<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 28, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________.
------------------------
COMMISSION FILE NO. 0-29454
POWER-ONE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0420182
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
740 CALLE PLANO, CAMARILLO, CA 93012
(Address of principle 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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such a shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
As of March 6, 1999 there were outstanding 17,100,607 shares of common
stock, $.001 par value.
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<PAGE>
POWER-ONE, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets--
March 31, 1999 and December 31, 1998........................................................ 3
Consolidated Statements of Operations--
for the Three Months Ended March 31, 1999 and 1998.......................................... 4
Consolidated Statements of Comprehensive (Loss) Income--
for the Three Months Ended March 31, 1999 and 1998.......................................... 5
Consolidated Statements of Cash Flows--
for the Three Months Ended March 31, 1999 and 1998.......................................... 6
Notes to Consolidated Financial Statements.................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................... 17
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................. 19
SIGNATURES................................................................................................ 20
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
POWER-ONE, INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................................. $ 3,099 $ 10,781
Accounts receivable:
Trade, less allowance for doubtful accounts: $1,869--1999; $1,402--1998............. 24,678 17,865
Other............................................................................... 2,052 2,184
Inventories........................................................................... 39,805 32,396
Refundable income taxes............................................................... 624 --
Deferred income tax assets--current................................................... 2,538 1,845
Prepaid expenses and other current assets............................................. 1,695 1,366
----------- ------------
Total current assets............................................................ 74,491 66,437
PROPERTY & EQUIPMENT, net of accumulated depreciation and amortization: $13,321--1999;
$8,045--1998.......................................................................... 38,273 34,608
INTANGIBLE ASSETS, NET.................................................................. 64,871 51,019
OTHER ASSETS............................................................................ 2,732 1,915
----------- ------------
TOTAL ASSETS............................................................................ $ 180,367 $ 153,979
----------- ------------
----------- ------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Credit facility....................................................................... $ 38,843 $ 14,680
Current portion of long-term debt..................................................... 2,878 2,912
Current portion of capital leases..................................................... 1,038 114
Bank overdraft........................................................................ 2,138 --
Accounts payable...................................................................... 9,455 6,273
Accrued payroll and related expenses.................................................. 2,075 1,297
Other accrued expenses................................................................ 9,135 7,582
Deferred income tax liability......................................................... 1,274 1,309
----------- ------------
Total current liabilities....................................................... 66,836 34,167
----------- ------------
LONG-TERM DEBT, less current portion.................................................... 6,434 7,645
----------- ------------
LONG-TERM CAPITAL LEASES, less current portion.......................................... 1,431 206
----------- ------------
DEFERRED INCOME TAX LIABILITY, noncurrent............................................... 3,795 3,585
----------- ------------
OTHER LIABILITIES....................................................................... 106 114
----------- ------------
STOCKHOLDERS' EQUITY
Common stock, par value $0.001, 60,000,000 shares authorized; 17,100,107 and
17,093,227 shares issued and outstanding at March 31, 1999 and December 31, 1998,
respectively........................................................................ 17 17
Additional paid-in capital............................................................ 92,409 92,368
Accumulated other comprehensive (loss) income......................................... (844) 2,177
Retained earnings..................................................................... 10,183 13,700
----------- ------------
Total stockholders' equity...................................................... 101,765 108,262
----------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY................................................ $ 180,367 $ 153,979
----------- ------------
----------- ------------
</TABLE>
See accompanying notes
3
<PAGE>
POWER-ONE, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
NET SALES.................................................................................. $ 34,834 $ 26,673
COST OF GOODS SOLD......................................................................... 21,653 15,570
----------- -----------
GROSS PROFIT......................................................................... 13,181 11,103
GENERAL AND ADMINISTRATIVE
Selling.................................................................................. 4,700 2,632
Administrative........................................................................... 2,776 2,157
Engineering.............................................................................. 2,878 1,175
Quality assurance........................................................................ 672 544
Amortization of intangibles.............................................................. 2,219 507
In process research and development...................................................... 3,300 --
----------- -----------
Total expenses....................................................................... 16,545 7,015
(LOSS) INCOME FROM OPERATIONS.............................................................. (3,364) 4,088
OTHER INCOME (EXPENSE)
Interest income.......................................................................... 35 406
Interest expense......................................................................... (723) (92)
Other income, net........................................................................ 352 21
----------- -----------
Total other income (expense)......................................................... (336) 335
(LOSS) INCOME BEFORE TAXES................................................................. (3,700) 4,423
INCOME (BENEFIT) TAXES..................................................................... (183) 1,350
----------- -----------
NET (LOSS) INCOME.......................................................................... $ (3,517) $ 3,073
----------- -----------
----------- -----------
BASIC (LOSS) EARNINGS PER COMMON SHARE..................................................... $ (0.21) $ 0.18
----------- -----------
----------- -----------
DILUTED (LOSS) EARNINGS PER COMMON SHARE................................................... $ (0.21) $ 0.18
----------- -----------
----------- -----------
BASIC SHARES OUTSTANDING................................................................... 17,095 17,060
----------- -----------
----------- -----------
DILUTED SHARES OUTSTANDING................................................................. 17,095 17,345
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
4
<PAGE>
POWER-ONE, INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
NET (LOSS) INCOME.......................................................................... $ (3,517) $ 3,073
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment.................................................. (3,021) --
----------- -----------
COMPREHENSIVE (LOSS) INCOME................................................................ $ (6,538) $ 3,073
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
5
<PAGE>
POWER-ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income....................................................................... $ (3,517) $ 3,073
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization........................................................... 3,708 1,113
Purchased in process technology......................................................... 3,300 --
Gain on sale of fixed assets............................................................ (95) --
Deferred income taxes................................................................... (317) 1
Changes in operating assets and liabilities:
Accounts receivable, net.............................................................. (2,724) 557
Inventories........................................................................... (1,867) 1,000
Refundable income taxes............................................................... 172 1,177
Prepaid expenses and other current assets............................................. (229) (47)
Accounts payable...................................................................... 2,199 (1,318)
Accrued expenses...................................................................... (23) 238
Other liabilities..................................................................... (381) --
---------- -----------
Net cash provided by operating activities............................................. 226 5,794
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................................................... (2,789) (2,673)
Proceeds from sale of fixed assets...................................................... 112 --
Investment in IPD, net of cash acquired (Note 4)........................................ (28,739) --
Other assets............................................................................ (521) 57
---------- -----------
Net cash used in investing activities................................................... (31,937) (2,616)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from credit facilities................................................... 23,220 --
Bank overdraft.......................................................................... 2,138 --
Proceeds from borrowings on long-term debt.............................................. 6,730 --
Repayments of long-term debt............................................................ (7,803) --
Principal payments under capital lease obligations...................................... (168) --
Sale and issuance of common stock-net................................................... 41 --
---------- -----------
Net cash provided by financing activities............................................... 24,158 --
---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................................... (129) --
---------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................................... (7,682) 3,178
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................................ 10,781 32,018
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................................................. $ 3,099 $ 35,196
---------- -----------
---------- -----------
</TABLE>
See accompanying notes
6
<PAGE>
POWER-ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1999 1998
---------- -----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest.............................................................................. $ 401 $ 23
Income taxes.......................................................................... $ 100 $ --
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
On January 29, 1999, the Company purchased all of the capital stock of
International Power Devices, Inc. ("IPD") for $29.5 million (See Note 4). In
conjunction with the acquisition, liabilities were assumed as follows (in
thousands):
<TABLE>
<S> <C> <C>
Fair value of tangible assets acquired.......................... $ 20,840
Fair value of goodwill and other identifiable intangible
assets........................................................ 17,862
Cash paid for capital stock..................................... (29,500)
---------
Liabilities assumed............................................. $ 9,202
---------
---------
</TABLE>
A capital lease obligation of $242,000 was incurred in the first quarter of 1999
when the Company entered into a lease for new equipment.
See accompanying notes
7
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year. For
further information, refer to the consolidated financial statements and notes
thereto for the year ended December 31, 1998, included in the Company's 1998
Annual Report on Form 10-K.
The Company's reporting period coincides with the 52- to 53-week period
ending on the Sunday closest to December 31 and its fiscal quarters are the 13
and 14 week periods ending on the Sunday nearest to March 31, June 30, September
30 and December 31. For simplicity of presentation, the Company has described
its year-ended December 27, 1998 as December 31 and the three-month periods
ended March 28, 1999 and March 29, 1998 as March 31.
Certain reclassifications have been made to the amounts in the Consolidated
Statement of Operations for the three month period ended March 31, 1998 to
confirm to the classifications in the three month period ended March 31, 1999.
NOTE 2--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Raw materials....................................................... $ 18,977 $ 16,036
Subassemblies-in-process............................................ 7,122 5,001
Finished goods...................................................... 13,706 11,359
----------- ------------
$ 39,805 $ 32,396
----------- ------------
----------- ------------
</TABLE>
NOTE 3--EARNINGS PER SHARE
Basic (loss) earnings per share is computed by dividing net (loss) income by
the weighted average common shares outstanding for the period while diluted
earnings per share also includes the dilutive
8
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3--EARNINGS PER SHARE (CONTINUED)
impact of stock options. Basic and diluted (loss) earnings per share for the
three month periods ended March 31 are calculated as follows (in thousands,
except per share data):
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
------------------------------- ---------------------------------
AVERAGE AVERAGE
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net (loss) income............................... $ (3,517) $ 3,073
Basic (loss) earnings per share:
Shares outstanding............................ 17,095 17,060
--------- --------- --------- ---------
Basic (loss) earnings per share............... (3,517) 17,095 $ (.21) 3,073 17,060 $ .18
--------- ---
Dilutive securities--
Stock options................................. 285
--------- --------- --------- ---------
Diluted (loss) earnings per share:.............. $ (3,517) 17,095 $ (.21) $ 3,073 17,345 $ .18
--------- --------- --------- --------- --------- ---
--------- --------- --------- --------- --------- ---
</TABLE>
The dilutive effect of options outstanding at March 31, 1999 was not
included in the calculation of diluted loss per share for the three month period
ended March 31, 1999 because to do so would have had an anti-dilutive effect as
the Company had a net loss for the period. The amount of such options excluded
from the diluted loss per share computation was approximately 400,000.
NOTE 4--ACQUISITIONS
On January 29, 1999, the Company completed its purchase of International
Power Devices, Inc. ("IPD"), for $31.8 million less certain capitalized lease
obligations and other indebtedness of IPD. As of March 31, 1999, the total
purchase price was calculated at $28.3 million, plus approximately $1.2 million
of transaction related costs. In addition, the Company may pay up to $13 million
earnout consideration to IPD's stockholders based upon IPD's attaining certain
defined operational performance objectives through March 31, 2000. The purchase
price was negotiated at arms length with IPD, which had no 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 approximately $28
million under its existing credit facility. In a separate transaction, the
Company has agreed to acquire IPD's manufacturing facility from a separate
partnership for its appraised value, which is anticipated to be approximately
$4.3 million to be funded by additional borrowings from credit facilities.
IPD, a Boston-based company, is a leading supplier of over 1,000
high-density and general-purpose DC/DC converters and ring generators which it
distributes primarily throughout North America. IPD's major customers include
Cisco, Bay Networks, Nortel and Hewlett-Packard. As part of the acquisition, the
Company acquired IPD's 49% ownership position in Shenzhen SED-IPD International
Electronic Device Co., Ltd., a joint venture based in Shenzhen, China.
The acquisition was accounted for using the purchase method of accounting.
The net purchase price, plus transaction costs, were 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 15 years.
9
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4--ACQUISITIONS (CONTINUED)
The fair market value of IPD's assets and liabilities has been included in the
Company's balance sheet as of March 31, 1999. The consolidated statements of
operations, comprehensive income and of cash flow for the three months ended
March 31, 1999, include two months of IPD's operations.
In connection with the IPD acquisition, the Company amended its credit
agreement with lenders to waive certain requirements and amend certain
provisions.
The product lines acquired as a result of the IPD acquisition were
substantially similar to purchased technology related to a technology and
license agreement with a company entered on April 2, 1996 for which an
intangible asset was recorded and was being amortized over the term of the
licensing agreement (see Note 5). Consequently, the Company recorded a charge of
approximately $1.0 million for the unamortized balance of the intangible asset
value related to the agreement in the three month period ended March 31, 1999.
The following unaudited pro forma financial information combines the
consolidated results of operations as if the acquisition of IPD had occurred as
of the beginning of the periods presented. 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 pro forma
amounts contained in the table below include adjustments for inventory fair
market valuation write-up, which increased cost of goods sold expense,
amortization of intangibles including an in process research and development
charge of $3.3 million, depreciation expense, assumed interest expense, a write
off of a technology and license agreement and deferred taxes.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1999 1998
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net sales......................................................... $ 37,063 $ 33,020
Net loss.......................................................... $ (5,364) $ (2,111)
Basic loss per common share....................................... $ (0.31) $ (0.12)
Diluted loss per common share..................................... $ (0.31) $ (0.12)
</TABLE>
The pro forma financial information does not necessarily reflect 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.
The allocation of the purchase price is based on preliminary data and could
change when final valuation information is obtained.
NOTE 5--INTANGIBLE ASSETS
Intangible assets include cost in excess of net assets acquired in
connection with the acquisition of the Company in 1995, of Melcher Holding AG
("Melcher") in 1998 and of IPD in the first quarter of 1999 (see Note 4) which
have been allocated among certain intangible items determined by management to
have value, such as the company name, distribution network and product lines.
Provision for amortization has been made based upon the estimated useful lives
of the intangible asset categories, which range from five
10
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5--INTANGIBLE ASSETS (CONTINUED)
to 25 years, using the straight-line method. At March 31, 1999 and December 31,
1998 accumulated amortization related to these intangible assets totaled
$7,893,000 and $6,743,000, respectively.
Intangible assets at December 31, 1998 also included purchased technology
related to a technology and license agreement (the "Agreement") with a company
entered on April 2, 1996. The Agreement called for total cash payments of
$1,500,000 over approximately two years in return for exclusive rights to
specified technical information. The obligation and asset were recorded at
present value using an implicit interest rate of 8.5%. The asset was being
amortized over the term of the licensing agreement, ten years, using the
straight-line method. Since the technology acquired as a result of the Agreement
was substantially similar to the product lines acquired as a result of the IPD
acquisition, the Company recorded a charge of approximately $1.0 million for the
unamortized balance of the intangible asset value related to the Agreement in
the three month period ended March 31, 1999. Accumulated amortization on the
license agreement was $384,000 at December 31, 1998.
Increase in intangible assets from December 31, 1998 to March 31, 1999
relates to the intangible assets recorded in connection with the IPD
acquisition. Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Goodwill and Trade Name............................................. $ 41,609 $ 39,121
Distribution Network................................................ 5,207 5,207
Sales Force......................................................... 735 790
Product Technology.................................................. 19,713 11,632
Assembled Workforce................................................. 800 --
Customer Relationships.............................................. 4,700 --
License Agreement................................................... -- 1,396
----------- ------------
72,764 58,146
----------- ------------
Less accumulated amortization....................................... 7,893 7,127
----------- ------------
$ 64,871 $ 51,019
----------- ------------
----------- ------------
</TABLE>
11
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL. On August 31, 1998, the Company acquired Melcher Holding AG
("Melcher") for $43.4 million. Melcher, a European-based company, is primarily
engaged in the design and manufacture of more than 750 high-reliability DC/DC
power conversion products that it distributes throughout Europe. On January 29,
1999, the Company acquired International Power Devices, Inc. ("IPD"), for
approximately $29.5 million. In addition, the Company may pay up to $13 million
earnout consideration to IPD's stockholders based upon IPD's attaining certain
defined operational performance objectives through March 31, 2000. IPD, a
Boston-based company, is a leading supplier of over 1,000 high-density and
general-purpose DC/DC converters and ring generators that it distributes
primarily throughout North America. Both of these acquisitions were accounted
for using the purchase method of accounting. In both cases, the net purchase
price, plus transaction costs, were allocated to tangible assets and intangible
assets. The fair market value of both Melcher's and IPD's assets and liabilities
has been included in the Company's balance sheet as of March 31, 1999. For the
three months ended March 31, 1999, financial results are consolidated to include
Melcher and two months of IPD's operations.
NET SALES. Net sales increased $8.2 million, or 30.6%, to $34.8 million for
the three months ended March 31, 1999 from $26.7 million for the three months
ended March 31, 1998. Included in net sales for the first quarter ended 1999,
are approximately $11.7 million contributed by Melcher for the three months and
approximately $5.4 million contributed by IPD since the date of acquisition. On
a consolidated basis, the principal contributors to the $8.2 million increase in
net sales were DC/DC power products which contributed $14.8 million, primarily
due to the Melcher and IPD acquisitions, low range power products, which
contributed $2.4 million, primarily due to the Melcher acquisition, and custom
power products which contributed $1.3 million. These increases were offset by
declines in the Company's high-range power products of $7.9 million, linear
power products of $1.8 million and all other product lines of $0.6 million, net.
Excluding Melcher and IPD, the Company's net sales decreased $8.9 million, or
33.2%, to $17.8 million in the first quarter of 1999 from $26.7 million for the
comparable period in 1998. This was primarily due to general weak demand for the
Company's high-range power supplies in the first quarter of 1999 as compared to
the same period in the prior year.
Sales to OEMs in the first quarter of 1999 were $28.1 million, or 80.6% of
net sales, up from $15.8 million over the comparable period in 1998, or 59.1% of
net sales, and up from $19.9 million in the fourth quarter of 1998, or 70.1% of
net sales. No one customer exceeded 10% of total sales in the first quarter of
1999. Sales through distributors were $6.7 million in the first quarter of 1999,
down $4.2 million from $10.9 million over the same period last year, and down
from $8.5 million in the fourth quarter of 1998. As a percent of net sales,
sales through distributors was 19.4%, down from 40.9% last year, and down from
29.9% in the fourth quarter of 1998. The lower percentage of net sales through
distributors in the first quarter of 1999 compared to the first quarter of 1998
is due to the change in the mix of the Company's customer base, as Melcher's and
IPD's customers are primarily OEMs.
Power-One provides power supplies to a global customer base including OEMs
with manufacturing operations in diverse markets such as voice and data
communications, semiconductor manufacturing, medical electronics, automatic
test, instrumentation, transportation and industrial equipment. The recent
acquisition of IPD has significantly broadened the Company's customer base by
increasing sales to key customers and adding new customers in the data
communications and telecommunications markets. As a result of the IPD
acquisition, the Company's sales to the communications market in general
increased $5.2 million in the first quarter of 1999.
12
<PAGE>
Sales by markets for the three months ended March 31, 1999 and March 31,
1998 were:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Communications............................................................. 37.8% 13.3%
Industrial................................................................. 19.3% 23.7%
Medical.................................................................... 9.1% 12.5%
Transportation............................................................. 9.0% --%
Computer and retail........................................................ 5.1% 9.1%
ATE/Semiconductor test equipment........................................... 4.9% 34.2%
Other...................................................................... 14.8% 7.2%
</TABLE>
The changes in the Company's sales set forth in the chart above to the
ATE/semiconductor test equipment and communications markets in the first quarter
of 1999 as compared to the comparable period in 1998 are primarily due to
decreased demand for the Company's high-range power supplies within the
ATE/semiconductor test equipment market and the change in the Company's customer
mix due to the acquisition of Melcher and IPD, which have a proportionately
larger concentration of sales in the communications market.
Beginning in the first quarter of 1999, demand for the Company's products
increased significantly. The Company's combined backlog on March 31, 1999 was
$42.1 million, an increase of 61.9%, compared to backlog of $26.0 million on
December 31, 1998. The Company's backlog on March 31, 1998 was $27.9 million.
March 1999 was the strongest booking month in the Company's history with
approximately $24 million in bookings, with much of this growth coming from
strong demand in the data communications and telecommunications markets. The
combined backlog at the end of the first quarter of 1999 includes $9.8 million
of IPD's backlog. Pro forma backlog, which assumes IPD's backlog was in place at
December 31, 1998, increased 38.5% at the end of the first quarter of 1999 as
compared to year-end 1998.
The Melcher acquisition has already had a positive impact on the Company's
overall business by expanding Power-One's product line in high-reliability DC/DC
products, by opening a $2 billion merchant market in Europe for Power-One
thereby broadening the Company's customer base, and by increasing the Company's
market share in the communications and transportation markets. Similarly, IPD is
also expected to contribute positively by opening a $2.3 billion worldwide
merchant market for Power-One in high-density DC/DC converters, by further
expanding the Company's portfolio of products, and by further expanding
Power-One's presence in the data communications and telecommunications markets.
GROSS PROFIT. Gross profit increased $2.1 million, or 18.7%, to $13.2
million for the three months ended March 31, 1999 from $11.1 million for the
three months ended March 31, 1998. As a percent of net sales, gross profit
margin decreased to 37.8% for the first three months of 1999 from 41.6% for the
same period in 1998. The decline in gross profit margin primarily resulted from
the inventory write-up related purchase accounting adjustments due to the IPD
acquisition, as well as a lower average gross margin attributable to IPD in the
first quarter of 1999. Excluding the IPD related adjustments, gross profit
margin would have been 40.0% for the first quarter of 1999.
SELLING EXPENSE. Selling expense increased $2.1 million, or 78.6%, to $4.7
million for the three months ended March 31, 1999 from $2.6 million for the
comparable period in 1998. As a percent of net sales, selling expense increased
to 13.5% for the first three months of 1999 from 9.9% for the comparable period
in 1998. The increase of $2.1 million in the first quarter of 1999 was primarily
due to Melcher's and IPD's selling expense of $2.1 million and $428,000,
respectively, which was partially offset by a $432,000 decrease in Power-One's
selling expense. The decrease in Power-One's selling expense was primarily
related to lower employee costs, as well as a decrease in outside sales
commissions due to lower sales volume. The increase in selling expense as a
percentage of net sales is primarily due to Melcher which, on a standalone
basis, has higher selling expenses than Power-One and IPD in relation to net
sales.
13
<PAGE>
ADMINISTRATIVE EXPENSE. Administrative expense increased $619,000, or
28.7%, to $2.8 million for the three months ended March 31, 1999 from $2.2
million for the three months ended March 31, 1998. As a percent of net sales,
administrative expense decreased slightly to 8.0% for the first three months of
1999 from 8.1% for the comparable period in 1998. The increase of $619,000 was
primarily attributable to Melcher's and IPD's administrative expense of $678,000
and $376,000, respectively, which was partially offset by a $435,000 decrease in
Power-One's administrative expense. The decrease in Power-One's administrative
expense was primarily due to lower employee costs related to a decrease in
employee performance bonuses.
ENGINEERING EXPENSE. Engineering expense increased $1.7 million, or 144.9%,
to $2.9 million for the three months ended March 31, 1999 from $1.2 million for
the three months ended March 31, 1998. As a percent of net sales, engineering
expense increased to 8.3% for the first three months of 1999 from 4.4% for the
comparable period in 1998. The increase of $1.7 million was primarily due to
Melcher's and IPD's engineering expense of $1.2 million and $543,000,
respectively, which was partially offset by a $17,000 decrease in Power-One's
engineering expense.
QUALITY ASSURANCE EXPENSE. Quality Assurance expense increased $128,000, or
23.5%, to $672,000 for the three months ended March 31, 1999 from $544,000 for
the three months ended March 31, 1998. As a percent of net sales, quality
assurance expense decreased slightly to 1.9% for the first three months of 1999
from 2.0% for the comparable period in 1998. The increase of $128,000 was
primarily due to higher quality assurance expense related to the Melcher and IPD
acquisitions.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased $1.7
million, or 337.7%, to $2.2 million for the three months ended March 31, 1999
from $507,000 for the same period in 1998. The majority of the increase is
attributable to a $1.0 million charge taken by the Company to write-off the
unamortized balance of the intangible asset value of a technology and license
agreement related to substantially similar product technology acquired as a
result of the IPD acquisition. The balance of the increase is due to two months
of amortization of intangibles initially recorded upon the acquisition of IPD on
January 29, 1999 totaling approximately $304,000, as well as $431,000 of
amortization of intangibles related to the Melcher acquisition.
IN PROCESS RESEARCH AND DEVELOPMENT. As a result of the IPD acquisition,
the Company recorded a one time charge of $3.3 million for purchased in-process
technology that had not reached technological feasibility and had no alternative
future use.
(LOSS) INCOME FROM OPERATIONS. As a result of the items above, (loss)
income from operations decreased $7.5 million, or 182.3%, to a $3.4 million loss
from operations for the three months ended March 31, 1999 from $4.1 million
income from operations for the comparable period in 1998. Included in the loss
from operations for the three months ended March 31, 1999, are several
significant non-recurring items totaling approximately $5.1 million. Excluding
the $0.8 million inventory write-up related purchase accounting adjustment for
IPD, $1.0 million write-off of a previously acquired technology license, and
$3.3 million charge for in process research and development, income from
operations would have been $1.7 million.
INTEREST EXPENSE. Interest expense increased $631,000, or 685.9%, to
$723,000 for the three months ended March 31, 1999 from $92,000 for the
comparable period in 1998. The increase is primarily due to advances on the
Company's credit facilities to finance the Melcher and IPD acquisitions.
INTEREST INCOME. Interest income decreased $371,000, or 91.4% to $35,000
for the three months ended March 31, 1999 from $406,000 for the three months
ended March 31, 1998. The decrease is primarily due to the decrease in
short-term, interest bearing financial instruments due to cash used for the
Melcher acquisition in the third quarter of 1998.
14
<PAGE>
OTHER INCOME, NET. Other income, net, increased $331,000, to $352,000 for
the three months ended March 31, 1999 from other income, net, of $21,000 for the
three months ended March 31, 1998. Other income increased primarily due to gains
on sales of fixed assets and foreign currency transactions.
INCOME TAXES. The provision for income taxes decreased to a $183,000
benefit for the three months ended March 31, 1999 from $1.4 million income tax
for the comparable period in 1998. The recorded loss for the first quarter of
1999 did not generate a significant income tax benefit primarily due to the $3.3
million charge for in process research and development and $304,000 amortization
of goodwill related to the IPD acquisition, both of which were nondeductible for
tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company's balance of cash and cash equivalents was
$3.1 million compared to $10.8 million at December 31, 1998, a decrease of $7.7
million, or 71.3%. The primary source of cash for the first three months of 1999
consisted of net borrowings from credit facilities of $23.2 million which were
primarily used to finance the IPD acquisition. The primary uses of cash for the
first three months of 1999 consisted of $28.7 million for the purchase of IPD,
including transaction costs and net of cash acquired, and $2.8 million for the
acquisition of property and equipment.
The $2.8 million for acquisition of property and equipment included
approximately $1.0 million for hardware, software and implementation support
related to the Company's Oracle Enterprise Resource Planning ("ERP") system
conversion and the balance reflects additional property, plant and capital
equipment expenditures to support the Company's growth plans.
The Company has a revolving line of credit in the U.S. which bears interest
on amounts outstanding payable quarterly based on the Company's leverage ratio
and one of the following rates as selected by the Company: LIBOR plus 1.0% to
2.25%, or the bank's base rate plus 0% to 1.25%. The credit agreement (a)
provides for restrictions on additional borrowings, leases and capital
expenditures; (b) prohibits the Company, without prior approval, from paying
dividends, liquidating, merging, consolidating or selling its assets or
business; and (c) requires the Company to maintain a specified net worth,
minimum working capital and certain ratios of current liabilities and total debt
to net worth. At March 31, 1999, amounts outstanding under Power-One's line of
credit in the U.S. were $34.4 million.
As a result of the Melcher acquisition, the Company has various credit
facilities with banks in Switzerland and Germany which can be drawn upon in the
form of term loans. The aggregate credit limit for all such credit facilities is
approximately $15.7 million. Melcher's credit facility in Switzerland bears
interest on amounts outstanding payable at various time intervals and market
rates based on Swiss LIBOR plus a margin ranging from 1.25% to 2.00%. Certain of
Melcher's credit agreements require Melcher to maintain certain financial
covenants as well as certain financial reporting obligations to the lenders none
of which is materially restrictive to Melcher. At March 31, 1999, short-term and
long-term amounts outstanding under Melcher's credit facilities were $3.9
million and $9.3 million, respectively, and Melcher was in compliance with all
debt covenants.
As a result of the IPD acquisition, the Company has an additional line of
credit in the U.S. which bears interest at the bank's prime rate plus .75%.
Borrowings are limited to the lesser of $4,500,000 or 80% of the Company's
eligible accounts receivable, as defined. At March 31, 1999, amounts outstanding
under IPD's line of credit were $0.5 million.
At March 31, 1999, short-term and long-term amounts outstanding under all
credit facilities with banks were $38.8 million and $9.3 million, respectively.
Primarily due to the acquisition of IPD and purchase related adjustments, the
Company was not in compliance with all debt covenants at March 31, 1999;
however, the Company is obtaining waivers from the appropriate financial
institutions and does not anticipate any complications. Borrowings are
collateralized by substantially all of the Company's assets.
15
<PAGE>
The Company expects to spend a total of approximately $1.5 million in 1999
to complete the implementation of its new Oracle ERP system. The Company has
also agreed to acquire IPD's manufacturing facility from a separate partnership
for its appraised value, which is anticipated to be approximately $4.3 million
to be funded by additional borrowings from credit facilities. In addition, the
Company currently anticipates that its total capital expenditures for 1999 will
be approximately $10.4 million, of which approximately $4.6 million represents
investments in surface mount technology automation and approximately $2.9
million represents investments in manufacturing improvements. The amount of
these anticipated capital expenditures will frequently change based on future
changes in business plans, the financial condition of the Company and general
economic conditions.
Based on current plans and business conditions, the Company believes its
existing working capital and borrowing capacity, coupled with the funds
generated from the Company's operations, will be sufficient to fund its
anticipated working capital, capital expenditures and outstanding lease
commitments for the foreseeable future. However, if the Company makes a large
acquisition, it may be necessary to raise debt or equity in the private or
public securities markets.
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.
The Company's plan for compliance with Year 2000 issues consists of five
phases: Awareness, Assessment, Renovation, Validation, and Implementation.
An awareness campaign has been conducted and a Year 2000 strategy has been
developed with the full support of the executive management team. Core business
areas and processes have been assessed and Y2K project coordinators assigned to
identify, prioritize, and mobilize needed resources. Affected applications,
databases, and related system components have been selected for conversion,
replacement, or elimination. Compliance plans and schedules have been
implemented for validation and testing including a careful review of warranties
for Y2K compliance of network applications and utilities. The Company has
developed a schedule for the implementation of all converted or replaced
applications and system components.
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. To address these risks,
the Company established a task force in early 1998. The task force has performed
a comprehensive review of, and is continuing to take actions, to ensure the
internal readiness of the Company's computer systems and software, its technical
infrastructure, as well as embedded systems commonly found in manufacturing
equipment such as microcontrollers. This review also included assessments of the
Company's products and the readiness of its key suppliers, subcontractors and
customers to handle dates beginning with the year 2000. The Company has received
survey responses from approximately 75% of its critical suppliers indicating Y2K
awareness as well as their intent to be fully Y2K compliant and certified by
year-end 1999. The Company expects the balance of critical vendors to provide
survey responses by the third quarter of 1999. The Company also believes, based
on its assessments, that its products are not date sensitive.
The Company has significantly reduced its exposure to problems resulting
from the Y2K issue by implementing a new Oracle ERP system, which is Y2K
compliant, at its Camarillo, California facility. The Company plans to implement
the Oracle system at its Mexican facilities and Melcher's European facilities,
which currently utilize non-compliant systems, and expects to complete this
implementation early in the fourth quarter of 1999. Although the Company's
Caribbean facility utilizes a Y2K compliant version of the
16
<PAGE>
Legacy ERP system, the Company intends to implement the Oracle System at this
facility early in the fourth quarter of 1999. Should the Company's
implementation of the Oracle System at these facilities be delayed, the Company
has developed a contingency plan to minimize its risk of exposure to problems
resulting from the Y2K issue.
Additionally, the Company is modifying or replacing, as necessary, other
software applications in order to ensure that they are Y2K compliant. The
Company currently maintains vital project statistics on a non-compliant intranet
database. This database has been converted, tested, and implemented using a Y2K
compliant solution. A second critical database used to track and analyze product
performance is currently in an acceptance testing phase and is expected to be
fully operational in the second quarter of 1999. Most of the Company's
assessment efforts have been completed at this time and remediation and testing
actions are either underway and are on schedule.
The overall costs to complete the Company's Y2K project are not expected to
be material. The Company is on schedule to complete modification and testing of
its computer systems and software in 1999 and expects to complete substantially
all of its Year 2000 project by the end of October 1999, before any anticipated
impact on its operating systems.
The Company may not be able to identify all Y2K problems before they occur
or to successfully remedy any problems that it discovers. While the Company does
not believe that Y2K related expenditures will have a material adverse effect on
its business, if the necessary implementations and modifications are not made on
a timely basis, the Y2K issue could adversely effect the Company's business,
results of operations, cash flows or financial condition.The Company believes
that the most significant adverse effect of the Y2K problem on its business
would be that some of the Company's smaller and less relied upon suppliers and
customers may not be Y2K compliant thereby resulting in the delay of receipt of
materials and delayed fulfillment of customers' orders. The Company is
developing contingency plans to minimize potential disruptions to its business
operations.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from
changes in interest rates and changes in foreign currency exchange rates. The
Company's exposure to interest rate risk results from the financial debt
instruments which arise from transactions entered into during the normal course
of business. The Company may enter into derivative financial instrument
transactions, such as swaps, in order to manage or reduce its exposure to
interest rate changes related to its portfolio of borrowings. Under no
circumstances does the Company enter into derivative or other financial
instrument transactions for speculative purposes.
DEBT. The Company is exposed to cash flow risk due to changes in market
interest rates related to its outstanding debt. Short-term borrowings under
credit facilities do not give rise to significant interest rate risk because
these borrowings generally have maturities of less than one year. For example,
in Europe the Company's credit facilities bear interest on borrowings
outstanding at various time intervals and market rates based on Swiss LIBOR, an
offshore rate that is similar to the London Interbank Offered Rate ("LIBOR")
plus a margin ranging from 1.25% to 2.00%. As the Company's long-term debt is
drawn from the available credit facilities in Europe, the Company's principal
risk with respect to its long-term debt is to changes in these market rates. The
table below presents principal cash flows and related weighted average interest
rates for the Company's credit facilities and Swiss franc denominated long-term
debt obligations at March 31, 1999 by expected maturity dates. The information
is presented in U.S. dollar equivalents, the Company's reporting currency, and
parenthetically in Swiss francs, where applicable. Additionally, the U.S. dollar
equivalent carrying value of Swiss franc denominated debt is sensitive to
foreign currency exchange
17
<PAGE>
rates. However, a 10% change in the U.S. dollar exchange rate against the Swiss
franc would not have a significant effect on the future earnings of the Company.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
--------------------------------------------------------------------
1999 2000 2001 2002 2003 THERE- AFTER TOTAL
--------- --------- --------- --------- ----- ----------- ---------
(AMOUNTS IN THOUSANDS EXCEPT FOR PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Credit facility:
Variable Rate ($US)...................... 34,902 34,902
Average Interest Rate.................. 6.7% 6.7%
Fixed Rate (CHF 5,820)..................... 3,941 3,941
Average Interest Rate.................... 3.4% 3.4%
Long-term Debt:
Fixed Rate (CHF 13,750).................. 1,693 4,233 2,370 1,016 -- -- 9,312
Average Interest Rate.................. 6.2% 3.9% 4.0% 5.0% 4.5%
<CAPTION>
FAIR
VALUE
---------
<S> <C>
Credit facility:
Variable Rate ($US)...................... 34,902
Average Interest Rate..................
Fixed Rate (CHF 5,820)..................... 3,941
Average Interest Rate....................
Long-term Debt:
Fixed Rate (CHF 13,750).................. 9,312
Average Interest Rate..................
</TABLE>
FOREIGN CURRENCY. A significant portion of the Company's business
operations are conducted in various countries in Europe. As a result, the
Company has a certain degree of market risk with respect to its cash flows due
to changes in foreign currency exchange rates when transactions are denominated
in currencies other than the Company's functional currency. Historically, the
Company has not actively engaged in substantial exchange rate hedging
activities, and at March 31, 1999, the Company had not entered into any
significant foreign exchange contracts.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. The words
"expect," "estimate," "believe," "anticipate," "may," "should," "plans,"
"intends," and similar expressions, or the negative thereof, are intended to
identify forward-looking statements. Such forward-looking information involves
important risks and uncertainties that could materially alter results in the
future from those expressed in any forward-looking statements made by the
Company. These risks and uncertainties include, but are not limited to, the
factors set forth in the "Risk Factors" section of the Company's 1998 Form 10-K
on file with the Securities and Exchange Commission. Other risks and
uncertainties include uncertainties relating to general domestic and
international economic conditions, including interest rate and currency exchange
rate fluctuations, electronics industry market conditions and growth rates,
acquisitions, the cyclical nature of the Company's business, government and
regulatory policies, technological developments and changes in the competitive
environment in which the Company operates. Persons reading this Form 10-Q are
cautioned that such forward-looking statements are not predictions and that
actual events or results may differ materially. In evaluating such statements,
readers should specifically consider the various factors set forth in this
report and other reports that the Company files with the Securities and Exchange
Commission, which could cause actual events or results to differ materially from
those indicated by such forward-looking statements.
18
<PAGE>
PART II--OTHER INFORMATION
ITEMS 1 THROUGH 5--NOT APPLICABLE
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27--Financial Data Schedule
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K dated January 29, 1999 was filed on February
9, 1999 to report the closing of the Company's acquisition of all of the
outstanding capital stock of International Power Devices, Inc. ("IPD")
for approximately $31.8 million, less certain capitalized lease
obligations and other indebtedness of IPD, in accordance with Item 2 of
the Instructions to Form 8-K.
A Current Report on Form 8-K/A dated January 29, 1999 was filed on April
14, 1999 to provide financial statements and the pro forma financial
information for the IPD acquisition, in accordance with Item 7 of the
Instructions to Form 8-K.
19
<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 thereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: May 12, 1999 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
SR. VICE PRESIDENT, FINANCE,
CHIEF FINANCIAL OFFICER AND SECRETARY
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
UNAUDITED CONSOLIDATED BALANCE SHEET AND UNAUDITED CONSOLIDATED STATEMENT OF
OPERATIONS INCLUDED IN THE COMPANY'S FORM 10Q FOR THE PERIOD ENDING MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,099
<SECURITIES> 0
<RECEIVABLES> 26,547
<ALLOWANCES> 1,869
<INVENTORY> 39,805
<CURRENT-ASSETS> 74,491
<PP&E> 51,594
<DEPRECIATION> 13,321
<TOTAL-ASSETS> 180,367
<CURRENT-LIABILITIES> 66,836
<BONDS> 6,434
0
0
<COMMON> 17
<OTHER-SE> 101,748
<TOTAL-LIABILITY-AND-EQUITY> 180,367
<SALES> 34,834
<TOTAL-REVENUES> 34,834
<CGS> 21,653
<TOTAL-COSTS> 21,653
<OTHER-EXPENSES> 16,545
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 723
<INCOME-PRETAX> (3,700)
<INCOME-TAX> (183)
<INCOME-CONTINUING> (3,517)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,517)
<EPS-PRIMARY> (.21)<F1>
<EPS-DILUTED> (.21)
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC
</FN>
</TABLE>
