SAP Announces 2006 Second Quarter and Six Months Results
by PR Newswire
WALLDORF, Germany, July 20 /PRNewswire-FirstCall/ -- SAP AG today announced its preliminary financial results for the second quarter and six months ended June 30, 2006.
HIGHLIGHTS - Second Quarter 2006
Revenues
- Software revenues were euro 621 million for the second quarter of 2006
(2005: euro 576 million), representing an increase of 8% (10% at
constant currencies(1))) compared to the same period in 2005.
- Product revenues for the 2006 second quarter were euro 1.5 billion
(2005: euro 1.4 billion), which is an increase of 9% (10% at constant
currencies(1)) compared to the second quarter of 2005.
- Total revenues were euro 2.2 billion for the second quarter of 2006
(2005: euro 2.0 billion), which represented an increase of 9% (9% at
constant currencies(1)) compared to the same period in 2005.
Core Enterprise Applications Vendor Share(2)
- Based on software revenues on a rolling four quarter basis, SAP's
worldwide share of Core Enterprise Applications vendors, which account
for approximately $16 billion in software revenues as defined by the
Company based on industry analyst research, continued to grow and was
21.7% at the end of the second quarter of 2006.
Regional Performance
The Americas region remained the growth driver for SAP, reporting an 18% increase in software revenues (21% at constant currencies(1)) to euro 239 million for the second quarter of 2006 compared to the same quarter last year. In the U.S., software revenues increased to euro 201 million, or 16% (20% at constant currencies(1)). Second quarter software revenues in the EMEA (Europe, Middle East and Africa) region climbed to euro 296 million, or 3% (3% at constant currencies(1)), with Germany reporting an 8% increase to euro 100 million for the second quarter of 2006. Software revenues in the APA (Asia/Pacific) region for the second quarter of 2006 were flat (4% increase at constant currencies(1)) at euro 86 million, with Japan reporting a 4% decline (4% increase at constant currencies(1)) in software revenues to euro 23 million.
Income
- Operating income for the second quarter of 2006 was euro 531 million
(2005: euro 460 million), which was an increase of 15% compared to the
2005 second quarter. Pro forma operating income(3) was euro
558 million (2005: euro 496 million) for 2005, representing an increase
of 13% compared to the second quarter of 2005.
- The operating margin for the 2006 second quarter was 24.2%, which was
an increase of 1.4 percentage points compared to the second quarter of
2005. The pro forma operating margin(3) for the 2006 second quarter
was 25.4%, which was an increase of 0.80 percentage points compared to
the 2005 second quarter.
- Net income for the second quarter of 2006 was euro 414 million (2005:
euro 289 million), or euro 1.35 per share (2005: euro 0.93 per share),
representing an increase of 43% compared to the second quarter of 2005.
Second quarter 2006 pro forma net income(3) was euro 432 million (2005:
euro 314 million), or pro forma euro 1.41 earnings per share(3) (2005:
euro 1.01 per share), representing an increase of 38% compared to the
second quarter of 2005. Second quarter 2006 net income, earnings per
share, pro forma net income and pro forma earnings per share were
positively impacted by approximately euro 30 million, or euro 0.10 per
share, from a reduced effective tax rate of 25% mainly due to a
settlement with the fiscal authorities on one specific item.
"SAP is on track for another successful year. Product revenue, pro forma operating margin and pro forma earnings per share all gained strongly in the first half and we succeeded in extending our global market share," said Henning Kagermann, CEO of SAP. "Software revenues were slightly below our expected full-year growth range, primarily due to order phasing and delayed contracts, but order entry - a key indicator for future software revenues - and our win rate against competitors both remained strong. The customer spending environment is stable and customer satisfaction is high, which has been helped by our clear product roadmap and well-defined product deliverables."
Mr. Kagermann continued, "At the beginning of the year, we stated that 2006 would be a cornerstone year for SAP distinguished by a series of new product launches. We successfully delivered in the first half with new product launches such as SAP CRM on-demand solutions, Duet software and our flagship mySAP ERP 2005, the first services-enabled ERP suite in the industry. Customer feedback has been very positive on these products, including strong interest from our user groups about migrating to mySAP ERP 2005. These new products and other products we have announced for 2006, along with our enterprise service-oriented architecture (enterprise SOA), will allow us to deliver to customers increased simplicity by innovating the user experience, greater flexibility in building business processes, and provide for easier adoption by refining the way companies deploy software."
HIGHLIGHTS - Six Months 2006
Revenues
- Software revenues increased 14% (12% at constant currencies(1)) to euro
1.1 billion (2005: euro 1.0 billion) for the first half of 2006
compared to the same period last year.
- Product revenues increased to euro 2.9 billion (2005: euro 2.5 billion)
for the first six months of 2006, representing an increase of 13% (11%
at constant currencies(1)) compared to the first six months of 2005.
- Total revenues were euro 4.2 billion (2005: euro 3.7 billion) for the
2006 first half, which was an increase of 13% (11% at constant
currencies(1)) compared to the first half of 2005.
Income
- Operating income for the first six months of 2006 was euro 940 million
(2005: euro 834 million), which was an increase of 13% compared to the
same period last year. Pro forma operating income(3) for the 2006 six
month period was euro 1.0 billion (2005: euro 877 million),
representing an increase of 16% compared to the 2005 six month period.
- The operating margin for the first half of 2006 was 22.2%, which went
down by 0.1 percentage points compared to the first half of 2005. The
pro forma operating margin(3) was 24.0% for the first six months of
2006, which was an increase of 0.6 percentage points compared to the
same period in 2005.
- Net income for the first half of 2006 was euro 696 million (2005: euro
543 million), or euro 2.26 per share (2005: euro 1.75 per share),
representing an increase of 28% compared to the first half of 2005.
Pro forma net income(3) for the 2006 six month period was euro
747 million (2004: euro 573 million), or pro forma euro 2.43 per
share(3) (2005: euro 1.85 per share), representing an increase of 30%
compared to the same period in 2005. First half 2006 net income,
earnings per share, pro forma net income and pro forma earnings per
share were positively impacted by approximately euro 30 million, or
euro 0.10 per share, from a second quarter reduced effective tax rate
of 25% mainly due to a settlement with the fiscal authorities on one
specific item.
Cash Flow
- Operating cash flow for the first half of 2006 was euro 963 million
(2005: euro 832 million). Free cash flow(3)(4) for the first half of
2006 was euro 832 million (2005: euro 720 million), which was 20% as a
percentage of total revenues in 2006 (2005: 19%). At June 30, 2006,
the Company had euro 2.5 billion in liquid assets (June 30, 2005: euro
3.5 billion). The year-over-year decrease in liquid assets is
primarily the result of an increase in expenditures on acquisitions and
share buybacks in 2006.
Share Buy-Back Program
- In the first half of 2006, the Company bought back 5.66 million shares
at an average price of euro 165.72 (total amount: euro 938 million).
This compares to 2.24 million shares bought back in the first half of
2005. At June 30, 2006, treasury stock stood at 11.31 million shares
at an average price of euro 139.79. SAP's current share buy-back
program allows the Company to purchase up to 30 million shares. Given
the Company's strong free cash flow(3)(4) generation, SAP plans to
further evaluate opportunities to buy back shares in the future.
BUSINESS OUTLOOK
The Company also announced that it reaffirmed its outlook for the full- year 2006 and as a result it continues to provide the following outlook for the full-year 2006 as described in its April 20, 2006 first quarter results press release.
- The Company expects full-year 2006 product revenues to increase in a
range of 13% - 15% compared to 2005. This growth rate is based on the
Company's expectation for full-year 2006 software revenue growth in a
range of 15% - 17% compared to 2005.
- The Company expects the full-year 2006 pro forma operating margin(3),
which excludes stock-based compensation and acquisition-related
charges, to increase in a range of 0.5 - 1.0 percentage points compared
to 2005.
- The Company expects full-year 2006 pro forma earnings per share(3),
which exclude stock-based compensation, acquisition-related charges and
impairment-related charges, to be in a range of euro 5.80 to euro 6.00
per share.
- The outlook is based on an assumed U.S. Dollar to Euro exchange rate of
$1.23 per euro 1.00.
Regional Performance
Second Quarter 2006 Software Revenue by Region
(in euro millions, unaudited)
SAP Group
Software Software
Revenue Revenue
Q2 2006 Q2 2005 Change % Change
Total 621 576 +45 +8%
- at constant currency
rates +10%
EMEA 296 289 +7 +3%
- at constant currency
rates +3%
Asia-Pacific 86 85 +1 0%
- at constant currency
rates +4%
Americas 239 202 37 +18%
- at constant currency
rates +21%
Second Quarter 2006 Total Revenue by Region (in euro millions, unaudited)
SAP Group
Revenue Revenue
Q2 2006 Q2 2005 Change % Change
Total 2,195 2,016 +179 +9 %
- at constant currency
rates +9 %
EMEA 1,136 1,086 +50 +5 %
- at constant currency
rates +5 %
Asia Pacific 254 238 +16 +7 %
- at constant currency
rates +10 %
Americas 805 692 +113 +16 %
- at constant currency
rates +16 %
Six Months 2006 Software Revenue by Region (in euro millions, unaudited)
SAP Group
Software Software
Revenue Revenue
6 Mos 6 Mos
2006 2005 Change % Change
Total 1,149 1,010 +139 +14 %
- at constant currency
rates +12 %
EMEA 525 504 +21 +4 %
- at constant currency
rates +4 %
Asia-Pacific 159 150 +9 +5 %
- at constant currency
rates +5 %
Americas 465 356 +109 +31 %
- at constant currency
rates +25 %
Six Months 2006 Total Revenue by Region (in euro millions, unaudited)
SAP Group
Revenue Revenue
6 Mos 6 Mos
2006 2005 Change % Change
Total 4,236 3,745 +491 +13 %
- at constant currency
rates +11 %
EMEA 2,141 2,012 +129 +6 %
- at constant currency
rates +6 %
Asia Pacific 511 456 +55 +12 %
- at constant currency
rates +12 %
Americas 1,584 1,277 +307 +24 %
- at constant currency
rates +18 %
KEY EVENTS - Second Quarter 2006
- In the second quarter of 2006, SAP demonstrated strong momentum,
announcing major contracts in all key regions: Deloitte & Touche,
FileNet, Jabil Circuit, TBC Corporation, The Home Depot in the
Americas; Commerzbank AG, La Caixa, Ministry of Defense (Ukraine), Oce
Technologies, Saint Gobain in EMEA; China MinMetals, Japan Tobacco,
Kumho Tire Co and Water Corporation in Asia Pacific.
- On June 14, 2006, SAP announced the worldwide 10,000th customer for
SAP(R) Business One, its integrated business management solution for
SMEs, which was introduced internationally in 2003.
- SAP signed several agreements with Neusoft Group, one of China's
leading IT services and training companies. The agreements are the
latest in a series of steps extending SAP's operations in China and
expanding its ability to serve Chinese customers and partners across
the country. The announcement was made on May 23, 2006.
- At SAPPHIRE '06 in Paris, SAP's annual international customer
conference, the company's executives detailed new tools, strategies and
the industry's first services-enabled ERP suite designed to simplify
and expedite customers' road maps to enterprise service-oriented
architecture (enterprise SOA).
- Speaking at SAPPHIRE '06 in Paris, Henning Kagermann, Shai Agassi and
Leo Apotheker announced plans for the industry's first enterprise SOA
appliance. They also unveiled plans for a composite application hub
that will facilitate the exploration, distribution and deployment of
hundreds of innovative composite applications built by system
integrators (SIs), independent software vendors (ISVs), SAP and
customers.
- On May 17, 2006, SAP announced the launch of a $125 million global fund
to accelerate the ecosystem of independent software vendors (ISVs)
building next-generation composite applications on the SAP NetWeaver(R)
platform.
- On May 17, 2006, SAP announced the creation of a new business unit to
empower customers with end-to-end solutions for governance, risk
management and compliance (GRC). On April 4, 2006, SAP had already
announced that it is acquiring Virsa Systems, Inc., a privately-held
leading supplier of cross-enterprise compliance solutions.
- At SAPPHIRE '06 Orlando, SAP announced the global availability of
mySAP(TM) ERP 2005, the latest version of its renowned enterprise
resource planning application. The new version of mySAP ERP features
more than 300 product enhancements to provide companies with better
information access and decision support.
- At SAPPHIRE '06 Orlando, SAP and IBM announced the expansion of their
relationship to serve the $500 billion small and midsize enterprise
(SME) market, leveraging the IBM Business Partner channel. The
companies have entered a new reseller, referral and solution
relationship for mySAP(TM) All-in-One solutions to help U.S. clients in
specific industries become more innovative and productive.
- SAP announced the formation of four new "industry value networks"
(IVNs) serving the consumer products, retail and technology industries
and the public sector. These networks bring together customers,
partners and SAP to co-innovate and quickly develop solutions to solve
industry-specific customer challenges.
- At SAPPHIRE '06 Orlando, SAP launched the second wave of its SAP(R) CRM
on-demand solutions. Delivering on SAP's road map of quarterly software
releases for its on-demand offerings, first announced in February 2006,
the SAP(R) Marketing on-demand solution provides line-of-business
managers with powerful search capabilities to help more effectively
target new customers, and track and pursue promising leads.
- On May 2, 2006, SAP and Microsoft Corp. announced that the two
companies will ship their joint product Duet(TM) software for Microsoft
Office and SAP on time in June 2006. Duet allows information workers to
use their familiar Microsoft Office environment to access selected SAP
business processes and data. Nearly 100 joint customers and partners
have been exploring the software's benefits in early release versions
since late 2005.
Webcast/Supplementary Financial Information
SAP senior management will host a financial analyst and investor presentation in New York today at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). The conference will be web cast live on the Company's website at http://www.sap.com/investor and will be available for replay purposes as well. Supplementary financial information pertaining to the quarterly results can be found at http://www.sap.com/investor.
About SAP
SAP is the world's leading provider of business software*. Today, more than 34,600 customers in more than 120 countries run SAP(R) applications-from distinct solutions addressing the needs of small and midsize enterprises to suite offerings for global organizations. Powered by the SAP NetWeaver(R) platform to drive innovation and enable business change, SAP software helps enterprises of all sizes around the world improve customer relationships, enhance partner collaboration and create efficiencies across their supply chains and business operations. SAP solution portfolios support the unique business processes of more than 25 industries, including high tech, retail, financial services, healthcare and the public sector. With subsidiaries in more than 50 countries, the company is listed on several exchanges, including the Frankfurt stock exchange and NYSE under the symbol "SAP." (Additional information at http://www.sap.com/)
(*) SAP defines business software as comprising enterprise resource planning and related applications such as supply chain management, customer relationship management, product life-cycle management and supplier relationship management.
Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this
document serve informational purposes only. National product specifications may vary.
For more information, press only:
Herbert Heitmann, +49 6227 7-61137, herbert.heitmann@sap.com, CET
Tony Roddam, +49 6227 7-49133, tony.roddam@sap.com, CET
Frank Hartmann, +49 6227 7-42548, f.hartmann@sap.com, CET
Steve Bauer +1 610 661-3951, steve.bauer@sap.com, EDT
For more information, financial community only:
Stefan Gruber, +49 6227 7-44872, investor@sap.com, CET
Martin Cohen, +1 212 653-9619, investor@sap.com, EDT
Consolidated Income Statements
SAP Group 2. Quarter
(unaudited)
(euro millions)
2006 2005 % Change
Software revenue 621 576 8%
Maintenance revenue 856 779 10%
Product revenue 1,477 1,355 9%
Consulting revenue 588 540 9%
Training revenue 98 91 8%
Service revenue 686 631 9%
Other revenue 32 30 7%
Total revenue 2,195 2,016 9%
Cost of product -264 -242 9%
Cost of service -513 -481 7%
Research and development -314 -281 12%
Sales and marketing -469 -452 4%
General and administration -109 -107 2%
Other income/expense, net 5 7 -29%
Total operating expenses -1,664 -1,556 7%
Operating income 531 460 15%
Other non-operating income/
expense, net 2 -4 N/A
Financial income, net 21 -16 N/A
Income before income taxes 554 440 26%
Income taxes -139 -151 -8%
Minority interest -1 0 N/A
Net income 414 289 43%
Basic earnings per share
(in euro) 1.35 0.93 43%
Consolidated Income Statements
SAP Group 2. Quarter
(unaudited)
additional information
(euro millions)
2006 2005 % Change
Pro-forma EBITDA reconciliation:
Net income 414 289 43%
Minority interest 1 0 N/A
Income taxes 139 151 -8%
Net income before income taxes 554 440 26%
Financial income, net -21 16 N/A
Other non-operating income/expense,
net -2 4 N/A
Operating income 531 460 15%
Depreciation and amortization 54 52 4%
Pro-forma EBITDA (3,4) 585 512 14%
as a % of Sales 27% 25%
Pro-forma operating income
reconciliation:
Operating income 531 460 15%
LTI/STAR/SOP 16 29 -45%
Settlement of stock-based
compensation programs 0 0 N/A
Total stock-based compensation 16 29 -45%
Acquisition-related charges 11 7 57%
Pro-forma operating income excluding
stock-based compensation and
acquisition-related charges (3) 558 496 13%
Operating margin 24.2% 22.8%
Pro-forma operating margin 25.4% 24.6%
Consolidated Income Statements
SAP Group 2. Quarter
(unaudited)
additional information
(euro millions)
2006 2005 % Change
Financial income, net 21 -16 N/A
- thereof impairment-related
charges 0 -1 N/A
Income before income taxes 554 440 26%
Income taxes 139 151 -8%
Effective Tax Rate 25% 34%
Pro-forma net income reconciliation:
Net income 414 289 43%
Stock-based compensation, net of
tax 12 20 -40%
Acquisition-related charges, net
of tax 6 4 50%
Impairment-related charges, net
of tax 0 1 N/A
Pro-forma net income excluding
stock-based compensation,
acquisition-related charges, and
impairment-related charges (3) 432 314 38%
Pro-forma EPS reconciliation:
Earnings per share (in euro) 1.35 0.93 43%
Stock-based compensation 0.04 0.06 -40%
Acquisition-related charges 0.02 0.02 50%
Impairment-related charges 0.00 0.00 N/A
Pro-forma EPS excluding
stock-based compensation,
acquisition-related charges and
impairment-related charges
(in euro) (3) 1.41 1.01 38%
Weighted average number of shares
(in thousands) Treasury Stock
excluded 307,149 309,695
Consolidated Income Statements
SAP Group 1. Halfyear
(unaudited)
(euro millions)
2006 2005 % Change
Software revenue 1,149 1,010 14%
Maintenance revenue 1,716 1,518 13%
Product revenue 2,865 2,528 13%
Consulting revenue 1,145 1,015 13%
Training revenue 187 163 15%
Service revenue 1,332 1,178 13%
Other revenue 39 39 0%
Total revenue 4,236 3,745 13%
Cost of product -535 -457 17%
Cost of service -1,018 -922 10%
Research and development -625 -528 18%
Sales and marketing -908 -809 12%
General and administration -219 -201 9%
Other income/expense, net 9 6 50%
Total operating expenses -3,296 -2,911 13%
Operating income 940 834 13%
Other non-operating income/
expense, net -15 11 N/A
Financial income, net 57 -8 N/A
Income before income taxes 982 837 17%
Income taxes -285 -293 -3%
Minority interest -1 -1 0%
Net income 696 543 28%
Basic earnings per share
(in euro) 2.26 1.75 28%
Consolidated Income Statements
SAP Group 1. Halfyear
(unaudited)
additional information
(euro millions)
2006 2005 % Change
Pro-forma EBITDA reconciliation:
Net income 696 543 28%
Minority interest 1 1 0%
Income taxes 285 293 -3%
Net income before income taxes 982 837 17%
Financial income, net -57 8 N/A
Other non-operating income/expense,
net 15 -11 N/A
Operating income 940 834 13%
Depreciation and amortization 108 101 7%
Pro-forma EBITDA (3,4) 1,048 935 12%
as a % of Sales 25% 25%
Pro-forma operating income
reconciliation:
Operating income 940 834 13%
LTI/STAR/SOP 50 29 72%
Settlement of stock-based
compensation programs 0 0 N/A
Total stock-based compensation 50 29 72%
Acquisition-related charges 25 14 79%
Pro-forma operating income
excluding stock-based compensation
and acquisition-related
charges (3) 1,015 877 16%
Operating margin 22.2% 22.3%
Pro-forma operating margin 24.0% 23.4%
Consolidated Income Statements
SAP Group 1. Halfyear
(unaudited)
additional information
(euro millions)
2006 2005 % Change
Financial income, net 57 -8 N/A
- thereof impairment-related charges 0 -2 -100%
Income before income taxes 982 837 17%
Income taxes 285 293 -3%
Effective Tax Rate 29% 35%
Pro-forma net income reconciliation:
Net income 696 543 28%
Stock-based compensation, net of
tax 36 20 80%
Acquisition-related charges, net
of tax 15 8 88%
Impairment-related charges, net
of tax 0 2 -100%
Pro forma net income excluding
stock-based compensation,
acquisition-related charges, and
impairment-related charges (3) 747 573 30%
Pro-forma EPS reconciliation:
Earnings per share (in euro) 2.26 1.75 28%
Stock-based compensation 0.12 0.06 80%
Acquisition-related charges 0.05 0.03 88%
Impairment-related charges 0.00 0.01 -100%
Pro-forma EPS excluding stock-based
compensation, acquisition-related
charges and impairment-related
charges (in euro) (3) 2.43 1.85 30%
Weighted average number of shares
(in thousands) Treasury Stock
excluded 308,027 309,820
Consolidated Balance Sheets
SAP Group
PRELIMINARY and UNAUDITED
(euro millions)
ASSETS
06/30/2006 12/31/2005 Change % Change
Intangible assets 1.244 766 478 62%
Property, plant and
equipment 1,121 1.095 26 2%
Financial assets 498 534 -36 -7%
FIXED ASSETS 2,863 2,395 468 20%
Accounts receivables 1,971 2,251 -280 -12%
Inventories and other
assets 836 655 181 28%
Liquid assets/Marketable
securities 2,535 3,423 -888 -26%
CURRENT ASSETS 5,342 6,329 -987 -16%
DEFERRED TAXES 197 251 -54 -22%
PREPAID EXPENSES 142 88 54 61%
TOTAL ASSETS 8,544 9,063 -519 -6%
SHAREHOLDERS' EQUITY
AND LIABILITIES
06/30/2006 12/31/2005 Change % Change
SHAREHOLDERS' EQUITY 5,191 5,782 -591 -10%
MINORITY INTEREST 8 8 0 0%
RESERVES AND ACCRUED
LIABILITIES 1,547 2,023 -476 -24%
OTHER LIABILITIES 765 846 -81 -10%
DEFERRED INCOME 1.033 404 629 156%
TOTAL SHAREHOLDERS'
EQUITY AND LIABILITIES 8,544 9,063 -519 -6%
Days Sales Outstanding 69 68
Consolidated Statements of Cash Flows
SAP Group
(unaudited)
six months ended June 30, (in EUR millions)
2006 2005
Net income 696 543
Minority interest 1 1
Income before minority interest 697 544
Depreciation and amortization 108 101
Gains on disposal of property, plant, and equipment
and equity securities -2 -2
Write-downs of financial assets, net -1 2
Impacts of STAR hedging -63 29
Stock-based compensation including income tax
benefits 52 37
Change in accounts receivables and other assets 163 84
Change in reserves and liabilities -548 -505
Change in deferred taxes -9 -12
Change in other assets -57 -70
Change in deferred income 623 624
Net cash provided by operating activities 963 832
Acquisition of minorities in subsidiaries 0 -25
Other acquisitions, net of cash and cash
equivalents acquired -486 -19
Purchase of intangible assets and property, plant,
and equipment -131 -112
Purchase of financial assets -16 -11
Proceeds from disposal of fixed assets 29 12
Purchase/sale of marketable securities 34 -21
Change in liquid assets (maturities exceeding
3 months) 796 -100
Net cash used in investing activities 226 -276
Dividends paid -447 -340
Purchase of treasury stock -947 -298
Proceeds from reissuance of treasury stock 134 111
Proceeds from issuance of common stock (Stock-based
compensation) 42 28
Proceeds/repayment of short-term and long-term debt 1 -1
Proceeds from the exercise of equity derivative
instruments (STAR hedge) 57 39
Acquisition of derivative equity instruments
(STAR hedge) -53 -47
Net cash used in financing activities -1.213 -508
Effect of foreign exchange rates on cash -34 76
Net change in cash and cash equivalents -58 124
Cash and cash equivalents at the beginning of
the period 2.064 1.506
Cash and cash equivalents at the end of the
period 2.006 1.630
First Half 2006 Free Cash Flow (in euro millions, unaudited)
SAP Group
H1 2006 H1 2005 % Change
Operating Cash Flow 963 832 +16
Capital Expenditure -131 -112 +17
Free Cash Flow(3)(4) 832 720 +16
Free Cash Flow as a % of Revenue 20% 19% +1 PP
Total Revenue 4,236 3,745 +13
Footnotes
1) SAP calculates "constant-currency" year-on-year changes in revenue and
operating income by translating foreign currencies using the average
exchange rates from 2005 instead of 2006. SAP believes that such
constant-currency measures provide supplemental meaningful information
for investors as they show how the Company would have performed if it
had not been affected by changes in exchange rates.
2) In previous quarters, worldwide peer group share was provided based on
a peer group of Microsoft Corp. (business solutions segment only),
Oracle Corp. (business applications only) and Siebel Systems, Inc. The
Company believes that after the large amount of consolidation that has
occurred among the larger companies in the software industry, the peer
group has become too small to provide an adequate metric for the
purpose of measuring growth of sales share. Therefore, the Company
will now be providing share data based on the vendors of Core
Enterprise Applications solutions, which account for approximately
$16 billion in software revenues as defined by the Company based on
industry analyst research. For 2006, industry analysts project
approximately 4% year-on-year growth for core Enterprise Applications
vendors. For its quarterly share calculation, SAP assumes that this
approximate 4% growth will not be linear throughout the year. Instead,
quarterly adjustments are made based on the financial performance of a
sub set (approximately 30) of Core Enterprise Application vendors.
3) Non-GAAP Measures:
This press release discloses certain financial measures, such as pro-
forma operating income, pro-forma operating margin, pro-forma
expenses, pro-forma net income, pro-forma earnings per share (EPS),
pro-forma EBITDA, and currency-adjusted year-on-year changes in
revenue and operating income, which are not prepared in accordance
with U.S. generally accepted accounting principles (U.S. GAAP) and are
therefore considered non-GAAP measures. The non-GAAP measures included
in this report are reconciled to the nearest U.S. GAAP measure. The
non-GAAP measures that SAP reports may not correspond to non-GAAP
measures that other companies report. The non-GAAP measures that SAP
reports should be considered as additional to, and not as a substitute
for or superior to, operating income, operating margin, cash flows, or
other measures of financial performance prepared in accordance with
U.S. GAAP.
SAP believes that pro-forma operating income, pro-forma operating margin, pro-forma net income, and pro-forma EPS, all based on pro-forma expenses, provide supplemental meaningful information that can help investors fully assess the financial performance of the Company's core operations. The pro- forma measures disclosed are the same measures that SAP uses in its internal management reporting. Pro-forma operating income is one of the criteria, alongside the software revenue increase, for performance-related elements of management compensation.
The following expenses are eliminated from pro-forma expenses, pro-forma operating income, pro-forma net income, pro-forma operating margin, pro-forma EPS, and other pro-forma measures:
- Stock-based compensation, including expenses for stock-based
compensation as defined under U.S. GAAP as well as expenses related to
the settlement of stock-based compensation plans in the context of
mergers and acquisitions. SAP excludes stock-based compensation
expenses because it has no direct influence over the actual expense of
these awards once it has entered into stock-based compensation
commitments.
- Acquisition-related charges, including amortization of identifiable
intangible assets acquired in acquisitions of businesses or
intellectual property.
- Impairment-related charges include other-than-temporary impairment
charges on minority equity investments.
In addition, SAP gives guidance based on non-GAAP financial measures. It does not provide guidance on U.S. GAAP operating margin and earnings per share measures because those measures include expenses such as stock-based compensation, impairment-related charges, and acquisition-related charges. The Company views those expenses as less meaningful in its own assessment of the financial performance of its core operations, or they are factors outside SAP's control, dependent on SAP's share price, or dependent on the share price of companies it acquires or in which it invests.
4) Management believes that EBITDA and free cash flow are widely accepted
supplemental measures of evaluating operating performance and
liquidity among companies. However these measures should be considered
in addition to, and not as a substitute, or superior to, operating
income, cash flows, or other measures of financial performance
prepared in accordance with generally accepted accounting principles.
Source: SAP AG
CONTACT: Herbert Heitmann, +49 6227 7-61137, herbert.heitmann@sap.com,
CET, Tony Roddam, +49 6227 7-49133, tony.roddam@sap.com, CET, Frank Hartmann,
+49 6227 7-42548, f.hartmann@sap.com, CET, Steve Bauer +1 610 661-3951,
steve.bauer@sap.com, EDT, Financial Community: Stefan Gruber,
+49 6227 7-44872, investor@sap.com, CET, Martin Cohen, +1 212 653-9619,
investor@sap.com, EDT
Web site: http://www.sap.com/
©2012