EXHIBIT 99.1
For Immediate Release
American Power Conversion Reports Second Quarter 2006 Financial Results
WEST KINGSTON, R.I. -- July 27, 2006 -- American Power Conversion Corporation (Nasdaq: APCC) (APC) today reported financial results for the second quarter ended June 25, 2006.
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® solutions, including Symmetra® 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® solution, the Smart-UPS RT, and summer demand for Back-UPS® 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®, its revolutionary architecture for on-demand data centers, as well as physical threat management products through the company’s NetBotzâ 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 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
