WEST KINGSTON, R.I., July 27 /PRNewswire-FirstCall/ -- American Power
Conversion Corporation (Nasdaq: APCC) (APC) today reported financial
results for the second quarter ended June 25, 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20031003/NEAPCLOGO )
Revenue for the second quarter 2006 was $560.0 million, up 17 percent
from $480.6 million in the second quarter 2005 and up 17 percent
sequentially from $478.8 million in the first quarter 2006. Net income for
the second quarter 2006 was $24.7 million or $0.13 per diluted share, down
41 percent from $41.9 million or $0.21 per diluted share in the second
quarter 2005 and up 70 percent from $14.5 million or $0.07 per diluted
share in the first quarter 2006.
Second Quarter 2006 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q2 2006 Q2 2005 Change Q1 2006 Change
Revenue $560.0 $480.6 17 % $478.8 17 %
Operating Income $27.0 $49.9 (46)% $13.3 103 %
Net Income $24.7 $41.9 (41)% $14.5 70 %
Diluted EPS $0.13 $0.21 (39)% $0.07 73 %
"The second quarter's performance continued to reflect strong demand
across geographies and major operating segments and extended our double
digit year-over-year revenue growth streak to twelve consecutive quarters.
Sequentially, top line growth that outpaced spending growth coupled with
gross margin improvement resulted in operating income more than doubling in
the second quarter versus the first quarter 2006," said Rodger B. Dowdell,
Jr., APC's president and chief executive officer. "I am also pleased to
announce that in the first half 2006 we have returned nearly $170 million
to shareholders through our cash dividend and stock repurchase programs. In
the second quarter, we repurchased 2.9 million shares representing an
approximately $60 million investment.
"Through the streamlining of operations, supply chain initiatives and
pricing actions, we are taking steps to improve our gross margin, while
maintaining investments in innovation, sales and marketing programs to
drive awareness and adoption of APC's network-critical physical
infrastructure (NCPI) solutions globally. Despite continued progress in our
operations and supply chain initiatives, the year-over-year trends remain
unfavorable although less so than previous quarters. Additionally,
year-over-year margins were also negatively impacted in the quarter by
segment and product mix as well as pricing," continued Dowdell.
Segment Review
For the second quarter 2006, revenue in APC's Large Systems segment,
consisting primarily of 3-phase uninterruptible power supplies (UPSs), APC
Global Services, precision cooling and ancillary products for data centers,
facilities and communication applications, increased 33 percent
year-over-year to $139.5 million. Continued year-over-year growth in
InfraStruXure(R) solutions, including Symmetra(R) three-phase UPSs, fueled
the top line performance of the segment.
The Small Systems segment, which provides power protection, UPS and
management products for the PC, server and networking markets, continued
posting healthy results, increasing 12 percent year-over-year to $399.6
million. Demand for APC's online single-phase Smart-UPS(R) solution, the
Smart-UPS RT, and summer demand for Back-UPS(R) desktop UPSs were top
drivers of growth in the segment during the quarter.
Business Outlook
"In 2002, APC first set out to educate customers about the benefits of
a modular, scalable NCPI solution," stated Dowdell. "We talked to customers
about lowering their total cost of ownership and adapting to rapidly
changing IT demands while maintaining high levels of availability. These
are simple themes for very complex problems. Turning the clock ahead to
2006, experts now predict that powering and cooling the data center will
soon become more expensive than purchasing the IT equipment to populate it.
The importance of properly managing and maximizing the performance of NCPI
has never been higher. APC anticipated this market need and is helping
customers prepare for this reality with an entirely new approach to design,
build and operate data centers. Today, we are committed to arm data center
professionals with a solution that enables them to manage their complex
power and cooling challenges."
Conference Call and Webcast
In conjunction with the second quarter 2006 earnings announcement, APC
management is hosting a conference call to discuss the Company's results.
This conference call will be held today, July 27, at 5:00 p.m. 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
913-981-5522. A replay will be accessible via telephone at approximately
8:00 p.m. on July 27 by dialing 719-457-0820 and entering the access code
4429604 and will continue through August 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; depending on market circumstances,
the Company may not complete its previously approved stock repurchase
program; 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, including successfully consolidating its Irish
manufacturing operations in Castlebar, Ireland and redeploying certain
customer-facing positions within the Europe, Middle East and Africa region;
the Company's ability to effectively align operating expenses and
production capacity with the current demand environment; 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; the discovery of a latent defect in any of the Company's
products; 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.
About American Power Conversion
Founded in 1981, American Power Conversion (Nasdaq: APCC) (APC) is a
leading provider of global, end-to-end solutions for real-time
infrastructure. 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. APC offers a wide variety of products for
network-critical physical infrastructure including InfraStruXure(R), its
revolutionary architecture for on-demand data centers, as well as physical
threat management products through the company's NetBotz(R) division. These
products and services help companies increase the availability and
reliability of their IT systems. Headquartered in West Kingston, Rhode
Island, APC reported sales of $2.0 billion for the year ended December 31,
2005, and is a Fortune 1000, Nasdaq 100 and S&P 500 Company. All trademarks
are the property of their owners. Additional information about APC and its
global end-to-end solutions is available at http://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 2006 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q2 2006 Q2 2005 Change Q1 2006 Change
Revenue $560.0 $480.6 17 % $478.8 17 %
Operating Income $27.0 $49.9 (46)% $13.3 103 %
Net Income $24.7 $41.9 (41)% $14.5 70 %
Diluted EPS $0.13 $0.21 (39)% $0.07 73 %
Second Quarter Segment Summary
YOY QOQ
Q2 2006 Q2 2005 Change Q1 2006 Change
Revenue
(In millions)
Small Systems $399.6 $356.2 12 % $350.9 14 %
% of revenue 72 % 74 % 74 %
Large Systems $139.5 $104.9 33 % $107.1 30 %
% of revenue 25 % 22 % 23 %
Other $15.6 $16.4 (5)% $17.5 (11)%
% of revenue 3 % 3 % 4 %
Shipping and
Handling $5.3 $3.1 $3.3
Net Sales $560.0 $480.6 17 % $478.8 17 %
YOY Basis QOQ Basis
Q2 2006 Q2 2005 Point Change Q1 2006 Point Change
Gross Margin
Percentage
Small Systems 41.5 % 45.2 % (370) 41.3 % 20
Large Systems 18.5 % 18.3 % 20 16.2 % 230
Other 55.2 % 56.5 % (130) 54.0 % 120
Second Quarter Geographic Summary
YOY QOQ
Q2 2006 Q2 2005 Change Q1 2006 Change
Revenue
(In millions)
Americas $304.8 $257.8 18 % $247.3 23 %
% of revenue 54 % 54 % 52 %
EMEA $162.3 $140.2 16 % $137.0 18 %
% of revenue 29 % 29 % 29 %
Asia $92.9 $82.6 12 % $94.5 (2)%
% of revenue 17 % 17 % 20 %
Net Sales $560.0 $480.6 17 % $478.8 17 %
Note: Totals may not add to 100% due to rounding
YOY = year-over-year
QOQ = quarter-over-quarter
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED)
JUNE 25, 2006 DECEMBER 31, 2005
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $202,078 $262,414
SHORT TERM INVESTMENTS 336,667 511,181
ACCOUNTS RECEIVABLE, NET 395,887 374,694
INVENTORIES 607,561 541,823
PREPAID EXPENSES AND
OTHER CURRENT ASSETS 62,701 59,181
DEFERRED INCOME TAXES 68,600 60,139
TOTAL CURRENT ASSETS 1,673,494 1,809,432
PROPERTY, PLANT & EQUIPMENT 502,728 459,736
LESS: ACCUMULATED DEPRECIATION
AND AMORTIZATION 309,588 293,692
NET PROPERTY, PLANT & EQUIPMENT 193,140 166,044
LONG TERM INVESTMENTS 564 562
GOODWILL 17,951 15,781
OTHER INTANGIBLES, NET 29,503 36,115
DEFERRED INCOME TAXES 43,820 42,427
OTHER ASSETS 3,919 5,101
TOTAL ASSETS $1,962,391 $2,075,462
CURRENT LIABILITIES
ACCOUNTS PAYABLE $162,288 $176,345
ACCRUED EXPENSES 222,067 204,702
INCOME TAXES PAYABLE 34,644 39,755
TOTAL CURRENT LIABILITIES 418,999 420,802
DEFERRED TAX LIABILITY 11,344 14,911
TOTAL LIABILITIES 430,343 435,713
SHAREHOLDERS' EQUITY
COMMON STOCK 1,902 1,958
ADDITIONAL PAID-IN CAPITAL 22,671 131,862
RETAINED EARNINGS 1,504,625 1,504,093
ACCUMULATED OTHER
COMPREHENSIVE INCOME 2,850 1,836
TOTAL SHAREHOLDERS' EQUITY 1,532,048 1,639,749
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,962,391 $2,075,462
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 25, 2006 JUNE 26, 2005
NET SALES $559,985 $480,606
COST OF GOODS SOLD 371,360 302,341
GROSS PROFIT 188,625 178,265
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 135,837 105,619
RESEARCH AND DEVELOPMENT 25,827 22,736
TOTAL OPERATING EXPENSES 161,664 128,355
OPERATING INCOME 26,961 49,910
OTHER INCOME, NET 4,918 5,189
EARNINGS BEFORE INCOME TAXES 31,879 55,099
INCOME TAXES 7,173 13,224
NET INCOME $24,706 $41,875
DILUTED EARNINGS PER SHARE $0.13 $0.21
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 194,342 199,742
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 25, 2006 JUNE 26, 2005
NET SALES $1,038,778 $888,609
COST OF GOODS SOLD 692,365 545,893
GROSS PROFIT 346,413 342,716
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 257,821 206,198
RESEARCH AND DEVELOPMENT 48,362 42,975
TOTAL OPERATING EXPENSES 306,183 249,173
OPERATING INCOME 40,230 93,543
OTHER INCOME, NET 10,352 8,983
EARNINGS BEFORE INCOME TAXES 50,582 102,526
INCOME TAXES 11,381 24,606
NET INCOME $39,201 $77,920
DILUTED EARNINGS PER SHARE $0.20 $0.39
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 195,981 199,036
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.
SOURCE American Power Conversion Corporation
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CONTACT:
Investors: Richard Thompson, chief financial
officer, +1-401-789-5735, ext. 2325, or Debbie Hancock, director,
investor relations, +1-401-789-5735, ext. 2994,
Debbie.hancock@apcc.com; or Media: Chet Lasell, APC director,
public relations-North America, +1-800-788-2208 ext. 2693,
chet.lasell@apcc.com, all of American Power Conversion
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