Gemplus Reports Earnings for the Third Quarter 2006
Luxembourg (ots/PRNewswire)
Third quarter 2006 highlights:
- Gemalto combination ongoing: tender offer reopened after the successful first round.
- Gemalto integration process well on-track.
- Net sales down 11.5% mainly due to strong price pressure in wireless.
- Gross margin at 26.7%, with lower margins in all business segments.
- Operating loss at 2.7 million euros, including 4.3 million euros of combination related costs.
Gemplus International S.A. (Euronext: LU0121706294 - GEM and NASDAQ: GEMP), a world leading provider of secure card solutions, today reported results for the third quarter ended September 30, 2006.
In millions of euros Q3 2006 Q3 2005 Year-on-year
change
Net sales 219.3 247.9 -11.5%
Adjusted for currency fluctuations, -8.9%
disposals and acquisitions
Gross profit 58.5 82.8 -29.4%
Gross margin 26.7% 33.4% - 6.7 pts
Operating expenses 61.2 61.5 -0.5%
Operating income (loss) -2.7 21.3 NM
Operating margin -1.2% 8.6% -9.8 pts
Attributable net income (loss)[1] -8.0 20.9 NM
Free cash flow[2] 28.0 -20.1 NM
Cash and cash equivalents 234.6 400.8 -41.5%
Per share data (in euros)
Earnings per share (fully diluted) -0.01 0.03 NMThe combination creating Gemalto, a world leader in digital security, is progressing well: Gemalto owns 94.56% of the share capital of Gemplus (and 94.68% of the voting rights) since the close of the first round of the public exchange tender offer filed by Gemalto for the securities issued by Gemplus. Following this success, the exchange offer was reopened at the same exchange ratio. It remains open to allow for an independent expert to assess the evaluation methodology and price of the sell-out procedure[3]. Gemalto has also indicated its intention to reserve its right to conduct a squeeze-out, either after the close of the reopened offer or during the sell-out period which follows the close of the reopened offer, assuming that more than 95% of the voting rights of Gemplus are held by Gemalto.
Third quarter 2006 financial review
- Income statement
Third quarter 2006 highlights:
- Net sales down 11.5% (-8.9% currency adjusted) mainly due to Telecom.
- Gross margin at 26.7%, with lower margins in all business segments.
- Operating loss at 2.7 million euros, including 4.3 million euros of combination related costs.
- Attributable net loss at 8.0 million euros.
Revenue in all regions was strongly impacted by the overall weak performance in Telecom. However, in Asia, strong growth in ID & Security and Financial Services drove a 5.6% year-on-year adjusted[4] revenue growth, even with some decrease in Telecom. In EMEA[5], adjusted[4] net sales were down 10.8% year-on-year, due to lower sales in Financial Services and in Telecom. In the Americas, adjusted[4] net sales were down 13.3% year-on-year, notwithstanding good growth in Financial Services.
Revenue by region
In millions of euros Q3 2006 Q3 2005 % change Adjusted[4]
change (%)
EMEA 118.5 133.3 -11.1% -10.8%
Asia 39.8 39.2 +1.4% +5.6%
Americas 61.0 75.4 -19.1% -13.3%
Total 219.3 247.9 -11.5% -8.9%As a result, Asia accounted for 18.1% of Group revenue compared with 15.8% for the third quarter 2005, despite adverse currency fluctuations. Conversely, the share of the Americas decreased to 27.8%, compared with 30.4%, a year ago.
Despite 3.6 million euros of combination related costs, operating expenses were flat.
Operating loss was 2.7 million euros, due to lower sales and low gross margin, in spite of good control of operating expenses.
Each quarter, the Company reassesses the recognition of its deferred tax assets, which led to an additional income tax charge of 3.2 million euros this quarter.
- Balance sheet and cash flow statement
Third quarter 2006 highlights:
- Free cash flow of 28.0 million euros.
The Group's cash position remains strong at 234.6 million euros, up 26.3 million euros compared to June 30, 2006. Free cash flow of 28.0 million euros mainly reflects an improvement in working capital requirement.
Compared to December 31, 2005, cash is down 183.8 million euros, largely due to a 164.4 million euros outflow related to the distribution in June 2006 of reserves (share premium) to shareholders.
Segment analysis
- Telecom
Third quarter 2006 highlights:
- Continued strong demand in wireless: shipments up 32% year-on-year, to 116 million units, driven by emerging markets.
- Wireless ASP down 35% year-on-year, currency adjusted, reflecting heavy price pressure.
In millions of euros Q3 Q3 % Adjusted[4]
2006 2005 change change
(%)
Wireless products & services net sales 128.6 154.0 -16.5% -13.8%
Wireless gross profit 42.7 62.3 -31.4%
Wireless gross margin 33.2% 40.4% -7.2 pts
Prepaid phone cards & scratchcards net 11.4 13.5 -16.8%
sales
Prepaid phone cards & scratchcards 1.4 0.9 +53.0%
gross profit
Prepaid phone cards & scratchcards 12.3% 6.7% +5.6 pts
gross margin
Telecom net sales 139.9 167.5 -16.5% -13.6%
Telecom gross profit 44.1 63.2 -30.2%
Telecom gross margin 31.5% 37.7% -6.2 pts
Telecom operating expenses 37.0 37.9 -2.4%
As a % of sales 26.4% 22.6% +3.8 pts
Telecom operating income 7.1 25.3 NM
Operating margin 5.1% 15.1% -10.0 ptsWireless revenue:
- Wireless products & services revenue[6] was down 16.5% year-on-year (down 13.8%, currency adjusted), to 128.6 million euros.
- Wireless shipments grew 32% year-on-year, to 116 million units, largely driven by emerging countries. Volumes were below the Group expectations due to weaker demand in developed economies.
- High-end card shipments (3G and above) grew 108%. They accounted for 13% of the third quarter total, compared to 8% a year ago, despite delays in migration to high-end products at several customers.
- Wireless average selling price (ASP) was down 10% quarter-on-quarter and 35% year-on-year, both currency adjusted, due to heavy price pressure and delays in product mix improvement, as well as a shift in the regional mix.
The decline in Wireless gross margin mainly reflects strong price pressure and delays in product mix improvement.
- Financial Services
Third quarter 2006 highlights:
- This quarter shows a pause in EMV[7] deliveries.
In millions of euros Q3 2006 Q3 2005 % change Adjusted[4]
change (%)
Net sales 52.2 58.9 -11.3% -9.6%
Gross profit 8.6 13.7 -37.2%
Gross margin as a % of sales 16.5% 23.3% -6.8 pts
Operating expenses 12.7 13.1 -2.7%
As a % of sales 24.4% 22.2% +2.2 pts
Operating income (loss) -4.1 0.6 NM
Operating margin as a % of sales -7.9% 1.1% -9.0 ptsEMV deliveries show a pause despite accelerating rollouts in Latin America and in Asia. In total, Gemplus shipped 20.8 million units of payment microprocessor cards during the third quarter, down 6% year-on-year, reflecting maturity of certain markets (UK, France, Turkey) and delays in EMV rollout in Southern Europe and in some emerging countries. However, shipments are up 24% year-to-date at 63.9 million units.
Payment microprocessor card revenue was down 17% year-on-year and up 8% year-to-date. Revenue for the third quarter reflects price pressure in mature markets and a greater share of modules in emerging countries.
Gross margin was down 6.8 percentage points mainly due to lower volumes and an unfavourable regional mix in smart payment.
- Identity and Security
Third quarter 2006 highlights:
- Strong growth led by deployment of e-passports.
In millions of euros Q3 2006 Q3 2005 % change Adjusted[4]
change (%)
Net sales 27.2 21.5 +26.4% +29.0%
Gross profit 5.8 5.9 -1.9%
Gross margin as a % of sales 21.3% 27.4% -6.1 pts
Operating expenses 11.4 10.5 +8.5%
As a % of sales 41.9% 48.8% -6.9 pts
Operating income (loss) -5.6 -4.6 NM
Operating margin as a % of sales -20.6% -21.3% +0.7 ptGrowth was driven by Government ID projects, notably the ongoing deployment of e-passports, including the first deliveries in Poland. However, revenue does not meet the Group expectations due to Government ID and Corporate Security projects which did not materialize as quickly as expected.
Gross margin was down 6.1 percentage points reflecting industrialization ramp-up and some start-up quality issues.
Year-to-date 2006 financial review (9-months period)
- Net sales up 2.9%, driven by strong growth in ID and Security.
- Gross margin at 29.8% reflecting strong price pressure in wireless.
- Operating margin at 3.1%.
In millions of euros YTD 2006 YTD 2005 % change Adjusted[4]
change (%)
Net sales 696.9 677.2 +2.9% -2.2%
Of which Telecom 450.5 474.9 -5.2% -6.4%
Of which Financial Services 163.7 147.1 +11.3% +4.5%
Of which ID & Security 82.8 55.2 +50.0% +16.0%
Gross profit 207.7 224.7 -7.6% NA
Gross margin 29.8% 33.2% -3.4 pts NA
Operating expenses 186.2 173.5 +7.3% NA
As a % of sales 26.7% 25.6% +1.1 pt NA
Operating income 21.5 51.1 -58.0%
Operating margin 3.1% 7.6% -4.5 pts NA
Attributable net income 13.4 49.9 -73.1%Sales in the first nine months 2006 was down 2.2% adjusted[4], due to Telecom, despite strong growth in ID and Security and sustained demand in Financial Services.
On a geographical basis, ID and Security and Financial Services drove a 4.6% adjusted[4] revenue growth in the Americas. Adjusted[4] revenue was down 4.3% in Asia, and 5.2% in EMEA, due to Telecom.
Gross margin decrease was due to strong price pressure in wireless, a shift in the business mix, and Setec purchase accounting, in spite of the reversal of a provision for a patent claim for a total amount of 9 million euros.
Operating expenses were stable excluding the 3.6 million euros combination related costs booked this year, the reversal of a 5.2 million euros litigation provision booked last year, and the impact of the Setec acquisition.
Due to the lower gross margin and notwithstanding good control of operating expenses, operating margin was 3.1%.
Creation of Gemalto
On June 2, 2006, Axalto and Gemplus announced a major step of their combination project to create Gemalto. The contribution in kind, by Texas Pacific Group and the Quandt family entities, of their interests in Gemplus International S.A. (in aggregate 43.6% of Gemplus share capital) to Axalto Holding N.V. was completed on the basis of 2 Axalto shares for every 25 Gemplus shares. On the same day, Axalto Holding N.V., renamed Gemalto N.V., filed a public exchange tender offer for the remaining shares and warrants issued by Gemplus. Prior to the contribution in kind, Gemplus had initiated the distribution of reserves (share premium) of EUR0.26 per share to all of its shareholders on record upon market close of the same day.
On July 6, 2006, the offering document filed by Gemalto received the visa No. 06-252 from the "Autorité des Marchés Financiers" (AMF) in Paris, the French stock market authority.
Gemalto owns 94.56% of the share capital and 94.68% of the voting rights of Gemplus since the close of the first round of the public exchange tender offer initiated by Gemalto for the shares and warrants issued by Gemplus.
The exchange offer was reopened on September 12, 2006, at the same exchange ratio of 2 Gemalto shares for every 25 Gemplus shares. It remains open to allow for an independent expert to assess the evaluation methodology and price of the sell-out procedure. Such sell-out price will be communicated to the market immediately after completion of the independent expert's assessment.
Gemalto has also indicated its intention to reserve its right to conduct a squeeze-out, either after the close of the reopened offer or during the sell-out period which follows the close of the reopened offer, assuming that Gemalto holds more than 95% of the voting rights of Gemplus.
More information is available at: www.gemalto.com.
This communication does not constitute an offer to purchase or exchange or the solicitation of an offer to sell or exchange any securities of Gemalto or an offer to sell or exchange or the solicitation of an offer to buy or exchange any securities of Gemplus.
The exchange offer described above will not be made, directly or indirectly, in or into the United Kingdom, Italy, Netherlands, Canada, Australia, or Japan or in or into any other jurisdiction in which such offer, solicitation, sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. Accordingly, persons who come into possession of this communication should inform themselves of and observe these restrictions.
You are strongly advised to read the offering circular relating to the exchange offer and related exchange offer materials regarding the transaction, as well as any amendments and supplements to those documents because they will contain important information. The prospectus/offer to exchange and the other documents are available are available from the Internet websites of the AMF (www.amf-france.org), of Gemalto N.V. (www.gemalto.com) and of Gemplus International S.A. (www.gemplus.com). You can obtain a free paper copy of the prospectus/offer to exchange and other related documents filed by Gemalto (ex-Axalto) upon request to the following:
- Gemalto N.V.: Koningsgracht Gebouw 1, Joop Geesinkweg 541-542, 1096 AX Amsterdam, the Netherlands.
- Axalto International S.A.S: 6 rue de la Verrerie, 92190, Meudon, France.
- Deutsche Bank: 3 avenue de Friedland, 75008, Paris, France.
- Gemplus International S.A.: 46A, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg.
US investors can obtain a copy of the US prospectus/offer to exchange and related offer materials from Mellon Investors Services LLC by telephoning to: +1-866-768-4951 (Call Toll Free) or: +1-201-680-6590 (Call Collect).
Notice to US investors
Any solicitation of offers to buy any Gemplus shares in the United States in the exchange offer will only be made pursuant to a prospectus/offer to exchange and related offer materials that Gemalto will make available to holders of Gemplus securities. Investors and security holders are strongly advised to read the prospectus/offer to exchange and related exchange offer materials, as well as any amendments and supplements to those documents because they will contain important information.
The Gemalto securities referred to herein that will be issued in connection with the exchange offer have not been, and are not intended to be, registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold, directly or indirectly, into the United States except pursuant to an applicable exemption. The Gemalto securities are intended to be made available within the United States in connection with the exchange offer pursuant to an exemption from the registration requirements of the Securities Act.
The exchange offer will relate to the securities of a non-U.S. company and will be subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the prospectus/offer to exchange will be prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under U.S. federal securities laws, since Gemalto and Gemplus have their corporate headquarters outside of the United States, and some or all of their officers and directors may be residents of foreign countries. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment.
Earnings calendar
Fourth quarter 2006 revenues are scheduled to be reported on February 1st, 2007, before the opening of Euronext Paris.
The schedule for the announcement of fourth quarter 2006 results will be communicated on February 1st, 2007.
About Gemplus
Gemplus International S.A. (Euronext: LU0121706294 - GEM and NASDAQ: GEMP) is a world leading player in the secure card industry in both revenue and total shipments (source: Gartner-Dataquest, Frost & Sullivan, Datamonitor).
Gemplus delivers a wide range of portable, personalized solutions in areas including Identity, Mobile Telecommunications, Public Telephony, Banking, Retail, Transport, Healthcare, WiFi, Pay-TV, e-government, and access control.
Gemplus's revenue in 2005 was 939 million euros.
In June 2006, Gemplus and Axalto initiated their combination to form Gemalto, a leader in digital security. Gemalto owns 94.56% of the share capital of Gemplus (and 94.68% of the voting rights) since close of the first round of the public exchange tender offer filed by Gemalto for the securities issued by Gemplus.
www.gemplus.com www.gemalto.com
For more information:
Press Gemplus Investor Relations
Remi Calvet Gemplus
Tel: +33-6-22-72-81-58 Céline Berthier
Email: remi.calvet@gemplus.com Tel: +41-(0)-22-544-5054
Email: celine.berthier@gemplus.com
Fineo
Tel: +33-(0)-1-56-33-32-31
Email: gemplus@fineo.com(c)2006 Gemplus. All rights reserved. Gemplus, the Gemplus logo, are trademarks and service marks of Gemplus S.A. and are registered in certain countries. All other trademarks and service marks, whether registered or not in specific countries, are the property of their respective owners.
Some of the statements contained in this release constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance, or achievements expressed or implied by such forward-looking statements. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this release include, but are not limited to: trends in wireless communication and mobile commerce sectors; our ability to develop new technology, and the effects of competing technologies developed and expected intense competition generally in our main segments; profitability of our expansion strategy; challenges to or loss of our intellectual property rights; our ability to establish and maintain strategic relationships in our major businesses; our ability to develop and take advantage of new software and services; changes in our operations and the market for our products arising from our business combination with Gemalto N.V.; and the effect of future acquisitions and investments on our share price. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. The forward-looking statements contained in this release speak only as of this release. We are under no duty to update any of the forward-looking statements after this date to conform such statements to actual results or to reflect the occurrence of anticipated results.
References:
[1] Net income (loss) attributable to equity holders
[2] Free cash flow is defined as net cash flow from operating activities less the purchase of property, plant and equipment and other investments related to the operating cycle (excluding acquisitions and financial investments).
[3] Right of then remaining Gemplus shareholders to sell their Gemplus shares to Gemalto for three months after the end of the current re-opended exchange offer period.
[4] After adjusting for currency fluctuations, acquisitions and disposals.
[5] Europe, Middle East, Africa
[6] Wireless products & services revenue comprises wireless microprocessor cards and related applications (embedded software and Over The Air platforms) and services (system integration and operated services).
[7] EMV is a jointly defined set of specifications adopted by Europay, MasterCard and Visa for the migration of bank cards to smart card technology.
Gemplus International SA
Press Release - Financial statements
For the quarterly period ended September 30, 2006
Consolidated Statements of Income
(in thousands of euros, except shares and per
share amounts)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
(unaudited) (unaudited)
Net sales 219,321 247,912 696,919 677,172
Cost of sales (160,853) (165,153) (489,219) (452,492)
Gross Profit 58,468 82,759 207,700 224,680
Research and (16,440) (14,984) (48,584) (44,387)
development
expenses
Selling and (27,756) (30,455) (90,048) (84,377)
marketing
expenses*
General and (17,119) (16,943) (49,505) (45,860)
administrative
expenses*
Restructuring 3 606 474 1522
expenses
Other 123 279 1450 (439)
operating
income
(expense), net
Goodwill - - - -
amortization
and impairment
Operating (2,721) 21,262 21,487 51,139
income
Financial 1,057 1,894 5,608 5,370
income
(expense), net
Share of 425 (360) 488 (1193)
profit (loss)
of associates
Other (1,280) (27) (1,427) 71
non-operating
income
(expense), net
Income before (2,519) 22,769 26,156 55,387
taxes
Income tax (5,240) (1,457) (11,978) (4,403)
expense
NET INCOME (7,759) 21,312 14,178 50,984
Attributable
to:
Equity holders (7,970) 20,873 13,375 49,876
of the Company
Minority 211 439 803 1108
interest
Net income per share
attributable to equity
holders of the Company (in
euros)
Basic (0.01) 0.03 0.03 0.08
Diluted (0.01) 0.03 0.03 0.08
Shares used in
net income per
share
calculation:
Basic 632,708,693 627,085,562 631,391,381 615,046,595
Diluted 632,708,693 645,019,286 647,447,922 630,519,467 Due to the adoption of IAS 1 (revised 2003) Presentation of Financial
Statements, the Company has modified its Consolidated Balance Sheet and
its Consolidated Statement of Income.
Please refer to Note 2.23 "Comparatives" of our 2005 Annual Report for
further details.
* Provisions for bad debt have been reclassified from general &
administrative expenses to selling & marketing expenses as of
January 1, 2006
The 2005 operating expenses displayed in the table above have been
restated in order to be fully comparable to those of 2006.
This restatement does not change the operating incomeConsolidated Balance Sheets
(in thousands of euros)
September December 31,
30, 2006 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 234,572 418,365
Trade accounts receivable, net 179,946 183,022
Inventory, net 126,985 107,673
Derivative financial instruments 4,202 4,187
Other current receivables 47,587 82,128
Total current assets 593,292 795,375
Non-current assets:
Property, plant and equipment, net 165,843 158,284
Goodwill, net 92,079 90,826
Deferred development costs, net 21,419 21,227
Other intangible assets, net 16,178 23,600
Deferred income tax assets 22,578 32,788
Investments in associates 14,008 16,309
Available-for-sale financial assets, net 2,273 2,469
Other non-current receivables, net 45,196 40,846
Total non-current assets 379,574 386,349
TOTAL ASSETS 972,866 1,181,724
LIABILITIES
Current liabilities:
Accounts payable 110,433 106,085
Derivative financial instruments - 2,592
Salaries, wages and related items 46,635 62,641
Current portion of provisions and other 44,713 73,434
liabilities
Current income tax liabilities 3,544 5,228
Other current tax liabilities 19,968 20,821
Current obligations under finance leases 5,416 5,539
Total current liabilities 230,709 276,340
Non-current liabilities:
Non-current obligations under finance leases 22,333 26,425
Non-current portion of provisions 15,859 23,482
Other non-current liabilities 12,133 13,417
Deferred income tax liabilities 1,986 4,354
Total non-current liabilities 52,311 67,678
Shareholders' equity:
Ordinary shares 134,181 133,466
Additional paid-in capital 904,185 1,063,145
Retained earnings (349,816) (365,940)
Other comprehensive income (9,796) (4,407)
Less, cost of treasury shares (1,395) (1,395)
Equity attributable to equity holders of the 677,359 824,869
Company
Minority interest 12,487 12,837
Total shareholders' equity 689,846 837,706
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 972,866 1,181,724
Due to the adoption of IAS 1 (revised 2003) Presentation of Financial
Statements, the Company has modified its Consolidated Balance Sheet and
its Consolidated Statement of Income.
Please refer to Note 2.23 "Comparatives" of our 2005 Annual Report for
further details.Consolidated Statements of Cash Flows
(in thousands of euros)
Nine months ended
September 30,
2006 2005
(unaudited)
Cash flows from operating activities:
Net income 14,178 50,984
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation, amortization and impairment 31,514 30,035
Changes in non-current portion of provisions and (7,499) (292)
other liabilities, excluding restructuring
Deferred income taxes 6,947 (1,559)
(Gain) / loss on sale and disposal of assets - (3,648)
Share of (profit) loss of associates (195) ,877
Share-based compensation 2,750 2,498
Other, net (220) (4,516)
Changes in operating assets and liabilities:
Trade accounts receivable and related current (2,413) (2,626)
liabilities
Trade accounts payable and related current assets (2,282) 8,619
Inventories (21,177) 9,390
Value-added and income taxes (845) 145
Salaries, wages and other (9,968) (9,335)
Restricted cash 5,775 23,277
Restructuring reserve payable (2,606) (12,206)
Litigation expense payable
Management severance expense
Provision for a loan to a former director and
executive
Net cash (used for) from operating activities 13,959 91,643
Cash flows from investing activities:
Sale / (Purchase) of activities net of cash 4,632 (63,401)
disposed / acquired
Other investments (2,570) (1,463)
Purchase of property, plant and equipment (34,068) (17,754)
Purchase of other assets (1,257) (1,125)
Proceeds from sale of non-current assets - 4,803
Change in non-trade accounts payable and other 1,238 3,299
Net cash used for investing activities (32,025) (75,641)
Cash flows from financing activities:
Proceeds from exercise of share options 6,152 1,817
Payments on long-term borrowings (90) (176)
Proceeds from sales-leaseback operations -
Principal payments on obligations under finance (4,215) (4,441)
leases
Increase (decrease) in bank overdrafts (979) (551)
Dividends paid by subsidiaries to minority (1,881) (1,307)
shareholders
Changes in non-trade accounts payables on 286 347
financing activities
Change in treasury shares -
Interests receivable on loans to senior management -
Cash paid to Shareholders (164,396)
Net cash (used for) from financing activites (165,123) (4,311)
Effect of exchange rate changes on cash (604) 705
Net increase (decrease) in cash and cash (183,189) 11,691
equivalents
Cash and cash equivalents, beginning of the period 418,365 388,430
Cash and cash equivalents, end of the period 234,572 400,8261) Accounting principles:
The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS).
2) Segment information
2.1) Third Quarter 2006 compared with Third Quarter 2005
2.1.1) Operating Segments
Three months ended (in millions of euros)
Net sales September 30, September % Adjusted
2006 30, 2005 change change
(%) (*)
Telecommunications 139.9 167.5 -16% -14%
Financial Services 52.2 58.9 -11% -10%
Identity and Security 27.2 21.5 26% 29%
Total 219.3 247.9 -12% -9%
(in millions of euros)
Gross profit September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications 44.1 32% 63.2 38% -30%
Financial Services 8.6 16% 13.7 23% -37%
Identity and Security 5.8 21% 5.9 27% -2%
Total 58.5 27% 82.8 33% -29%
(in millions of euros)
Operating expenses September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications (37.0) 26% (37.9) 23% -2%
Financial Services (12.7) 24% (13.1) 22% -3%
Identity and Security (11.4) 42% (10.5) 49% 8%
Total (61.2) 28% (61.5) 25% 0%
(in millions of euros)
Operating income (loss) September 30, September 30, Change in
2006 2005 Operating
income
(loss)
Telecommunications 7.1 25.3 (18.2)
Financial Services (4.1) 0.6 (4.7)
Identity and Security (5.6) (4.6) (1.0)
Total -2.7 21.3 -23.9
(*) Adjusted for currency fluctuations, disposals & acquisitions2.1.2) Geographical Segments
Three months ended (in millions of euros)
Net sales September 30, 2006 September % change Adjusted
30, 2005 change
(%) (*)
Europe, Middle East and 118.5 133.3 -11% -11%
Africa
Asia 39.8 39.2 1% 6%
Americas 61.0 75.4 -19% -13%
Total 219.3 247.9 -12% -9%2.2) Nine months 2006 compared with nine months 2005
2.2.1) Operating Segments
9 months ended (in millions of euros)
Net sales September 30, September % Adjusted
2006 30, 2005 change change
(%) (*)
Telecommunications 450.5 474.9 -5% -6%
Financial Services 163.7 147.1 11% 5%
Identity and Security 82.8 55.2 50% 16%
Total 696.9 677.2 3% -2%
(in millions of euros)
Gross profit September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications 155.1 34% 176.9 37% -12%
Financial Services 31.1 19% 29.7 20% 5%
Identity and Security 21.5 26% 18.1 33% 19%
Total 207.7 30% 224.7 33% -8%
(in millions of euros)
Operating expenses September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications (113.9) 25% (114.1) 24% 0%
Financial Services (36.4) 22% (30.7) 21% 19%
Identity and Security (35.8) 43% (28.7) 52% 25%
Total (186.2) 27% (173.5) 26% 7%
(in millions of euros)
Operating income (loss) September 30, September 30, Change in
2006 2005 Operating
income
(loss)
Telecommunications 41.2 62.8 (21.6)
Financial Services (5.3) (1.1) (4.2)
Identity and Security (14.3) (10.6) (3.7)
Total 21.5 51.1 -29.5
(*) Adjusted for currency fluctuations, disposals & acquisitions2.2.2) Geographical Segments
9 months ended (in millions of euros)
Net sales September 30, September % change Adjusted
2006 30, 2005 change
(%) (*)
Europe, Middle East and 363.2 353.6 3% -5%
Africa
Asia 124.0 127.2 -2% -4%
Americas 209.7 196.4 7% 5%
Total 696.9 677.2 3% -2%Contact:
Press Gemplus: Remi Calvet, Tel: +33-6-22-72-81-58, Email:
remi.calvet@gemplus.com