Power-One, Inc. today announced that for the first fiscal quarter ended March 31, 2006, net sales were $64.6 million and net loss was $0.06 per share, compared with revenue and net loss of $66.7 million and $0.34 per share during the first quarter of 2005. Consistent with the company's announcement in March 2006, first quarter revenue and earnings were negatively impacted due to supply chain issues at one of its contract manufacturers. Power-One projects that these supply chain issues will be largely resolved by the end of the second quarter of 2006. Higher than anticipated legal fees were also cited among the factors having a negative impact on profits in the current period.
Earnings during the first quarter of 2006 were negatively impacted by high freight and expedite fees incurred as a result of the company's efforts to meet customer needs during the supply chain shortage. Also impacting earnings were an inventory write off related to a facility being restructured, and higher operating costs related to a bad debt expense. In addition, the company incurred higher tax expense in Europe. The company expects some continued margin pressure during the second quarter of 2006 due to higher freight and expedite costs, higher raw material prices and product mix changes related to new products that are in early stages of production, even as sales are expected to increase substantially, and has included these factors into its guidance for the second quarter of 2006.
For fiscal year 2006, the company continues to expect significant revenue growth over 2005 levels due to the ramp-up and success of design wins achieved in 2005. "While our top-line sales and margins suffered during the first quarter, we are optimistic about resolving our contract manufacturer's supply chain issues during the second quarter of 2006, enabling Power-One to reach its revenue goals during the remainder of 2006," commented Bill Yeates, Chief Executive Officer. "We are seeing lead times on key components increasing, and our business challenges for the remainder of the year will revolve around operations and supply chain and being able to respond to increasing demand for our products by new and existing customers. In fact, we have the potential to surpass the 10% to 15% growth forecast we published at the beginning of the year, if we are successful in overcoming the operational challenges."
Mr. Yeates continued, "Our sales organization has been firing on all cylinders over the past year, and these focused efforts are being turned into new customer revenue during 2006. This is the largest bookings quarter that we've seen in five years, so we are extremely excited about the increase in business. We are continuing to see success achieving high-volume design wins with tier-one customers, especially in the areas of ac-dc and our power systems business. In addition, we're making continued progress on our Z-One design wins, and we are finding that once a customer adopts the Z-One architecture, the technology inevitably becomes a fundamental building block and works its way onto additional platforms and projects at the customer."
For the second quarter of 2006, Power-One expects that net sales will be in the range of $72 million to $77 million with modestly profitable results, as the company anticipates continued margin pressures due to air freight and expediting costs, higher raw material costs and product mix shifts toward newer products still in the ramp-up stages. The company currently anticipates net income will be in the range of breakeven to $0.02 per share.
