<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 31, 1998
POWER-ONE, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-29454 77-0420182
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File number) Identification No.)
740 CALLE PLANO, CAMARILLO, CA 93012
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-8741
NOT APPLICABLE
- - -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
<PAGE>
This report amends the current report on Form 8-K dated August 31, 1998
of Power-One, Inc. (the "Company"), relating to the purchase by the Company
of all of the outstanding capital stock and certain convertible loans of
Melcher Holding AG ("Melcher"). This report contains the financial statements
and pro forma financial information required to be provided under Item 7 of
the Form 8-K. Therefore, the Company hereby amends its Form 8-K in accordance
with Rule 12b-15 under the Securities Exchange Act of 1934. Other than as set
forth herein, there has been no change in the information set forth in the
Form 8-K.
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
The following financial statements and pro forma financial information
are filed as part of this report:
(a) Financial statements of businesses acquired.
Consolidated balance sheet of Melcher Holding AG as of September 30, 1997
and related consolidated statements of operations and cash flows for the year
ended September 30, 1997.
Unaudited interim consolidated balance sheet of Melcher Holding AG as of
June 30, 1998 and related unaudited interim consolidated statements of
operations and cash flows for the nine months ended June 30, 1998 and 1997.
2
<PAGE>
(b) Pro forma financial information.
Pro forma consolidated balance sheet as of December 31, 1997 and explanatory
notes.
Pro forma consolidated statements of operations for the year ended
December 31, 1997 and for the nine months ended September 30, 1998 and 1997
and explanatory notes.
(c) Exhibits
The exhibits listed below are filed as part of, or incorporated by
reference, into this report.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1* Stock and Loan Purchase Agreement effective August 31, 1998
between SBC Equity Partners Ltd., Defi Holding SA,
Elektrowatt AG, Dr. Hans Grueter, Dr. Martin Schnider,
Johann Milavec and Power-One, Inc. regarding the sale and
purchase of shares in and certain convertible loans to
Melcher Holding AG
23 Consent of KPMG Fides Peat with respect to the
Consolidated Financial Statements of Melcher Holding AG.
- - -------------------
* Previously filed as an exhibit on Form 8-K of Power-One, Inc.
(File No. O-29454)
</TABLE>
The Registrant undertakes to furnish supplementally to the Commission, upon
request, a copy of any Exhibit or Schedule to the Stock and Loan Purchase
Agreement.
3
<PAGE>
Independent Auditors' Report
To the Board of Directors of
Melcher Holding AG
We have audited the accompanying consolidated balance sheet of Melcher
Holding AG and subsidiaries ("Melcher Holding AG") as of September 30, 1997
and the related consolidated statements of operations and cash flows for the
year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Melcher
Holding AG as of September 30, 1997 and the results of their operations and
their cash flows for the year then ended in conformity with generally
accepted accounting principles in Switzerland.
Generally accepted accounting principles in Switzerland vary in certain
significant respects from generally accepted accounting principles in the
United States. The application of generally accepted accounting principles in
the United States would have affected net income for the year ended September
30, 1997 and shareholders' equity as of September 30, 1997 to the extent
summarized in Note 17 to the consolidated financial statements.
KPMG Fides Peat
Zurich, Switzerland
November 13, 1998
F-1
<PAGE>
Melcher Holding AG
Consolidated Balance Sheets
(in thousands of Swiss francs)
<TABLE>
<CAPTION>
September 30, June 30,
1997 1998
-------------------- --------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 1,540 2,411
Trade accounts receivable, net 12,884 14,887
Other receivables 2,372 3,956
Inventories, net 11,391 15,424
Other current assets 258 310
-------------- --------------
Total current assets 28,445 36,988
-------------- --------------
Non-current assets:
Fixed assets, net 13,156 13,680
Intangible assets 2 -
-------------- --------------
Total non-current assets 13,158 13,680
-------------- --------------
Total assets 41,603 50,668
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 3,533 5,200
Trade accounts payable 4,435 4,673
Accrued payroll and related items 3,044 2,670
Taxes payable 559 1,442
Other accrued expenses 3,407 3,653
-------------- --------------
Total current liabilities 14,978 17,638
-------------- --------------
Non-current liabilities:
Long-term debt 13,807 16,846
Other long-term liabilities 4,709 4,724
-------------- --------------
Total non-current liabilities 18,516 21,570
-------------- --------------
Shareholders' equity:
Share capital 4,800 4,800
Participation certificate capital 227 227
Additional paid-in capital 4,833 4,833
Retained earnings (accumulated deficit), including
currency translation adjustments (1,751) 1,600
-------------- --------------
Total shareholders' equity 8,109 11,460
-------------- --------------
Total liabilities and shareholders' equity 41,603 50,668
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to the consolidated financial statements
F-2
<PAGE>
Melcher Holding AG
Consolidated Statements of Operations
(in thousands of Swiss francs)
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30,
September 30, -------------------------------
1997 1998 1997
------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Net sales 62,761 54,067 45,270
Cost of goods sold 24,840 25,976 18,282
Changes in inventories 747 (3,004) 497
------------- ------------- -------------
Gross profit 37,174 31,095 26,491
Personnel costs 19,781 16,659 14,427
General expenses 8,591 7,177 6,496
Other expenses, net 997 88 771
Depreciation of fixed assets 2,230 1,911 1,691
------------- ------------- -------------
Income before interest, extraordinary
items and taxes 5,575 5,260 3,106
Financial expenses 981 741 764
Financial income (248) (31) (163)
Extraordinary income (279) (109) (360)
Extraordinary expenses 610 13 314
------------- ------------- -------------
Income before taxes 4,511 4,646 2,551
Provision for taxes 1,017 1,398 727
------------- ------------- -------------
Net income 3,494 3,248 1,824
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to the consolidated financial statements
F-3
<PAGE>
Melcher Holding AG
Consolidated Statements of Cash Flows
(in thousands of Swiss francs)
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30,
September 30, ------------------------------
1997 1998 1997
---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income 3,494 3,248 1,824
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation of fixed assets 2,230 1,911 1,691
Net (gain) loss from sale of fixed assets 61 (36) 18
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable, net (1,100) (2,003) 309
Inventories 493 (4,003) 1
Other receivables (479) (1,635) (1,360)
Trade accounts payable 1,100 230 906
Accruals and other liabilities 3,447 874 322
------------- ------------- -------------
Net cash flows provided by
(used in) operating activities 9,246 (1,414) 3,711
------------- ------------- -------------
Cash flows from investing activities:
Investments in fixed assets (3,317) (2,432) (1,854)
Proceeds from sale of fixed assets 203 111 60
Other, net 8 -- 10
------------- ------------- -------------
Net cash flows used in investing activities (3,106) (2,321) (1,784)
------------- ------------- -------------
Cash flows from financing activities:
Borrowings (repayments) of third party debt (6,400) 4,705 (1,389)
Proceeds from issuance of equity capital to third parties 23 -- 23
------------- ------------- -------------
Net cash flows provided by
(used in) financing activities (6,377) 4,705 (1,366)
------------- ------------- -------------
Effect of exchange rate changes on cash and
cash equivalents (659) (99) 124
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents (896) 871 685
Cash and cash equivalents at beginning of period 2,436 1,540 2,436
------------- ------------- -------------
Cash and cash equivalents at end of period 1,540 2,411 3,121
------------- ------------- -------------
------------- ------------- -------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest 1,024 675 672
Taxes 316 383 202
</TABLE>
See accompanying notes to the consolidated financial statements
F-4
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements
(in thousands of Swiss francs, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
DESCRIPTION OF THE BUSINESS
Melcher Holding AG and subsidiaries ("Melcher" or the "Company") is primarily
engaged in the design and manufacture of DC/DC power conversion products which
it distributes throughout Europe. Melcher has manufacturing operations in three
European locations and sales and application engineering offices in seven
European countries, the United States and Canada.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all of the entities
owned/controlled by the Company. All significant intercompany transactions and
balances have been eliminated. The companies included in the consolidation are
listed below:
Melcher Holding AG Switzerland
Melcher AG Switzerland
Domenic Melcher AG Switzerland
Melcher S.A. France
Melcher Ltd. Great Britain
Melcher S.r.l. Italy
Melcher GmbH Germany
Melcher B.V. Netherlands
Melcher Simp Ltd. Ireland
Melcher Produktion AG Switzerland
Melcher s.r.o. Slovakia
LR Crystal IMMO a.s. Slovakia
Melcher Inc. USA
Melcher Corp. Canada
All subsidiaries are wholly owned except for Melcher Produktion AG and LR
Crystal IMMO a.s. Melcher s.r.o. is 100% owned by Melcher Produktion AG.
Melcher Produktion AG is 90% owned by Melcher AG with the remaining 10% owned
by a minority shareholder. LR Crystal IMMO a.s. is 70% owned by Melcher
Produktion AG with the remaining 30% owned by the same minority shareholder.
BASIS OF PRESENTATION
For purposes of consolidation, the accounts are prepared using uniform
accounting and valuation principles, and are summarized in the consolidated
financial statements according to the same consolidation rules. The
consolidated financial statements are prepared in conformity with the Swiss
Accounting and Reporting Recommendations Committee guidelines (Swiss GAAP).
F-5
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
BASIS OF PRESENTATION - (CONTINUED)
The Company was incorporated to effect the acquisition (the "Acquisition") of
Melcher from Elektrowatt AG (Elektrowatt) on June 25, 1996. Melcher was acquired
for a purchase price of CHF 16,000 provided through the issuance of (i) equity
of CHF 100 to management and SBC Equity Partners (SBC), (ii) short-term
obligations of CHF 9,760 to management and SBC held exclusively for the right to
purchase shares of the Company, (iii) long-term debt of CHF 1,140 payable to SBC
and (iv) long-term debt of CHF 5,000 to Elektrowatt in the form of a convertible
and subordinated loan.
Goodwill arising from the Acquisition has been charged directly to consolidated
shareholders' equity.
Effective November 28, 1996, the articles of incorporation were amended (the
"Recapitalization") and the CHF 9,760 of short-term obligations previously held
by management and SBC were converted into varying amounts of Class A and B
shares. All such shares have equal voting rights.
Accounting policies applied for valuing financial statement items have been
consistently applied. Assets are valued at historical cost. If the market value
of the assets is less than the book value, the lower value is used. Assets are
valued individually, and are subject to value adjustments as necessary.
CONVERSION OF FOREIGN CURRENCIES
The reporting currency for the consolidated financial statements of the Company
is the Swiss franc. The assets and liabilities of companies whose functional
currency is other than the Swiss franc are included in the consolidation by
translating the assets and liabilities at the exchange rates applicable at the
end of the reporting year. The statements of operations and cash flows of such
companies are translated at the average exchange rates during the year.
Translation gains or losses are accumulated as a separate component of
shareholders' equity.
FIXED ASSETS
Fixed assets are included in the consolidated balance sheet at historical
cost less accumulated depreciation. Depreciation is calculated using the
straight-line method over the useful life of the asset. Scheduled
depreciation periods are as follows:
Buildings and improvements 20 to 32 years
Machinery and equipment 4 to 10 years
Vehicles 4 to 5 years
Computer equipment 3 to 6 years
INVENTORIES
Inventories (raw materials, work-in-progress, semi-finished and finished
goods) are included in the balance sheet at their average purchase price or
production cost, but not higher than their net realizable value. Production
costs include direct materials and labor costs.
F-6
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
RECEIVABLES
Trade accounts receivable are recorded at the nominal value, taking into account
necessary allowances for doubtful accounts. The amount of the allowance depends
on the term of the accounts receivable, and the customer or country-specific
risks.
TAXES
Current income taxes are calculated based on taxable income of the period and
are accrued in the same periods as the revenues and expenses to which they
relate.
Deferred income taxes are determined using the liability method whereby deferred
income tax is recognized on temporary differences. Temporary differences between
the carrying value of an asset or liability used for tax purposes and that used
for financial reporting purposes arise in one period and reverse in one or more
subsequent periods. The related deferred tax liabilities are included in other
long-term liabilities with those changes being recorded in the statement of
operations. Deferred tax assets are generally not recognized.
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim consolidated financial statements included herein have
been prepared by the Company without audit in accordance with Swiss GAAP. In the
opinion of the Company management, the accompanying unaudited interim
consolidated financial statements have been prepared on a basis substantially
consistent with the audited consolidated financial statements and contain
adjustments, all of which are of a normal recurring nature, necessary to present
fairly its financial position as of June 30, 1998 and its results of operations
and cash flows for each of the nine month periods ended June 30, 1998 and 1997.
Interim results are not necessarily indicative of results for the fiscal year.
2. SALES
Sales refer to net sales to third parties after intercompany profit elimination
and sales tax. Revenue is recognized when title to a product has transferred or
services have been rendered.
3. OTHER EXPENSES
Other expenses includes expenditures to establish reserves for liabilities.
F-7
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
4. EXTRAORDINARY INCOME
Extraordinary income includes earnings from services of CHF 99, subsidies in
connection with job creation of CHF 102 and other items.
5. EXTRAORDINARY EXPENSES
Extraordinary expenses include losses from sale of assets of CHF 61,
restructuring costs of CHF 250 and other items.
6. TRADE ACCOUNTS RECEIVABLE, NET
The allowance for doubtful accounts receivable totaled CHF 582 at September
30, 1997.
7. INVENTORIES, NET
Inventories consist of :
<TABLE>
<CAPTION>
September 30, June 30,
1997 1998
------------- -----------
(unaudited)
<S> <C> <C>
Raw materials 6,490 8,949
Work-in-progress 1,038 1,356
Semi-finished and finished products 5,507 6,497
Obsolescence reserve (1,644) (1,378)
------- -------
Total 11,391 15,424
------- -------
------- -------
</TABLE>
8. FIXED ASSETS, NET
Fixed assets consist of :
<TABLE>
<CAPTION>
September 30,
1997
-------------
<S> <C>
Land 12
Buildings and improvements 6,435
Machinery and equipment 4,128
Computer equipment and other 2,581
------
Total 13,156
------
------
</TABLE>
F-8
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
8. FIXED ASSETS, NET - (CONTINUED)
<TABLE>
<CAPTION>
September 30,
1997
-------------
<S> <C>
Net book value at October 1, 1996 12,196
Additions 3,317
Retirements (264)
Depreciation (2,230)
Currency differences 137
-------
Net book value at September 30, 1997 13,156
-------
-------
Initial gross value 29,528
Accumulated depreciation (16,372)
-------
Net book value at September 30, 1997 13,156
-------
-------
</TABLE>
The fire insurance value of such asset was CHF 28,670. Commitments for the
purchase of capital goods totaled CHF 202.
9. LONG-TERM DEBT
Long-term debt consist of :
<TABLE>
<CAPTION>
September 30,
1997
-------------
<S> <C>
Borrowings under revolving credit arrangements 11,200
Due to SBC, interest at 4%, due in full on June 20, 2001 1,000
Due to Elektrowatt, interest at 4% payable in semi-annual
installments of CHF 500 beginning July 1, 2001 2,500
Convertible loans due to Elektrowatt and SBC 2,640
------
17,340
Current maturities (3,533)
------
13,807
------
------
</TABLE>
The Company has entered into various revolving credit arrangements which allow
the Company to borrow up to CHF 21,000. Any such borrowings bear interest at
Swiss LIBOR plus 1.25% to 2.0% and mature at various time intervals. At
September 30, 1997, the borrowings under the revolving credit arrangements
total CHF 11,200 of which CHF 3,533 are due within one year. A loan under the
revolving credit arrangement of CHF 3,000 is secured by a mortgage. The net book
value of the corresponding asset is CHF 4,242.
F-9
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
9. LONG-TERM DEBT - (CONTINUED)
The Company has convertible loans outstanding to Elektrowatt and SBC totaling
CHF 2,500 and CHF 140, which are convertible into 45,440 and 2,560
shares of Class B stock, respectively. Such loans are non-interest bearing.
The convertible loan from Elektrowatt is payable in semi-annual installments
beginning July 1, 2001. Elektrowatt may also convert the loan into Class B
shares in CHF 500 increments beginning January 1, 1999. Elektrowatt and SBC
have the right to convert the entire amount of the loans if the Company's
majority share capital is sold to a third party prior to January 1, 1999. The
SBC convertible loan is due in full on July 1, 2003.
10. OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
September 30,
1997
-------------
<S> <C>
Deferred taxes 2,292
Reserves for liabilities 1,924
Pension commitments 103
Other 390
-----
Total 4,709
-----
-----
</TABLE>
11. SHAREHOLDERS' EQUITY
At October 1, 1996, the authorized capital stock of the Company consisted of
2,085 Class A stock, with a CHF 10 par value, 3,166 shares of Class A stock,
with a CHF 25 par value and approximately CHF 9,760 in short-term obligations
held solely for the purpose of converting into shares of the Company's stock.
In connection with the November 28, 1996 Recapitalization, the short-term
obligations held by management and SBC were converted into their respective
Class A and B shares. All such shares have equal voting rights.
At September 30, 1997, the authorized capital stock of the Company consisted
of 300,000 shares of which 100,000 were designated as Class A stock, with a
CHF 10 par value, 200,000 shares of stock were designated as Class B stock,
with a CHF 25 par value, and 2,272 participation certificates ("PC's"), with
a CHF 100 par value. As of September 30, 1997, there were 100,000 shares of
Class A stock, 152,000 shares of Class B stock and 2,272 PC's outstanding.
The PC's have no voting rights. Rather, the PC's entitle the holder to
participate in the appreciation (or depreciation) of the Company as defined
by the SBC purchase agreement. Under the purchase agreement with SBC, Melcher
may assign the right to purchase the PC's from SBC to employees of the
Company as of specified dates. All purchases by employees are made at fair
market value as stated in the purchase agreement with SBC. The Company
receives no proceeds from purchases made by employees.
F-10
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
12. CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Currency
For the year ended Paid-in Participation Paid-in Accumulated Translation Minority
September 30, 1997 Capital Certificates Capital Deficit Adjustment Interest Total
- - ------------------ ------- -------------- ------- ------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1996 100 - 9,760 (5,104) 358 - 5,114
Recapitalization 4,700 227 (4,927) - - - -
Minority interest
contribution - - - - - 23 23
Net income - - - 3,560 - (66) 3,494
Currency translation
adjustment - - - - (522) - (522)
------ ------ ------- ------ ------- ----- -----
Balance at September 30, 1997 4,800 227 4,833 (1,544) (164) (43) 8,109
------ ------ ------- ------ ------- ----- -----
------ ------ ------- ------ ------- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Retained
Additional Earnings Currency
For the nine month period Paid-in Participation Paid-in (Accumulated Translation Minority
ended June 30, 1998 Capital Certificates Capital Deficit) Adjustment Interest Total
- - ------------------------- ------- -------------- ------- ------- ---------- -------- -----
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1997 4,800 227 4,833 (1,544) (164) (43) 8,109
Net income - - - 3,286 - (38) 3,248
Currency translation
adjustment - - - - 103 - 103
----- --- ----- ------ ---- --- ------
Balance at June 30, 1998 4,800 227 4,833 1,742 (61) (81) 11,460
----- --- ----- ------ ---- --- ------
----- --- ----- ------ ---- --- ------
</TABLE>
Goodwill resulting from the purchase of the Company from Elektrowatt in 1996
of CHF 7,329 was charged directly to shareholders' equity. The following
table shows a comparison of the as reported and pro forma amounts of
shareholders' equity and net income for 1997 assuming that such goodwill is
depreciated over a 10 year period.
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
Net income 3,494 2,761
Shareholders' equity 8,109 13,972
----------- ---------
----------- ---------
</TABLE>
13. RESEARCH AND DEVELOPMENT
Research and development expenditures are charged directly to the statement
of operations. Such amounts totaled CHF 6,328 in 1997.
F-11
<PAGE>
Melcher Holding AG
Notes to Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
14. EXCHANGE RATES
The following exchange rates were used:
<TABLE>
<CAPTION>
Year ended
September 30, September 30,
Currency 1997 1997
-------- ------------- -------------
<S> <C> <C>
100 FRF 25.05 24.51
1 GBP 2.3261 2.3460
100 ITL 0.08565 0.0841
100 DEM 84.55 82.33
100 NLG 75.19 73.1
1 IEP 2.2116 2.1180
1 USD 1.4199 1.4555
1 CAD 1.0347 1.0530
</TABLE>
15. CONTINGENT LIABILITIES
Contingent liabilities for customs and excise amounted to CHF 183 at September
30, 1997.
LIABILITIES FROM LEASE AGREEMENTS
The Companies future obligations under lease agreements are as follows at
September 30, 1997:
<TABLE>
Machinery and
Vehicles equipment
------------- -------------
<S> <C> <C>
Up to 1 year 155 119
2 to 3 years 194 233
4 to 5 years 12 59
Thereafter - 10
------ ------
Total 361 421
------ ------
------ ------
</TABLE>
16. SUBSEQUENT EVENT (UNAUDITED)
Effective August 31, 1998, the Company, sold all of its previously outstanding
capital stock and convertible loans to Power-One, Inc. pursuant to a Stock and
Loan Purchase Agreement dated August 25, 1998 for approximately USD 42 million.
In connection with the sale, the conversion features on the loans held by both
Elektrowatt and SBC were exercised.
F-12
<PAGE>
Melcher Holding AG
Notes to Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
17. SWISS GAAP TO U.S. GAAP RECONCILIATION
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN SWISS GAAP AND U.S. GAAP
The audited and unaudited interim consolidated financial statements have been
prepared and are presented in accordance with Swiss GAAP which differs in
certain significant respects from generally accepted accounting principles in
the United States (U.S. GAAP).
The following is a summary of significant adjustments to consolidated net income
and consolidated shareholders' equity for Melcher Holding AG and subsidiaries
which would be required if U.S. GAAP were applied instead of Swiss GAAP:
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30,
September 30, ----------------------------
1997 1998 1997
---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
Consolidated net income as reported
in the consolidated statements of
operations under Swiss GAAP 3,494 3,248 1,824
Losses allocated to minority interests 66 38 3
------ ------ ------
Adjusted net income under Swiss GAAP 3,560 3,286 1,827
Adjustments to conform with U.S. GAAP:
Business combinations - Fixed assets (39) (41) (50)
Inventories (260) 898 (615)
Accruals 749 (479) 612
Foreign currency translation (271) (11) 84
Loss allocated to minority interests (43) (38) -
Other 73 90 50
Deferred taxes (1,333) 136 (1,218)
Tax effect of U.S. GAAP adjustments (133) 21 (40)
------ ------ ------
Consolidated net income under U.S. GAAP 2,303 3,862 650
------ ------ ------
------ ------ ------
</TABLE>
F-13
<PAGE>
Melcher Holding AG
Notes to Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
17. SWISS GAAP TO U.S. GAAP RECONCILIATION - (CONTINUED)
<TABLE>
<CAPTION>
Nine months
Year ended ended
September 30, June 30,
1997 1998
---- ----
(unaudited)
<S> <C> <C>
Consolidated shareholders' equity as
reported in the consolidated balance
sheets under Swiss GAAP 8,109 11,460
Less minority interests (43) (81)
------ ------
Adjusted shareholders' equity under
Swiss GAAP 8,152 11,541
Adjustments to conform with U.S. GAAP:
Business combinations - Fixed assets 836 795
Inventories 2,469 3,367
Accruals 864 385
Foreign currency translation 29 18
Loss allocated to minority interests (43) (81)
Other 47 135
Deferred taxes 163 299
Tax effect of U.S. GAAP adjustments (1,122) (1,101)
------ ------
Consolidated shareholders' equity under U.S. GAAP 11,395 15,358
------ ------
------ ------
</TABLE>
BUSINESS COMBINATIONS
In accordance with Swiss GAAP, the difference between the purchase price and
historical cost or fair value of net assets acquired as part of a business
combination (goodwill) may be charged directly to shareholders' equity. Under
U.S. GAAP, the difference between the purchase price and fair value of net
assets acquired as part of a business combination is capitalized as goodwill and
amortized through the statement of operations over its estimated useful life
which may not exceed 40 years.
Under Swiss GAAP, assets acquired as part of a business combination, including
but not limited to fixed assets, inventory and other assets and/or liabilities
may be valued at historical cost. Under U.S. GAAP, the net assets acquired in a
business combination are recorded at fair market value. In addition, under U.S.
GAAP, direct costs incurred to consummate an acquisition are included in the
cost of the net assets acquired (purchase price).
F-14
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
17. SWISS GAAP TO U.S. GAAP RECONCILIATION - (CONTINUED)
BUSINESS COMBINATIONS - (CONTINUED)
Additionally, under U.S. GAAP, the tax benefits resulting from any temporary
differences or net operating loss carryforwards existing at the date of an
acquisition that are first recognized subsequent to the acquisition date (by
reduction of the valuation allowance) are reported in the following manner:
-- First, the positive goodwill related to the acquisition is
reduced to zero.
-- Second, other non-current intangible assets related to the
acquisition are reduced to zero.
-- Third, any remaining benefit is reported as a reduction of
income tax expense.
At the Acquisition date, the Company had net operating loss carryforwards at
certain of its subsidiaries. During 1997, certain of these subsidiaries
utilized the tax benefits of net operating loss carryforwards. As such, the
Company has accordingly reduced the goodwill related to the Acquisition to
zero. All remaining benefits have been reported as reductions of income tax
expense.
INVENTORY
In accordance with Swiss GAAP, inventory costs include direct material and
labor costs but do not include an allocation of production overhead which are
expensed as incurred. Under U.S. GAAP, inventory costs include appropriate
production and other indirect overhead.
ACCRUALS
Under Swiss GAAP, accruals are determined by reasonable and prudent estimates
reflecting the expected costs and expenses or as allowed by Swiss tax code.
The amount of such accruals or provisions represents the anticipated exposure
to the Company. Restructuring accruals are recorded at the earliest time that
an expense is known to the Company.
Under U.S. GAAP, an estimated loss from a loss contingency shall be charged
to income only if it is probable that an asset had been impaired or a
liability had been incurred at the date of the financial statements and the
amount of the loss can be reasonably estimated. If a loss is probable and the
reasonable estimate of the loss is a range and no amount within the range
appears to be a better estimate than any other amount, the minimum amount in
the range shall be accrued. General or unspecified business risks do not meet
the conditions for accrual and, therefore, no accrual shall be made.
F-15
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
17. SWISS GAAP TO U.S. GAAP RECONCILIATION - (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Under Swiss GAAP, intercompany receivables and payables, including short and
long-term loans, denominated in a foreign currency are translated at each
balance sheet date to the respective local currency at the lower of the
currency exchange rate on the transaction date or the balance sheet date.
Under U.S. GAAP, such amounts are recorded at balance sheet rates with any
resulting gain or loss recognized in the statement of operations. In
addition, under U.S. GAAP, all foreign currency gains or losses resulting
from long-term intercompany loans, for which there are no intention to repay,
are charged directly to shareholders' equity
LOSSES ALLOCATED TO MINORITY INTERESTS
Under Swiss GAAP, minority interests' share of the net assets of the Company
may be classified in the consolidated balance sheet as a component of
shareholders' equity. In such cases, the minority interests share of the net
income or loss for the year is not deducted from the profit or loss of the
Company. Furthermore, a minority interests' share of the net assets of the
Company can be allocated unlimited losses generated by the respective
investment.
Under U.S. GAAP, minority interests are not classified as equity. In
addition, minority interests share of the profit or loss for the period is
deducted from or added to the Company's consolidated net income or loss in
the statement of operations. Under U.S. GAAP, losses allocated to minority
interests are limited to the extent of minority interests.
DEFERRED TAXES
Under Swiss GAAP, deferred tax assets are not generally recognized for all
temporary differences between the book carrying values and tax bases of the
assets and liabilities. Under U.S. GAAP, with some exceptions, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis and
operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates in which the Company operates. Additionally,
a valuation allowance is established to reduce gross deferred tax assets to
the amount which will more likely than not be realized.
OTHER
Other differences consist of primarily miscellaneous valuation differences
that are not individually significant, including start-up costs, pensions,
leases and other items.
F-16
<PAGE>
Melcher Holding AG
Notes to the Consolidated Financial Statements - (continued)
(in thousands of Swiss francs, except share data)
17. SWISS GAAP TO U.S. GAAP RECONCILIATION - (CONTINUED)
EXTRAORDINARY INCOME AND EXPENSE
In accordance with Swiss GAAP, certain income and expense items such as gains
and losses from the sale of long-term assets and other items as well as the
reversal of certain provisions and allowances for doubtful accounts can be
classified as extraordinary income or expense. Under U.S. GAAP, such amounts are
generally recorded as operating income and expense. Additionally, the reversal
of provisions are generally recorded as reductions to the original expense
rather than income.
TOTAL COST METHOD
As allowed under Swiss GAAP, the Company has presented its statement of
operations under the "total cost" method. Under U.S. GAAP, the statement of
operations would be presented in a cost of sales format. Such difference in
presentation has no effect on net income.
COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to various legal proceedings and claims which arise in
the ordinary course of its business. Although occasional adverse decisions
(or settlements) may occur, the Company believes that the final disposition
of such matters will not have a material adverse effect on the financial
position or results of operations of the Company. The Company is currently
involved in a dispute with a third party regarding a product liability case.
The investigations and potential remedies are currently being pursued. The
ultimate outcome of this case can not be determined at this time.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
as well as disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates.
F-17
<PAGE>
POWER-ONE, INC.
Pro Forma Financial Information:
On August 31, 1998, the Company completed its purchase of Melcher for a
purchase price of $41.8 million. The purchase price was negotiated at arms
length with the Sellers, none of whom had any prior relationship with the
Company. The source of funds for the acquisition was a combination of the
Company's available cash, as well as advances totaling $10 million under its
existing credit facility.
The acquisition was accounted for using the purchase method of
accounting. The purchase price, including liabilities assumed, was allocated
to tangible assets and intangible assets. The excess of the aggregate
purchase price over the estimated fair market values of the net assets
acquired was recognized as goodwill and other identifiable intangible assets,
and is being amortized over periods ranging from five to 20 years.
The following unaudited pro forma consolidated statements of operations
gives effect to the acquisition as if it had occurred at the beginning of the
period, while the unaudited pro forma consolidated balance sheet gives effect
to the acquisition as if it had occurred as of December 31, 1997. Pro forma
adjustments include only the effects of events directly attributable to the
transaction that are expected to have a continuing impact and that are
factually supportable. The notes to the pro forma financial information
describe the pro forma amounts and adjustments presented below. The pro forma
financial information does not necessarily relect the operating results that
would have occurred had the acquisition been consummated as of the above
dates, nor is such information indicative of future operating results. In
addition, the pro forma financial results contain estimates since the
acquired company did not maintain information on a period comparable with the
Company's fiscal year-end.
The pro forma consolidated balance sheet as of December 31, 1997 reflects
the combination of Power-One's balance sheet as of December 31, 1997 and
Melcher's balance sheet as of September 30, 1997. The pro forma consolidated
statement of operations for the year ended December 31, 1997 reflects the
combination of Power-One's statement of operations for the year ended
December 31, 1997 and Melcher's statement of operations for the year ended
September 30, 1997. The pro forma consolidated statements of operations for
the nine months ended September 30, 1998 and 1997 reflects the combination of
Power-One's statements of operations for the nine months ended September 30,
1998 and 1997 and Melcher's statements of operations for the nine months ended
June 30, 1998 and 1997, respectively.
The most recent interim period balance sheet as of September 30, 1998 has
been filed with the Company's Form 10-Q for the quarterly period ended
September 30, 1998. This balance sheet includes the consolidated financial
information of Melcher and Power-One subsequent to the acquisition.
F-18
<PAGE>
POWER-ONE, INC.
PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------------------
POWER-ONE MELCHER ADJUSTMENTS REFERENCE PRO FORMA
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 32,018 $ 1,059 $ (31,776) (B) $ 1,301
Trade accounts receivable, net 13,268 9,028 - 22,296
Other receivables 328 1,616 - 1,944
Inventories 22,369 9,533 2,903 (B, C) 34,805
Other current assets 3,854 178 - 4,032
----------------------------------------------- ----------------
Total current assets 71,837 21,414 (28,873) 64,378
Fixed assets and other 13,619 10,067 3,750 (B, C) 27,436
Intangible assets, net 27,181 - 28,960 (B, C) 56,141
----------------------------------------------- ----------------
Total assets $112,637 $31,482 $ 3,837 $147,956
----------------------------------------------- ----------------
----------------------------------------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $ 326 $ 2,431 $ - $ 2,757
Accounts payable 4,465 3,050 - 7,515
Accrued payroll and related expenses 652 3,857 - 4,509
Other accrued expenses and liabilities 5,031 1,156 3,508 (D, E) 9,695
----------------------------------------------- ----------------
Total current liabilities 10,474 10,494 3,508 24,476
Long-term debt - 9,836 8,168 (B) 18,004
Other liabilities 1,949 3,313 - 5,262
----------------------------------------------- ----------------
Total non-current liabilities 1,949 13,149 8,168 23,266
Stockholders' equity:
Common stock 17 3,302 (3,302) (B) 17
Participation certificate share capital - 156 (156) (B) -
Additional paid in capital 92,227 3,324 (3,324) (B) 92,227
Retained earnings 7,970 1,011 (1,011) (B) 7,970
Cumulative currency translation - 46 (46) (B) -
----------------------------------------------- ----------------
Total stockholders' equity 100,214 7,839 (7,839) 100,214
----------------------------------------------- ----------------
Total liabilities and stockholders' equity $112,637 $31,482 $ 3,837 $147,956
----------------------------------------------- ----------------
----------------------------------------------- ----------------
</TABLE>
F-19
<PAGE>
POWER-ONE, INC.
PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
------------------------------------------------------------------------------
POWER-ONE MELCHER ADJUSTMENTS REFERENCE PRO FORMA
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 91,583 $44,378 $ - $135,961
Cost of goods sold 55,481 18,262 3,228 (B, C) 76,971
----------------------------------------------- ----------------
Gross profit 36,102 26,116 (3,228) 58,990
Selling, general and
administrative expense 19,456 22,159 - 41,615
Amortization of intangibles 2,029 - 1,814 (A) 3,843
----------------------------------------------- ----------------
Total expenses 21,485 22,159 1,814 45,458
Income from operations 14,617 3,957 (5,042) 13,532
Interest income (expense), net (2,823) (612) (3,150) (D, E) (6,585)
Other income (expense), net (18) (100) - (118)
----------------------------------------------- ----------------
Income before income taxes 11,776 3,245 (8,192) 6,829
Income taxes 3,542 1,633 (2,564) (F) 2,611
----------------------------------------------- ----------------
Net income before minority interest 8,234 1,612 (5,628) 4,218
Minority interest - 16 - 16
----------------------------------------------- ----------------
Net income 8,234 1,628 (5,628) 4,234
Preferred stock dividends and accretion 1,514 - - 1,514
----------------------------------------------- ----------------
Net income attributable to common shares $ 6,720 $ 1,628 $ (5,628) $ 2,720
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Basic earnings per common share $ 0.58 $ 0.14 $ (0.48) $ 0.23
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Diluted earnings per common share $ 0.56 $ 0.14 $ (0.47) $ 0.23
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Basic shares 11,659 11,659 11,659 11,659
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Diluted shares 11,934 11,934 11,934 11,934
----------------------------------------------- ----------------
----------------------------------------------- ----------------
</TABLE>
F-20
<PAGE>
POWER-ONE, INC.
PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
------------------------------------------------------------------------------
POWER-ONE MELCHER ADJUSTMENTS REFERENCE PRO FORMA
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 68,299 $36,835 $ - $105,134
Cost of goods sold 40,354 15,032 3,164 (B, C) 58,550
----------------------------------------------- ----------------
Gross profit 27,945 21,803 (3,164) 46,584
Selling, general and
administrative expense 17,554 17,867 - 35,421
Amortization of intangibles 1,522 - 1,539 (A) 3,061
----------------------------------------------- ----------------
Total expenses 19,076 17,867 1,539 38,482
Income from operations 8,869 3,936 (4,703) 8,102
Interest income (expense), net 901 (508) (1,889) (D, E) (1,496)
Other income (expense), net 75 42 - 117
----------------------------------------------- ----------------
Income before income taxes 9,845 3,470 (6,592) 6,723
Income taxes 2,788 839 (1,981) (F) 1,646
----------------------------------------------- ----------------
Net income before minority interest 7,057 2,631 (4,611) 5,077
Minority interest - - - -
----------------------------------------------- ----------------
Net income attributable to common shares $ 7,057 $ 2,631 $ (4,611) $ 5,077
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Basic earnings per common share $ 0.41 $ 0.15 $ (0.27) $ 0.30
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Diluted earnings per common share $ 0.41 $ 0.15 $ (0.27) $ 0.29
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Basic shares 17,068 17,068 17,068 17,068
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Diluted shares 17,327 17,327 17,327 17,327
----------------------------------------------- ----------------
----------------------------------------------- ----------------
</TABLE>
F-21
<PAGE>
POWER-ONE, INC.
PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
------------------------------------------------------------------------------
POWER-ONE MELCHER ADJUSTMENTS REFERENCE PRO FORMA
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 65,785 $32,582 $ - $ 98,367
Cost of goods sold 39,127 13,586 3,164 (B, C) 55,877
----------------------------------------------- ----------------
Gross profit 26,658 18,996 (3,164) 42,490
Selling, general and
administrative expense 15,796 17,019 - 32,815
Amortization of intangibles 1,522 - 1,539 (A) 3,061
----------------------------------------------- ----------------
Total expenses 17,318 17,019 1,539 35,876
Income from operations 9,340 1,977 (4,703) 6,614
Interest income (expense), net (2,906) (376) (2,563) (D) (5,845)
Other income (expense), net 12 169 - 181
----------------------------------------------- ----------------
Income before income taxes 6,446 1,770 (7,266) 950
Income taxes 1,748 1,304 (2,251) (F) 801
----------------------------------------------- ----------------
Net income before minority interest 4,698 466 (5,015) 149
Minority interest - 2 - 2
----------------------------------------------- ----------------
Net income 4,698 468 (5,015) 151
Preferred stock dividends and accretion 1,259 - - 1,259
----------------------------------------------- ----------------
Net income attributable to common shares $ 3,439 $ 468 $ (5,015) $ (1,108)
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Basic earnings per common share $ 0.34 $ 0.05 $ (0.50) $ (0.11)
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Diluted earnings per common share $ 0.33 $ 0.05 $ (0.49) $ (0.11)
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Basic shares 10,000 10,000 10,000 10,000
----------------------------------------------- ----------------
----------------------------------------------- ----------------
Diluted shares 10,266 10,266 10,266 10,266
----------------------------------------------- ----------------
----------------------------------------------- ----------------
</TABLE>
F-22
<PAGE>
Notes to Pro Forma Balance Sheet:
A) The Company is undertaking studies, including appraisals as appropriate, to
establish the fair market value of the acquired Melcher assets. Final
results of these studies, not available at the time of this filing on Form
8-K, will be used to establish the opening balance sheet carrying values
for Melcher's net assets.
B) Record the purchase of all of the outstanding capital stock and certain
convertible loans of Melcher Holding AG. The purchase price of
approximately $41.8 million was financed with the Company's available cash
and $10.0 million of borrowings under the Company's available borrowing
facility.
C) Record the fair market value of certain assets acquired from Melcher, based
on the preliminary appraisal values and management estimates. These amounts
are subject to reclassification and adjustments.
D) Record liabilities for professional fees and expenses related to the
acquisition of $1,645.
E) Record the change in deferred taxes based on preliminary tax values of the
assets acquired and liabilities assumed.
Notes to Pro Forma Statements of Income:
A) Record annual amortization of goodwill and other identified intangible
assets, assuming amortization periods from 7 to 20 years. The estimated
useful lives are based on periods of economic benefit.
B) Record depreciation expense related to the fair market value adjustment of
fixed assets.
C) Record additional cost of sales arising from fair market value inventory
adjustment recorded upon the purchase of Melcher.
D) Record interest expense related to assumed borrowing of $10 million
to partially finance the Melcher acquisition, assumed interest rate
of 7.3%. For the period January 1, 1997 to September 30, 1997, additional
borrowings of $33.4 million at an interest rate of 7.87% were assumed
outstanding to finance the purchase of Melcher.
E) Record reduction in interest income related to the assumed $33.4 decrease
in interest earning cash and short-term investments used to purchase
Melcher, assumed interest rate of 5.35%. Cash was available beginning
October 1, 1997, subsequent to the Company's initial public offering.
F) Record income taxes related to the above adjustments.
G) Additional sales and cost savings benefits from synergies derived from the
acquisition are expected but are not reflected in the Pro Forma Statements
of Income.
F-23
<PAGE>
YEAR 2000 ISSUE
What is now commonly known as "The Year 2000 Issue" ("Y2K") is primarily
the result of computer systems and software programs being coded to accept
two digit entries rather than four to define the applicable year. These
computer systems and programs were designed and developed without
consideration of the upcoming change in the century. For example, the year
"00" may be recognized as 1900 instead of 2000 and, if not corrected, many
computer applications could fail or create erroneous results.
Because the Y2K issue creates risk for the Company from unforeseen
problems with its own computer systems and software and from third party
suppliers and customers with whom the Company deals on financial
transactions, Melcher has recently begun assessments of its Y2K readiness. A
Y2K team has been established with representatives from each of Melcher's
facilities. The team is currently performing a comprehensive review of its
computer systems and software, its technical infrastructure, as well as
embedded systems commonly found in manufacturing equipment such as
microcontrollers. The review also includes assessments of the Company's
products and the readiness of its key suppliers, subcontractors and customers
to handle dates beginning with the year 2000.
More specifically, in order to parallel the Company's Y2K effort, Melcher
is conducting an enterprise-wide (three European manufacturing locations and
sales and application engineering offices in seven European countries, the
United States and Canada) inventory of vendor and information systems to
identify links to the following areas: (a) core business processes; (b)
system platforms, program languages and database management systems; (c)
operating system software and utilities; (d) telecommunications systems; and
(e) internal and external interfaces.
Melcher will work closely with vendors and customers to confirm that they
too are taking the steps necessary to become Y2K compliant. Each system,
application and vendor will be prioritized and ranked in terms of importance
to the business, and conversion efforts will then be based on this ranking.
Although the Melcher Y2K team is still in the assessment phase of the
project, it has been determined that its manufacturing software system,
"Phoenix", is Y2k compliant whereas the financial software package is not
compliant. The cost associated with conversion of the financial systems has
not yet been determined. A complete internal risk analysis is scheduled for
finalization by the end of this calendar year which will also include a
comprehensive project implementation plan. In addition, it is expected that
by the end of the first quarter of 1999 the Y2K team will have also assessed
the readiness of key suppliers and vendors. The preliminary target for the
completion of Y2K remediation and testing efforts is by the end of the third
quarter of 1999. The overall costs to complete Melcher's Y2K project are not
fully known at this time and the Company is not certain if these costs will
be material.
F-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 16, 1998 Power-One, Inc.
By: /s/ STEVEN J. GOLDMAN
------------------------------
Steven J. Goldman
Chairman of the Board, Chief Executive
Officer and President
By: /s/ EDDIE K. SCHNOPP
-------------------------------
Eddie K. Schnopp
Vice President, Finance and Logistics,
Chief Financial Officer and Secretary
Zurich, Switzerland
November 13, 1998
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Melcher Holding AG:
We consent to the inclusion of our report dated November 13, 1998, with
respect to the consolidated balance sheet of Melcher Holding AG and
subsidiaries as of September 30, 1997, and the related consolidated
statements of operations, and cash flows for the year then ended, which
report appears in the Form 8-K of Power-One, Inc. dated November 16, 1998.
KPMG Fides Peat
Zurich, Switzerland
November 13, 1998
