News

Power-One Announces Financial Results; Investment Of $60 Million From Silver Lake Sumeru

April 23, 2009 by Jeff Shepard

Power-One, Inc. announced that it has agreed to a significant, privately issued minority investment by Silver Lake Sumeru, a leading investment fund focused on middle-market technology enterprises.

Silver Lake Sumeru will invest $60 million of new capital consisting of $23.6 million of convertible preferred stock, $36.4 million senior convertible notes due 2019, and 8.7 million warrants for Power-One common stock. The warrants will have an exercise price of $1.33 and expire in seven years. The preferred stock will pay quarterly dividends at a rate of 10% per year, and the notes will pay interest semi-annually at a rate of 6% per year the first year, 8% the second year and 10% thereafter. Both the preferred stock and the notes will be convertible into Power-One common stock at a conversion price of $1.35, which represents an approximate 42.1% premium over the closing price of Power-One common Stock on April 23, 2009 of $0.95 a share.

Power-One anticipates that the net proceeds from the transaction, after deducting the estimated expenses, will be approximately $56 million. Power-One intends to use these proceeds to purchase certain 8% Notes from consenting bondholders to fund strategic initiatives, and to provide for working capital needs and general corporate purposes.

Power-One has announced that pursuant to private negotiations with two of its bondholders, it has obtained majority consent and will repurchase $21.75 million of outstanding bonds from these two bondholders upon the close of the transaction, allowing Power-One to modify certain covenants in the existing 8% Senior Secured Convertible Notes due 2013. These amendments will lower the minimum cash requirement to the lower of $20 million or 50% of outstanding 8% Senior Secured Convertible Notes due 2013, remove the minimum tangible net worth covenant; and loosen other restrictions that limit the total debt it may incur and its ability to secure new debt financing or execute its business strategy.

The transaction is expected to close by May 8, 2009, subject to customary closing conditions.

The company also announced that for the first quarter ended March 29, 2009, net sales were $97.8 million, a decrease of 17% from $117.8 million in the first quarter of 2008. The net loss, which includes a $57 million charge for goodwill impairment, was $61.2 million, or $0.70 per share, compared to a net loss of $13.6 million, or $0.16 per share, for the same period last year.

Revenue for the quarter was affected by the weakening global economy resulting in a lower customer demand across all product lines and geographies. Included in the results for the quarter are a non-cash goodwill impairment charge of $57 million, or $0.65 per share, due to the continued decline in the company’s share price; a non-cash charge of $6 million, or $0.07 per share, for inventory write-downs; and a restructuring charge of $1.1 million, or $0.01 per share, to right-size the company’s headcount. These charges were partially offset by a gain of $3.1 million, or $0.04 per share, from the repurchase of $7 million in convertible notes.

Gross margin was 14.2% in the first quarter of 2009 compared with 18.1% in the first quarter of 2008. The decrease in gross margin was primarily attributable to lower than anticipated demand resulting in unfavorable factory utilization and to increased inventory charges. S,G&A, engineering, quality assurance and amortization expenses decreased 36% year-over-year to $21.1 million compared with $33.1 million for the first quarter of 2008.