYABLE |
| 14,779 |
| 11,330 |
| ||
TOTAL CURRENT LIABILITIES |
| 329,896 |
| 326,164 |
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DEFERRED TAX LIABILITY |
| 15,408 |
| 15,449 |
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TOTAL LIABILITIES |
| 345,304 |
| 341,613 |
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SHAREHOLDERS’ EQUITY |
|
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COMMON STOCK |
| 1,941 |
| 1,921 |
| ||
ADDITIONAL PAID-IN CAPITAL |
| 99,770 |
| 60,081 |
| ||
RETAINED EARNINGS |
| 1,476,990 |
| 1,437,691 |
| ||
ACCUMULATED OTHER COMPREHENSIVE INCOME |
| 1,661 |
| 2,566 |
| ||
TOTAL SHAREHOLDERS’ EQUITY |
| 1,580,362 |
| 1,502,259 |
| ||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| $ | 1,925,666 |
| $ | 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 |
| ||||
|
| JUNE 26, 2005 |
| JUNE 27, 2004 |
| ||
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NET SALES |
| $ | 480,606 |
| $ | 395,663 |
|
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COST OF GOODS SOLD |
| 302,341 |
| 246,141 |
| ||
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GROSS PROFIT |
| 178,265 |
| 149,522 |
| ||
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MARKETING, SELLING, GENERAL AND ADMINISTRATIVE |
| 105,619 |
| 94,648 |
| ||
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RESEARCH AND DEVELOPMENT |
| 22,736 |
| 21,446 |
| ||
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TOTAL OPERATING EXPENSES |
| 128,355 |
| 116,094 |
| ||
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OPERATING INCOME |
| 49,910 |
| 33,428 |
| ||
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OTHER INCOME, NET |
| 5,189 |
| 2,256 |
| ||
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EARNINGS BEFORE INCOME TAXES |
| 55,099 |
| 35,684 |
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INCOME TAXES |
| 13,224 |
| 8,921 |
| ||
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NET INCOME |
| $ | 41,875 |
| $ | 26,763 |
|
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DILUTED EARNINGS PER SHARE |
| $ | 0.21 |
| $ | 0.13 |
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DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING |
| 199,742 |
| 204,992 |
| ||
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.
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
|
| FOR THE SIX MONTHS ENDED |
| ||||
|
| JUNE 26, 2005 |
| JUNE 27, 2004 |
| ||
|
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NET SALES |
| $ | 888,609 |
| $ | 747,414 |
|
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COST OF GOODS SOLD |
| 545,893 |
| 448,800 |
| ||
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GROSS PROFIT |
| 342,716 |
| 298,614 |
| ||
|
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MARKETING, SELLING, GENERAL AND ADMINISTRATIVE |
| 206,198 |
| 180,832 |
| ||
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RESEARCH AND DEVELOPMENT |
| 42,975 |
| 39,849 |
| ||
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TOTAL OPERATING EXPENSES |
| 249,173 |
| 220,681 |
| ||
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OPERATING INCOME |
| 93,543 |
| 77,933 |
| ||
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OTHER INCOME, NET |
| 8,983 |
| 3,988 |
| ||
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EARNINGS BEFORE INCOME TAXES |
| 102,526 |
| 81,921 |
| ||
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INCOME TAXES |
| 24,606 |
| 20,480 |
| ||
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NET INCOME |
| $ | 77,920 |
| $ | 61,441 |
|
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DILUTED EARNINGS PER SHARE |
| $ | 0.39 |
| $ | 0.30 |
|
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DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING |
| 199,036 |
| 205,554 |
| ||
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.