ATSN Artesyn Technologies (MM)

Artesyn Reports Second Quarter 2005 Financial Results BOCA RATON, Fla., July 26 /PRNewswire-FirstCall/ -- Artesyn Technologies, Inc. (NASDAQ:ATSN) today reported financial results for the second quarter ended July 1, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20050117/FLMLOGO ) Sales for the second quarter of 2005 were $108.1 million compared to $105.5 million for the corresponding quarter in 2004. For the first six months of 2005, sales were $210.5 million compared to $202.0 million for the same period last year. Total orders received during the quarter were $100.2 million, yielding a book-to-bill ratio of 0.93. Backlog at the end of the quarter was $77.7 million with approximately 91% shippable during the third quarter. During the second quarter, Artesyn had 27 major design wins that the Company estimates will realize approximately $221 million in lifetime project revenues. For the first six months of 2005, the Company had 57 major design wins and estimates lifetime project revenues of approximately $575 million to be realized in the next two to four years. Net income for the second quarter of 2005 was $0.1 million, or $0.00 per share, compared to net income of $3.1 million, or $0.08 per share in the second quarter of 2004. Included in net income for the second quarter were $3.3 million of restructuring charges associated with an initiative to reduce operating costs. The restructuring charges, net of tax, totaled $2.7 million, or $0.07 per share, during the quarter. Net income for the first six months of 2005 was $2.0 million, or $0.05 per share, compared to net income of $5.0 million, or $0.13 per share for the same period in 2004. The Company expects a total of $5.0 million of restructuring charges in 2005, associated with the cost reduction initiative mentioned above. As part of this initiative, Artesyn announced today that it will be closing the Tatabanya, Hungary manufacturing facility, and intends to award European manufacturing services work to Celestica Inc., a global electronics manufacturing services (EMS) provider. Most of the products currently being manufactured in Hungary will be transferred to Celestica's Romanian factory in Oradea. This transition is expected to be complete by the end of 2005. Savings in 2006 from this closure are estimated to be $6.0 million. Discussing more about the factory closure, Artesyn's CEO and President, Joseph O'Donnell, stated, "The decision to close the Hungarian facility was difficult, but necessary to protect our competitive position while improving profitability. Unfortunately, since opening the plant in 2001, our customers have reassessed their regional sourcing needs resulting in an under-utilized facility. "Our intent to outsource production to Celestica is primarily based on their larger purchasing power and ability to leverage economies of scale from a larger manufacturing base. Additionally, Celestica's global manufacturing structure will open up sourcing options in different geographic locations as we grow our global wireless infrastructure business. The new relationship with Celestica gives us the ability to leverage our cost structure, as well as improve gross margins and overall profitability." Business Segment Results Power Conversion Second quarter sales for the Power Conversion segment grew 5% to $92.1 million compared to $88.0 million for the second quarter of 2004. Sales for the first six months of 2005 were $173.4 million compared to $171.4 million for the same period last year. Revenues in the wireless division increased as several new rectifier programs began shipping during the quarter. However, Artesyn's largest market sector, servers and storage, continued to have slower than anticipated growth, negatively impacting sales and operating income for the segment. Included in this segment's operating costs are restructuring charges of $3.1 million discussed in detail above. As a result, the Power Conversion segment had an operating loss of $0.7 million for the second quarter and a loss of $1.8 million for the first six months of the year. "Rectifier programs have begun to add revenue to our wireless infrastructure business and we expect to see a positive impact for the remainder of the year. The server and storage business, however, will continue to be slow for the rest of 2005 due to some large programs ending sooner than anticipated and before many of the new program wins are rolled out. Based on three sequential quarters of large design wins in this market, we anticipate significant growth over the next two years," O'Donnell said. Embedded Systems Second quarter sales for the Embedded Systems segment decreased 9% to $15.9 million compared to $17.5 million for the second quarter of 2004. Sales for the first six months of 2005 were $37.1 million compared to $30.7 million for the same period last year. The decrease in sales is a result of two important wireless customers significantly reducing their demand due to operator delays of 3G rollouts in China and North America. Operating income was $4.0 million for the second quarter and $11.0 million for the first six months of the year. Mr. O'Donnell commented on the Embedded Systems second quarter results, "While sales for the segment were significantly less than planned this quarter, costs continued to be leveraged to maintain a healthy operating income. Unfortunately, large operator plans are sometimes pushed out, as was done this quarter and most likely for the remainder of the year. While this is disappointing, we do continue to anticipate significant growth for 2006." Second Half 2005 Outlook The Company expects the second half of 2005 to improve sequentially each quarter. Sales growth for the second half of 2005 is expected to range between 8% and 10% compared to the first half of the year. Second half operating costs may increase approximately $0.03 per share as a result of manufacturing inefficiencies associated with the transition of Hungarian manufacturing. There will also be restructuring charges of approximately $0.02 per share in the second half. Including these non-recurring costs and restructuring charges, earnings per share for the second half of 2005 will range between $0.19 and $0.23 per share. Conference Call Information A conference call will be held at 8:30 a.m. Eastern Time on today's date to discuss the information in this release. Investors may listen by either calling 800-711-4000 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 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 Twenty-Six Weeks Ended July 1, June 25, July 1, June 25, 2005 2004 2005 2004 Orders $100,187 $106,281 $201,191 $212,395 Sales Power Conversion 92,149 87,999 173,449 171,356 Embedded Systems 15,918 17,498 37,068 30,654 Total 108,067 105,497 210,517 202,010 Operating income 1,520 5,313 5,254 9,185 Depreciation and amortization 5,532 5,600 11,193 11,030 EBITDA 7,052 $10,913 16,447 $20,215 Net Income $75 $3,078 2,022 $4,995 Diluted Earnings Per Share $0.00 $0.08 $0.05 $0.13 Artesyn Technologies, Inc. Condensed Consolidated Statements of Operations (In Thousands Except Per Share Data) (Unaudited) 13 Weeks ended 26 Weeks Ended July 1, June 25, July 1, June 25, 2005 2004 2005 2004 Sales $108,067 $105,497 $210,517 $202,010 Cost of Sales 82,183 79,025 158,801 151,065 Gross Profit 25,884 26,472 51,716 50,945 Operating Expenses Selling, general and administrative 9,943 11,239 20,480 21,687 Research and development 11,104 9,920 22,665 20,073 Restructuring and other charges 3,317 -- 3,317 -- Total Operating Expenses 24,364 21,159 46,462 41,760 Operating Income 1,520 5,313 5,254 9,185 Debt Extinguishment Expense -- -- -- -- Interest Expense, net (1,000) (1,278) (2,005) (2,525) Income Before Income Taxes 520 4,035 3,249 6,660 Provision for Income Taxes 445 957 1,227 1,665 Net Income $75 $3,078 $2,022 $4,995 Net Income Per Share -Basic $0.00 $0.08 $0.05 $0.13 -Diluted $0.00 $0.08 $0.05 $0.13 Weighted Average Common and Common Equivalent Shares Outstanding -Basic 39,573 39,032 39,491 38,939 -Diluted 40,149 39,885 40,261 39,888 Artesyn Technologies, Inc. Condensed Consolidated Balance Sheets (In Thousands) (Unaudited) July 1, December 31, 2005 2004 ASSETS Current Assets Cash and equivalents $52,786 $84,811 Short-term marketable debt securities 40,879 21,125 Accounts receivable, net 70,147 61,352 Inventories, net 47,039 50,320 Prepaid expenses and other current assets 2,771 1,380 Deferred income taxes, net 9,137 9,137 Total current assets 222,759 228,125 Property, Plant & Equipment, Net 60,407 66,124 Other Assets Goodwill 21,155 22,107 Deferred income taxes 4,158 4,155 Other assets 20,268 21,128 Total other assets 45,581 47,390 Total Assets $328,747 $341,639 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $50,922 $54,958 Accrued and other current liabilities 43,579 52,838 Total current liabilities 94,501 107,796 Long-Term Liabilities Convertible subordinated debt 90,000 90,000 Deferred income taxes 6,087 5,598 Other long-term liabilities 3,723 4,269 Total long-term liabilities 99,810 99,867 Total liabilities 194,311 207,663 Shareholders' Equity 134,436 133,976 Total Liabilities and Shareholders' Equity $328,747 $341,639 http://www.newscom.com/cgi-bin/prnh/20050117/FLMLOGO http://photoarchive.ap.org/ DATASOURCE: Artesyn Technologies CONTACT: Gary Larsen, Interim 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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