ATSN Artesyn Technologies (MM)

BOCA RATON, Fla., Nov. 4 /PRNewswire-FirstCall/ -- Artesyn Technologies, Inc. (NASDAQ:ATSN) today reported financial results for the third quarter ended September 30, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20050117/FLMLOGO ) Sales for the third quarter of 2005 were $102.0 million compared to $107.0 million for the corresponding quarter in 2004. Net income for the third quarter of 2005 was $4.0 million, or $0.09 per share, compared to net income of $3.6 million, or $0.09 per share in the third quarter of 2004. Included in net income for the third quarter of 2005 was approximately $0.4 million, or $0.01 per share, of restructuring charges associated with the closure of the Company's manufacturing facility in Hungary. Additionally, the Company realized a net tax benefit of $1.6 million, or $0.03 per share, from the elimination of previously established tax contingencies that are no longer required. Total orders received during the quarter were $106.1 million, yielding a book-to-bill ratio of 1.04. Backlog at the end of the quarter was $81.8 million with approximately 92% shippable during the fourth quarter. During the third quarter, Artesyn had 23 major design wins that the Company estimates will realize approximately $184 million in lifetime project revenues. Over the past 12 months, the Company had a record 99 major design wins and estimates lifetime revenues of approximately $1.1 billion to be realized in the next two to four years. Sales for the first nine months of 2005 were $312.5 million compared to $309.0 million for the same period last year. Net income for the first nine months of 2005 was $6.0 million, or $0.15 per share, compared to net income of $8.6 million, or $0.22 per share for the same period in 2004. Included in net income for the first nine months of the year are restructuring charges of $3.7 million, or $0.08 per share net of tax. Commenting on the quarter, Joseph O'Donnell, Artesyn's Chief Executive Officer, stated, "While sales of rectifier and amplifier products contributed to 33% sales growth in our wireless infrastructure division during the quarter, sales were pressured from end of life server programs and certain 3G orders not materializing as expected. Replacement programs, currently in design, for the end of life programs did not overlap to offset the decline in revenue this quarter. We expect these programs to begin production in the first quarter of 2006. Additionally, we continue to expect 3G orders for embedded systems that have been pushed back since the second quarter to materialize in the beginning of next year." "Gross margins of 24.2% for the quarter were also pressured from lower sales in the embedded systems segment, as well as from the recent action to close the facility in Hungary and outsource European manufacturing. The closure of the factory and transition to outsourcing should be complete by the end of the year," added Mr. O'Donnell. Business Segment Results Power Conversion Third quarter sales for the Power Conversion segment decreased 2% to $85.2 million compared to $86.7 million for the third quarter of 2004. The decline in sales resulted primarily from older programs in the server division going end of life during the quarter. Gross margins in this segment were also negatively impacted from pricing pressures with a new large wireless infrastructure customer during the quarter. The profitability from this customer will increase significantly as production shifts from Hungary. Operating income for Power Conversion was $1.6 million for the third quarter compared to $1.5 million for the same period last year. The reduction of executive incentive awards resulting from weaker than anticipated financial performance contributed to improved profitability this quarter. However, operating income in the third quarter of 2005 also included restructuring charges of approximately $0.4 million related to closing the Company's manufacturing facility in Hungary. Embedded Systems Third quarter sales for the Embedded Systems segment decreased 18% to $16.7 million compared to $20.3 million for the third quarter of 2004. Similar to the second quarter, the decline in sales was primarily due to a large wireless infrastructure customer experiencing delays in 3G deployments. In addition to lower sales, a change in the product mix sold during the quarter reduced gross margins, resulting in operating income of $4.7 million for the third quarter compared to $6.8 million for the same period last year. Fourth Quarter and 2006 Outlook Sales for the fourth quarter are expected to increase sequentially from the third quarter. The 3G delays and end of life programs discussed above are anticipated to impact sales for the remainder of the year, and the Company now expects fourth quarter revenue to range between $108 million and $111 million. Including estimated restructuring expenses of $1.0 million, and $1.2 million of operating inefficiencies, related to the closure of the manufacturing facility in Hungary, earnings per share for the fourth quarter should range between $0.07 and $0.09. Based on the design wins over the last 12 months, we expect 2006 revenue to increase 15% to 20% from this year. Other Matters As previously announced, the Company is working with Lehman Brothers to evaluate strategic alternatives for the Company and that process continues. The Company will not have any further announcement on this subject unless and until a definitive agreement with another party is reached or the Company chooses to terminate pursuing such an evaluation. Conference Call Information A conference call will be held at 10:30 a.m. Eastern Time on today's date to discuss the information in this release. Investors may listen by either calling 800-274-0251 or over the Internet at http://www.artesyn.com/ . The webcast will be available for replay immediately following the conference call. For further information on the call, please call the Company at 561-451- 1000. About Artesyn Technologies, Inc. Artesyn Technologies, Inc., headquartered in Boca Raton, FL. is a world leader in the design, manufacture and sale of power conversion and embedded board solutions for infrastructure applications in server and storage, networking, wireless and telecommunications systems. The Company's products are used in middle to high-end servers, data storage devices, routers, hubs, high-speed modems, RF amplification systems, base station controllers and transceivers. The Company has a global sales reach with design and manufacturing facilities in Asia, Europe and North America. Artesyn is a public company whose common stock is traded on the Nasdaq stock market under the symbol ATSN. For more information, please visit the Company's web site at http://www.artesyn.com/ . Use of Non-GAAP Financial Measures To supplement the Company's financial statements presented on a GAAP basis, Artesyn uses non-GAAP financial measures to give the reader a clearer picture of Artesyn's current operating performance from management's perspective. These non-GAAP financial measures include EBITDA, which management believes is appropriate to enhance the overall understanding of Artesyn's past financial performance. These measures are not recognized for US GAAP financial statement presentation and, as required, reconciliations to GAAP are provided in the financial highlights after the written portion of this release. Cautionary Statement About Forward-Looking Statements Statements in this press release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that these forward- looking statements involve certain risks and uncertainties and may differ materially from actual future events or results. Undue reliance should not be placed on such forward-looking statements. Certain risks and uncertainties are identified in Artesyn's periodic filings with the United States Securities and Exchange Commission, specifically the most recent annual report on Form 10-K, filed on March 16, 2005. Some of these risk factors include, but are not limited to, operating in a volatile, competitive industry characterized by rapidly changing prices, technologies and demands associated with global manufacturing in foreign locations, dependence on a relatively small number of customers, dependence on and volatility of foreign sales, and technological changes which may render our existing products uncompetitive or obsolete. Any forward-looking statement made in this release is made as of the date of this release and should not be relied upon as representing our estimates as of any subsequent date. Artesyn assumes no obligation to update any such forward- looking statements. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. For a more detailed discussion of such risks and uncertainties, the Company strongly encourages you to review its SEC filings. Artesyn Technologies, Inc. Financial Highlights (In Thousands Except per Share Data) (Unaudited) Thirteen Weeks Ended Thirty-Nine Weeks Ended Sept. 30, Sept. 24, Sept. 30, Sept. 24, 2005 2004 2005 2004 Orders $106,078 $101,935 $307,270 $314,330 Sales Power Conversion 85,218 86,696 258,667 258,052 Embedded Systems 16,734 20,317 53,802 50,971 Total 101,952 107,013 312,469 309,023 Operating income 3,887 5,452 9,141 14,638 Depreciation and amortization 5,574 5,519 16,767 16,549 EBITDA 9,461 10,971 25,908 31,187 Net Income $4,020 $3,609 $6,041 $ 8,604 Diluted Earnings Per Share $0.09 $0.09 $0.15 $0.22 Weighted Average Shares Outstanding 51,700 51,064 40,354 39,890 Artesyn Technologies, Inc. Condensed Consolidated Statements of Operations (In Thousands Except per Share Data) (Unaudited) Thirteen Weeks Ended Thirty-Nine Weeks Ended September September September September 30, 2005 24, 2004 30, 2005 24, 2004 Sales $ 101,952 $ 107,013 $ 312,469 $ 309,023 Cost of Sales 77,291 79,379 236,091 230,443 Gross Profit 24,661 27,634 76,378 78,580 Operating Expenses Selling, general and administrative 9,203 11,486 29,682 33,173 Research and development 11,220 10,696 33,887 30,769 Restructuring expense 351 -- 3,668 -- Total Operating Expenses 20,774 22,182 67,237 63,942 Operating Income 3,887 5,452 9,141 14,638 Interest Expense, net (791) (1,166) (2,796) (3,692) Income Before I Income Taxes 3,096 4,286 6,345 10,946 (Benefit) Provision for Income Taxes (924) 677 304 2,342 Net Income $4,020 $3,609 $6,041 $8,604 Net Income Per Share -Basic $0.10 $0.09 $0.15 $0.22 -Diluted $0.09 $0.09 $0.15 $0.22 Weighted Average Common and Common Equivalent Shares Outstanding -Basic 39,774 39,210 39,586 39,029 -Diluted 51,700 51,064 40,354 39,890 Artesyn Technologies, Inc. Condensed Consolidated Balance Sheets (In Thousands) (Unaudited) September 30, 2005 December 31, 2004 ASSETS Current Assets Cash and equivalents $58,845 $84,811 Short term Investments 42,180 21,125 Accounts receivable, net 65,337 61,352 Inventories, net 47,969 50,320 Prepaid expenses and other 2,215 1,380 Deferred income taxes, net 9,137 9,137 Total current assets 225,683 228,125 Property & Equipment, Net 57,465 66,124 Other Assets Goodwill, net 20,843 22,107 Deferred income taxes, net 4,067 4,155 Other assets, net 19,951 21,128 44,861 47,390 $328,009 $341,639 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable $50,145 $54,958 Accrued and Other 38,840 52,838 Total current liabilities 88,985 107,796 Long-Term Liabilities Convertible debt 90,000 90,000 Deferred income taxes 6,082 5,598 Other long-term liabilities 3,729 4,269 Total long-term liabilities 99,811 99,867 Total liabilities 188,796 207,663 Shareholders' Equity 139,213 133,976 Total Liabilities & Shareholders' Equity $328,009 $341,639 http://www.newscom.com/cgi-bin/prnh/20050117/FLMLOGO http://photoarchive.ap.org/ DATASOURCE: Artesyn Technologies CONTACT: Gary Larsen, Chief Financial Officer, +1-561-451-1000, or Pamela Rembaum, Director, Investor Relations, +1-561-451-1028, both of Artesyn Technologies Web site: http://www.artesyn.com/

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