Smith Barney Citigroup 18th Annual Global Industrial...

American Power Conversion (Nasdaq: APCC)

March 9, 2005Grand Hyatt, New York, NYDon Muir, APC Senior Vice President Finance and Administration, CFO

Smith Barney Citigroup18th Annual Global Industrial Manufacturing Conference

© 2005 American Power Conversion Corporation

Presentation of Results

Today’s presentation contains information regarding the historical performance of APC, including the presentation of historical netincome. These results may be presented both in accordance with Generally Accepted Accounting Principles (GAAP) and in non-GAAP format.

A reconciliation from non-GAAP amounts to GAAP for APC’s historical performance is posted on the investor relations section of the Company’s Web site at http://investor.apcc.com


Safe Harbor Provision

This presentation contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements in this presentation that do not describe historical facts, such as statements concerning the Company’s future prospects, 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 comply 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.


APC Initiatives Support Targeted Mission

• APC’s MissionTo create delighted customers by improving the manageability, availability, and performance of information and communication systems through the rapid delivery of innovative solutions to real customer problems

• APC’s VisionAPC products ensuring availability wherever data is created, transmitted or stored

• APC’s Market PositioningGlobal, End-to-End, Nonstop Networking

• APC’s Products and SystemsSurge suppressors, uninterruptible power supplies (UPS), power distribution, power management software, DC power systems, precision cooling equipment, and services


Consumer: Technology in the Home

Technology TrendsVoIP, Biometrics, Convergence, Digital Living and Wireless

OpportunitiesNew product categoriesGeographic expansionChannel expansion

CompetitionBelkin (cables, surge protection, UPS)Monster (A/V surge protection and UPS)Phoenixtec (Asia and OEM provider of UPSs)

New: Backup power for PCs

New: Products for the Audio Visual Market


Mid-market: Core APC Customer

Technology TrendsServer consolidation, IP telephony, disaster recovery, Sarbanes-Oxley

OpportunitiesVerticals, such as healthcareBrand the data center with InfraStruXureExpand the sale with end-to-end solutions

CompetitionLiebert (Emerson Electric)Eaton Power Quality (formerly Powerware)MGE New: Smart-UPS RT

New: Smart-UPS® VT, 10 – 40 kVA for small data centers

New: Smart-UPS, next generation


Technology TrendsServer consolidation, IP telephony, disaster recovery, Sarbanes-Oxley

OpportunitiesBrand the data center with InfraStruXureServicesExpand the sale with end-to-end solutions globallyIndustrial

CompetitionLiebert (Emerson Electric)Eaton Power Quality (formerly Powerware)MGE

Enterprise: End-to-End Solutions

New: InfraStruXure Express, On-demand mobile data center

New: InfraStruXure™with Integrated Cooling


Solid Historical Sales Performance

$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Other

LargeSystemsSmallSystems

2004: $1.7 B up 16%

CAGR: ~30%

$ M

illio

n


$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

History of Strong Profitability$

Mill

ion

$182$169

GAAP Non-GAAP

Non-GAAP

CAGR: 25% • 2004 GAAP Net Income Up 3% YOY

• 2004 Non-GAAP Net Income down 4% YOY


Fourth Quarter 2004 Revenue Tops Half Billion Mark for First Time in Company History

$431$511

050

100150200250300350400450500

Q4 2003 Q4 2004

$ M

illio

n

Q4 04 Revenue up 19%Q4 04 Net Income down 9%

Q4 04 Non-GAAP Net Income down 13%

GAAP Non-GAAP

$58$61

$53 $53

$0

$10

$20

$30

$40

$50

$60

Q4 2003 Q4 2004


Fourth Quarter 2004: Record Quarter for Small and Large Systems Segment

Large Systems: $108 million (21%)

Small Systems: $380 million (75%)

Q4 04 Revenue Composition by Segment, % of Revenues

Other: $19 million (4%)

YOY Growth QOQ Growth

Small 14% 11%

Large 41% 38%

Other 9% 15%


Record Year for Small and Large Systems Segment

Large Systems: 19%

Small Systems: 77%

2004 Revenue Composition by Segment, % of Revenues

Other: 4%

2004 Revenue $M YOY Growth

Small Systems $1,300 13%

Large Systems $322 34%

Other $66 4


Balanced Geographic Distribution of Revenue 2004 Revenue Growth Across All Regions

% of total 2004 revenue by major geographic region

2004 % Change Constant $Americas 14% 14%

EMEA 17% 11%

Asia 19% 14%Americas 50%EMEA: 32%

Asia: 18%


Historical APC Revenue Growth versus IT Spending Growth Worldwide

-10.00%-5.00%0.00%5.00%

10.00%15.00%20.00%25.00%30.00%

1998 1999 2000 2001 2002 2003 2004

IT Spending GrowthAPC Revenue Growth

Source: IDC and Company Estimates


Historical Quarterly Margin Trends, 1995-Q4 2004

Note: Results are presented as non-GAAP, a reconciliation for each period is available at http://investor.apcc.com

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%Q1

199

5

Q4 1

995

Q3 1

996

Q2 1

997

Q1 1

998

Q4 1

998

Q3 1

999

Q2 2

000

Q1 2

001

Q4 2

001

Q3 2

002

Q2 2

003

Q1 2

004

Q4 2

004

Small SystemsGross Margin

Gross Margin

OPEX to Sales

Operating Profit


Expanding Market Opportunity Represents Growth Opportunity

0

2

4

6

8

10

12

14

1997 Today

APC Revenue

APC MarketOpportunity

$ B

illio

n

Source: Company and Industry Estimates


$14 Billion Market Opportunity, by Major Product Category

Single Phase UPS

3 Phase UPS

Physical InfrastructureServicesCooling

Mobile Accessories

Surge Protection

NCPI Management Other

Industrial Power DC Power

Power Distribution



InfraStruXure Addresses a $7 Billion Market Opportunity


Single Phase UPS 3 Phase UPS

Cooling

DC Power Systems

NCPI Management

Physical Infrastructure

Power Distribution

Power Generation

ServicesSurge Protection


Rack-based architecture for power, cooling, and environmental management

Changing the way the world designs data centers

Symmetra PX

InfraStruXure PDU

NetShelter VX

NetworkAIR FM

$50-$400K

Closets (1-3 Racks) Small Data Centers (5-20 racks)

Smart-UPS

NetShelter® VX

NetworkAIR™ PA

$1 - $10K

InfraStruXure

Computer Rooms (1-5 Racks)

Symmetra® RM

NetShelter VX

NetworkAIR PA

$4 - $25K

Symmetra PX

InfraStruXure PDU

NetShelter VX

NetworkAIR FM

$130 K - $1 M plus

Medium Data Centers (20-100 racks) Large Data Centers (>100 racks)

Symmetra MW

InfraStruXure PDU

NetShelter VX

NetworkAIR FM

$250 K and up

InfraStruXure for:


Investment in Education and Adoption Programs Driving Top Line ResultsQ4 2004 InfraStruXure™ Revenue

and Education UpdateRecord fourth quarter revenue

Up 96% year-over-yearUp 50% quarter-over-quarter

Full year revenue up ~90% year-over-yearTrained nearly 100,000 channel partners and end users in 2004Detecting 50% more qualified projects than in 20032005 plans call for continued investment in demand generation and education programs


Commitment to Shareholder Value: APC Returned approximately $220 million to Shareholders in 2004

APC commenced and completed $150 million stock buyback in Q3 2004

Bought back and retired approximately 9.3 million shares at an average price of $16.09

APC pays quarterly dividend

$0.10 per share quarterly dividend Dividend instituted in June 2003 at $0.08 per shareIncreased 25% in June 2004

0

100

200

300

400

500

600

700

800

900

Q1

2001

Q2

2001

Q3

2001

Q4

2001

Q1

2002

Q2

2002

Q3

2002

Q4

2002

Q1

2003

Q2

2003

Q3

2003

Q4

2003

Q1

2004

Q2

2004

Q3

2004

Q4

2004

$ M

illio

n

Cash and InvestmentsYear end 2004: $721 M


APC: Investing in Expanding Market Opportunities

APC is a strong company with good opportunities investing heavily in delivering innovation to the market

Solid FundamentalsSolid profitability and strong balance sheet with healthy cash positionInvesting in future products plus sales and marketing programsGlobal manufacturing, sales and support

Global, End-to-end, Nonstop networkingActively supporting APC’s comprehensive line of business segments and geographies from consumer to mid-market to enterpriseNew product categories; New price points; New markets

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