Revenue Increases 21 Percent to a Record $621 Million
WEST KINGSTON, R.I., Nov. 2 /PRNewswire-FirstCall/ -- American Power
Conversion Corporation (Nasdaq: APCC) (APC) today reported financial
results for the third quarter ended September 24, 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20031003/NEAPCLOGO )
Revenue for the third quarter 2006 was a record $621.3 million, up 21
percent from $512.3 million in the third quarter 2005 and up 11 percent
sequentially from $560.0 million in the second quarter 2006. Net income for
the third quarter 2006 was $45.1 million or $0.24 per diluted share, down 7
percent from $48.7 million or $0.24 per diluted share in the third quarter
2005 and up 83 percent from $24.7 million or $0.13 per diluted share in the
second quarter 2006.
Net income for the third quarter of 2006 includes several previously
announced items:
* $6.1 million in costs, consisting primarily of employee severance costs,
associated with workforce reduction actions announced in June and
September.
* $1.5 million for severance payments to the company's former president
and CEO, Rodger B. Dowdell, Jr., in accordance with the previously
disclosed severance and compensation agreement between the company and
Mr. Dowdell.
* A net tax benefit of $12.9 million or $0.07 per share associated with
the adjustment of income tax provisioning resulting from recent tax
audits.
Adjusted for these items, non-GAAP net income in the third quarter was
$38.1 million or $0.20 per share, down 22 percent from the third quarter
2005 and up 54 percent from the second quarter 2006.
Third Quarter 2006 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q3 2006 Q3 2005 Change Q2 2006 Change
Revenue $621.3 $512.3 21 % $560.0 11 %
Operating Income $36.8 $58.2 (37)% $27.0 36 %
Net Income $45.1 $48.7 (7)% $24.7 83 %
Diluted EPS $0.24 $0.24 (3)% $0.13 85 %
"Our business was strong during the third quarter, reaching record
revenue levels, accelerating revenue growth and achieving the thirteenth
straight quarter of double-digit year-over-year revenue growth," said Rob
Johnson, APC's president and chief executive officer. "In addition to
strong revenue growth, sequential improvements in gross margin coupled with
operating expense growth of just five percent sequentially helped drive a
greater than 50 percent increase in non-GAAP net income sequentially."
Small Systems segment gross margin increased sequentially to 43.0
percent, or 1.5 percentage points, as a result of higher Smart-UPS(R)
family sales and price increases in the segment. Large Systems segment
gross margin, however, declined sequentially to 15.9 percent, or 2.6
percentage points, as the result of improved product mix in the segment
offset by higher service costs.
"We recently announced a definitive merger agreement with Schneider
Electric," continued Johnson. "The complementary nature of our solutions
and businesses will deliver customers globally industry leading solutions
from the data center to the living room and expand the sales and support
system for our InfraStruXure(R) architecture. Both companies have a
dedication to innovation and customer service that make our combined
enterprise an even stronger player in the industry."
Segment Review
For the third 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 35 percent
year-over-year to $135.9 million. Continued year-over-year growth in
products for APC's InfraStruXure architecture, including Symmetra(R)
three-phase UPSs, as well as strong demand for the company's broadband
power products, drove the segment's strong top line performance.
The Small Systems segment, which provides power protection, UPS and
management products for the PC, server and networking markets, continued
posting healthy results, increasing 18 percent year-over-year to $460.0
million. The segment's solid revenue growth stemmed from demand for APC's
online single-phase Smart-UPS solution, the Smart-UPS RT, as well as Back-
UPS(R) desktop UPSs and InfraStruXure architecture components, including
racks and power distribution.
Business Outlook
"The demand drivers in our industry, particularly relating to powering
and cooling the data center, continue to be strong and we are very excited
about the opportunities ahead of APC," continued Johnson.
Additionally, associated with previously announced workforce
reductions, APC anticipates recognizing approximately $4 to $6 million in
costs in addition to those costs recognized in the third quarter. These
costs will be predominantly in the fourth quarter of 2006 and will consist
primarily of employee severance costs.
Non-GAAP Results
The Company believes that the non-GAAP results, i.e., results excluding
certain charges or one-time events, described in this release for the third
quarter 2006, are useful for an understanding of its ongoing operations
because GAAP (generally accepted accounting principles) results include
financial results not expected to be part of the Company's ongoing
business. Specifically, the Company does not currently believe the
reduction in income tax recorded during the third quarter 2006, the
severance payment to its former CEO or the third quarter restructuring
actions will recur in future quarters. The Company cautions that non-GAAP
results are not a substitute for GAAP results. A comparison and
reconciliation from non-GAAP to GAAP results is included in the financial
statements accompanying this release.
Conference Call and Webcast
In light of the merger agreement announced earlier this week with
Schneider Electric, APC will not be hosting a conference call to discuss
its third quarter 2006 financial results.
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 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 respective owners.
Additional Information Relating to the Merger and Where to Find It
APC will file a proxy statement with the U.S. Securities and Exchange
Commission (SEC) in connection with the proposed transaction. Investors are
urged to read any such proxy statement, when available, which will contain
important information. The proxy statement will be, and other documents
filed by APC with the SEC are, available free of charge at the SEC's
website (http://www.sec.gov) or from APC by directing a request to American
Power Conversion Corporation, 132 Fairgrounds Road, West Kingston, Rhode
Island 02892, Attention: Investor Relations (telephone 401-789-5735), or
from APC's website at http://www.apcc.com.
APC, Schneider and their respective directors, executive officers and
other employees may be deemed to be participating in the solicitation of
proxies from APC shareholders in connection with the approval of the
proposed transaction. Information about APC's directors and executive
officers is available in APC's proxy statements and Annual Reports on Form
10-K previously filed with the SEC. Information about Schneider's directors
and executive officers is available from its 2005 Annual Report, which can
be obtained for free from its website at http://www.schneider-electric.com,
and will also be available in a Schedule 13D to be filed by Schneider with
the SEC. Additional information about the interests of potential
participants will be included in the proxy statement APC will file with the
SEC.
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. While not exhaustive, the
factors that could cause actual results to differ include the following:
The ability of APC and Schneider to gain regulatory and shareholder
approval for the proposed merger; successful completion of the transaction;
ability to achieve expected growth, savings and benefits of merger;
potential disruption in business or relationships with customers, vendors,
partners and employees as a result of the proposed merger; the pervasive
and intensifying competition in all markets where we operate; prolonged
adverse economic and employment conditions in the markets we serve; changes
in available technology that make our existing technology obsolete or
expensive to upgrade; the availability and cost of capital; the impact of
any industry consolidation; the outcome of pending or threatened complaints
and litigation; the Company's ability to achieve the targeted job
reductions and savings; 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 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; the discovery of a latent defect in any of the Company's
products; 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;
and the risks described from time to time in the Company's filings with the
Securities and Exchange Commission.
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
Third Quarter 2006 Financial Summary
(In millions, except per share amounts)
YOY QOQ
Q3 2006 Q3 2005 Change Q2 2006 Change
Revenue $621.3 $512.3 21 % $560.0 11 %
Operating Income $36.8 $58.2 (37)% $27.0 36 %
Net Income $45.1 $48.7 (7)% $24.7 83 %
Diluted EPS $0.24 $0.24 (3)% $0.13 85 %
Third Quarter Segment Summary
YOY QOQ
Q3 2006 Q3 2005 Change Q2 2006 Change
Revenue (In millions)
Small Systems $460.0 $390.3 18 % $399.6 15 %
% of revenue 75 % 76 % 72 %
Large Systems $135.9 $100.4 35 % $139.5 (3)%
% of revenue 22 % 20 % 25 %
Other $19.4 $18.5 5 % $15.6 24 %
% of revenue 3 % 4 % 3 %
Shipping and
Handling $6.0 $3.1 $5.3
Net Sales $621.3 $512.3 21 % $560.0 11 %
YOY Basis QOQ Basis
Point Point
Q3 2006 Q3 2005 Change Q2 2006 Change
Gross Margin Percentage
Small Systems 43.0 % 44.8 % (180) 41.5 % 150
Large Systems 15.9 % 16.4 % (50) 18.5 % (260)
Other 50.8 % 60.3 % (950) 55.2 % (440)
Third Quarter Geographic Summary
YOY QOQ
Q3 2006 Q3 2005 Change Q2 2006 Change
Revenue (In millions)
Americas $343.1 $268.3 28 % $304.8 13 %
% of revenue 55 % 52 % 54 %
EMEA $167.0 $148.9 12 % $162.3 3 %
% of revenue 27 % 29 % 29 %
Asia Pacific $111.2 $95.1 17 % $92.9 20 %
% of revenue 18 % 19 % 17 %
Net Sales $621.3 $512.3 21 % $560.0 11 %
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)
SEPTEMBER 24, DECEMBER 31,
2006 2005
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $187,566 $262,414
SHORT TERM INVESTMENTS 323,175 511,181
ACCOUNTS RECEIVABLE, NET 415,469 374,694
INVENTORIES 636,534 541,823
PREPAID EXPENSES AND
OTHER CURRENT ASSETS 76,561 59,181
DEFERRED INCOME TAXES 69,835 60,139
TOTAL CURRENT ASSETS 1,709,140 1,809,432
PROPERTY, PLANT & EQUIPMENT 516,394 459,736
LESS: ACCUMULATED DEPRECIATION
AND AMORTIZATION 320,059 293,692
NET PROPERTY, PLANT & EQUIPMENT 196,335 166,044
LONG TERM INVESTMENTS 330 562
GOODWILL 18,202 15,781
OTHER INTANGIBLES, NET 26,338 36,115
DEFERRED INCOME TAXES 44,535 42,427
OTHER ASSETS 3,954 5,101
TOTAL ASSETS $1,998,834 $2,075,462
CURRENT LIABILITIES
ACCOUNTS PAYABLE $175,027 $176,345
ACCRUED EXPENSES 249,390 204,702
INCOME TAXES PAYABLE 12,928 39,755
TOTAL CURRENT LIABILITIES 437,345 420,802
DEFERRED TAX LIABILITY 11,894 14,911
TOTAL LIABILITIES 449,239 435,713
SHAREHOLDERS' EQUITY
COMMON STOCK 1,899 1,958
ADDITIONAL PAID-IN CAPITAL 14,134 131,862
RETAINED EARNINGS 1,530,692 1,504,093
ACCUMULATED OTHER
COMPREHENSIVE INCOME 2,870 1,836
TOTAL SHAREHOLDERS' EQUITY 1,549,595 1,639,749
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,998,834 $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
SEPTEMBER 24, SEPTEMBER 25,
2006 2005
NET SALES $621,318 $512,289
COST OF GOODS SOLD 410,546 323,633
GROSS PROFIT 210,772 188,656
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 147,292 108,276
RESEARCH AND DEVELOPMENT 26,699 22,200
TOTAL OPERATING EXPENSES 173,991 130,476
OPERATING INCOME 36,781 58,180
OTHER INCOME, NET 4,796 5,448
EARNINGS BEFORE INCOME TAXES 41,577 63,628
INCOME TAXES (3,545) 14,953
NET INCOME $45,122 $48,675
DILUTED EARNINGS PER SHARE $0.24 $0.24
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 191,895 200,740
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.
Net income for the third quarter of 2006 includes a net tax benefit of
approximately $12.9 million or $0.07 per share associated with the
adjustment of income tax provisioning resulting from recent tax audits,
partially offset by a charge for workforce reductions and severance
payments of $7.6 million, or $0.03 per share after-tax. Excluding these
items, non-GAAP net income for the third quarter of 2006 was $38.1 million
or $0.20 per share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of these items:
FOR THE THREE MONTHS ENDED
SEPTEMBER 24, 2006
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income, excluding charges $49,172 $38,108 $0.20
Items excluded from non-GAAP results:
Charge for workforce
reductions in COGS (3,384) (2,623) (0.01)
Charge for workforce
reductions in SG&A (4,211) (3,263) (0.02)
Tax reserve adjustment -- 12,900 0.07
GAAP income, including charges $41,577 $45,122 $0.24
AMERICAN POWER CONVERSION CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 24, SEPTEMBER 25,
2006 2005
NET SALES $1,660,096 $1,400,898
COST OF GOODS SOLD 1,102,911 869,526
GROSS PROFIT 557,185 531,372
MARKETING, SELLING, GENERAL
AND ADMINISTRATIVE 405,113 314,474
RESEARCH AND DEVELOPMENT 75,061 65,175
TOTAL OPERATING EXPENSES 480,174 379,649
OPERATING INCOME 77,011 151,723
OTHER INCOME, NET 15,148 14,431
EARNINGS BEFORE INCOME TAXES 92,159 166,154
INCOME TAXES 7,836 39,559
NET INCOME $84,323 $126,595
DILUTED EARNINGS PER SHARE $0.43 $0.63
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 194,755 199,686
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.
Net income for the first nine months of 2006 includes a net tax benefit
of approximately $12.9 million or $0.07 per share associated with the
adjustment of income tax provisioning resulting from recent tax audits,
partially offset by a charge for workforce reductions and severance
payments of $7.6 million, or $0.03 per share after-tax. Excluding these
items, non-GAAP net income for the first nine months of 2006 was $77.3
million or $0.39 per share.
The following table details a reconciliation from Non-GAAP amounts to U.S.
GAAP and effects of these items:
FOR THE NINE MONTHS ENDED
SEPTEMBER 24, 2006
Per
Diluted
Pretax Net of Tax Share
Non-GAAP income, excluding charges $99,754 $77,309 $0.39
Items excluded from non-GAAP results:
Charge for workforce
reductions in COGS (3,384) (2,623) (0.01)
Charge for workforce
reductions in SG&A (4,211) (3,263) (0.02)
Tax reserve adjustment -- 12,900 0.07
GAAP income, including charges $92,159 $84,323 $0.43
SOURCE American Power Conversion Corporation
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http://www.apc.com/
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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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