Power-One Announces First Quarter 2007 Results

May 01, 2007 by Jeff Shepard

Power-One, Inc. announced that for the first fiscal quarter ended March 31, 2007, net sales were $124.0 million and net loss was $0.14 per share, compared with revenue and a net loss of $64.6 million and $0.06 per share, respectively, during the first quarter of 2006. Consistent with the company’s announcement in April 2007, revenue for the quarter was slightly below the low-end of the company’s guidance primarily due to a shortfall coming predominantly from forecasted North American business. North America operations experienced a softening of sales to distributors and certain key customers, who have taken actions to make their inventory positions significantly leaner. The softening occurred during the latter part of the quarter and impacted the company’s manufacturing logistics and inventory pull programs.

The net loss for the quarter was impacted by an estimated $0.07 per share loss for the unanticipated decline in sales volume, product mix, and associated manufacturing costs. Significant unplanned expediting charges for motor control customers, delayed anticipated product cost savings and other inventory charges had an estimated impact of $0.05 per share loss. Other factors including various integration inefficiencies and higher than expected legal costs associated with the company’s IP defense accounted for the balance of the loss.

The 90% year-over-year revenue growth was driven by organic growth as well as the late 2006 acquisition of Magnetek’s Power Electronics group. The company ended the first quarter 2007 with approximately $103 million in 180-day backlog and $84 million in 90-day backlog. The 180-day backlog is the largest in recent history for the company.

Bill Yeates, CEO, commented, "Despite the weakened market conditions we experienced towards the end of the first quarter in North America, we continued to see strong bookings and signs of demand strength across our core and new custom business. We believe the weakness resulted from inventory adjustments at some of our larger OEM and distribution customers, which may continue to impact us in the short term, but we do not anticipate this having a long-term effect on our results as we move forward."

Yeates continued, "As integration of the PEG acquisition accelerates and changes within our product mix level out, we are optimistic of the opportunities we see as a combined company and are intent on aligning our cost structure in order to position the company for sustained profitability. We are taking actions to reorganize and restructure the business to significantly reduce SG&A costs, improve manufacturing efficiencies, and strengthen our product line management focus to increasingly capitalize on new business. Over the course of the next few quarters we expect to realize an SG&A reduction of approximately $20M annualized. We are confident that the acquisition will have the expected synergies, although the timeline is somewhat longer than we anticipated. We are on-plan to close the newly-acquired California manufacturing facility and transfer all of its production to our low-cost facility in the Dominican Republic by the end of the second quarter of 2007. These steps will further enhance Power-One’s margins and drive value for our shareholders."

Yeates concluded, "On the digital power management side of the business, the ’Markman’ hearing court issued its ruling on a number of important issues in favor of Power-One, strengthening Power-One’s patent infringement claims as the case proceeds to a jury trial in the lawsuit against Artesyn Technologies, now a subsidiary of Emerson. Additionally, traction with the Z-One® architecture was evident throughout the quarter as the number of higher-volume design wins and penetration into new and existing tier-one customers continued. In 2007, we will further strengthen our position in digital power management with higher power products."