Power-One (PWER) Acquisition Presentation TM October 2006
Disclaimer This presentation contains forward-looking statements, which are made pursuant to the Safe. Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “forecast, ” “expect, ” “anticipate, ” “will, ” “looking, ” “believe” and similar expressions reflecting something other than historical fact are intended to identify forwardlooking statements, but are not the exclusive means of identifying such statements. Forward-looking statements are not guarantees, but rather are predictions of and make certain assumptions regarding anticipated future results. Please refer to the end of this presentation for complete disclaimer. 2 3/15/2018
Power-One Mission Statement To be recognized as the leader in system-level power and power management solutions from AC to the IC in the communications and hightechnology markets, utilizing our technical leadership to deliver comprehensive low-cost solutions; providing increasing value to customers, employees, and investors 3 3/15/2018
Power-One Power Supplies Are Everywhere Our products convert, process & purify electricity to the high levels of quality, reliability, & precise direct current required by the digital economy Over 30 million power supplies shipped & Silicon… Soon: Custom, Alternative Energy, digital motor controls, specialty transportation & systems 4 3/15/2018
Power Conversion Products for Communications & High -technology Infrastructure Markets AC/DC Powers Telecom, Networking & Industrial Equipment Controls Power at the System Cabinet DC/DC Power Plus Digital Power Management Controls Power on the Printed Circuit Board 5 3/15/2018
Power-One Today • 30+ years of success • One of the world’s top power supply companies – Broad-line power conversion supplier – 100’s of standard product families – Over 2, 500 employees (Soon 4000!) – Top brand name & quality reputation – Industry leading Gross Margins • • • Five acquisitions since 1999 (Soon six!) Highly-automated worldwide manufacturing Strong balance sheet (~$72 M in cash- no debt) Revenues est. at $300 M in 2006 (Soon $530 -550 M) Investing ~$7 M/yr in R&D for silicon design Today, Power-One is the technology leader in power; a consolidator; and a developer of silicon products 6 3/15/2018
Where Power-One Excels • Worldwide Mfg. and R&D (Asia, Americas & Europe) • Worldwide Customer Service and Support Including Field Applications, Sales & Sophisticated IT Infrastructure (EDI) • Technology: – In-house silicon development and packaging capabilities – Digital Power Management, Z-One. TM Digital IBA, the first complete power conversion AND power management solution – Density leadership in DC-DC bricks and POLs – Leadership in AC Front Ends and Telecom Power Systems – Industry’s highest efficiency and power density • Competitive on a world class level • We are a complete supplier from AC to the IC 7 3/15/2018
Digital Power Revolution--- ZZZZ TM A Digital Power Revolution Conversion … Communications… Control
Power Management and Power Conversion Becomes One … with Digital Technology Conversion Communication Control (Pwr. Mgt. ) Goal: 20% Market Share in 5 Years 9 3/15/2018
The “Before” – Unmanageable with Analog Controller 48 V “BRICK” DC/DC Converter POL 3. 3 V POL 2. 5 V POL 3. 0 V V 1 V 2 POL V 5 POL 1. 8 V V 3 V 4 POL V 6 V 7 10 3/15/2018
The “After”: Z-One DIGITAL IBA™ 48 V I 2 C from Host System “BRICK” DC/DC Converter DPM Z-POL V 2 V 1 Z-POL V 5 Z-POL V 3 Z-POL V 6 V 4 Z-POL V 7 11 3/15/2018
8 -output Power System Comparison IBA with Analog Power Mgmt Z-One Digital IBA 200+ 9 600+ <100 ~10 in 2 3. 8 in 2 8 Weeks 3 Days ~$100+ Limited ~$90 Virtually Unlimited 12 3/15/2018
Results for Z-One Digital Power • We have a significant head-start on the competition • The Z-series disruptive architecture is a true revolution in power • Licensed technology (second sourcing) – Benefits in broader/larger market, licensing fees & technology sharing – Module 2 nd source in Dec. ’ 04 with C&D Technologies (top 5 supplier) – Semiconductor Z-affiliate announced with Atmel in July’ 05; and with Micrel LDO (Low Drop-Out) regulator IC in Sept ‘ 06 – Recent announcement – Silicon Labs is joining the Z-Alliance – Meeting with other potential partners • Customers who implement the “Z” can offer products with additional system features and benefits; and with faster TTM (time to market) • New markets opened, e. g. , Storage & Server, Military, Aerospace & Security (total POL market exceeds $1. 0 billion) • Core business is growing as a result of the “Z” • ~70 Z-One board-level design wins & growing (now with top 10 cust. ) • Significantly more embedded in the customers’ systems architecture 13 3/15/2018
Transaction for Power Electronics Group of Magnetek, Inc. • Power-One, Inc. has signed a Definitive Agreement to acquire the Power Electronics Group (P. E. G. ) of Magnetek, Inc. • P. E. G. has been operating essentially as an autonomous business unit for many years • Transaction Closing is expected to be in October • Power-One has secured $50 M of acquisition financing via an 18 month loan. We will be investigating a variety of options for longer-term financing that is more accretive • The company will use a portion of its cash and investments, but will keep ~$40 M on our balance sheet. Total post-closing debt, with financing will be 65 -70 M 14 3/15/2018
Overall Transaction Assets • Three main factories – 230 K sq. ft. in Shenzen (Baoan) China – 180 K sq. ft. in Valdarno, Italy (Includes R&D and Admin, with low-cost “feeder plant” in Hungary) Shenzhen, China – 50 K sq. ft. in Chatsworth, CA • Best-in-class R&D Center (80+ experienced engineers) • Custom product capability • New applications, like Alternative Energy (AE) & digital control for motors Valdarno, Italy • High-volume purchasing leverage Chatsworth, California 15 3/15/2018
Liabilities – What Power-One Will Not Get • Only taking the liabilities of the parent company (Magnetek, Inc. ) that are for the Power Electronics Group • The transaction does not include the liabilities of the parent company: – Fluorescent lighting lawsuit and liabilities will remain with Magnetek – Employee benefits and pension liability of Magnetek, Inc. is retained by them 16 3/15/2018
Excellent Strategic Value • Purchase price of ~$72 M in cash, plus $17 M debt • Grows Power-One’s revenue by over 50% with overall purchase price of approximately 0. 5 x forecasted sales for 2007 • Power-One will become a ½ billion dollar company in 2007; forecast sales range from $530 M to $550 M • Power-One continues to be a consolidator with this 6 th acquisition in 8 years • Lowers Overheads & Operating Expenses 17 3/15/2018
Strategic Synergies & Importance 1. 2. 3. 4. 5. 6. 7. 8. Accretive in Early 2007 R&D resources and technologies Size and purchasing power of larger company High-volume, low-cost China operation Alternative Energy initiative European operations expanded Augments top customer base Customs and new applications widen market 18 3/15/2018
Strategic Synergies & Importance #1 – Accretive in Early 2007 • The acquisition is strategic and accretive – Will be accretive in Q 1 of 2007 • Synergies will be additive to earnings per share ~$9 M ($0. 10 per share) in 2007 ~$20 M ($0. 22 per share) in 2008 • Although acquisition has lower gross margins than Power-One, it also has lower operating costs. Post merger will see margins in the high 20’s%, but should gradually increase throughout 2007 to above 30%, with further improvements into the low 30’s% in 2008 • Primary drivers for margin improvement are synergies in purchasing and manufacturing • Operating expenses of ~30% of sales will immediately decrease into the mid to high 20’s% range; gradually decrease throughout 2007 with a target goal in the low 20’s% • Cash generation expected to begin in 2007 19 3/15/2018
#2 Strategic Synergies & Importance – R&D Resources And Technologies • Experience (breadth and depth) in Italy with 80+ Engineers • Augments other European Design Centers in Switzerland Slovakia • Increased IP portfolio • Low cost for experienced R&D personnel • Products range from smart motor driver and control circuits to large 50 KW power modules Custom Power Supplies Inverters High Density Data Storage 20 3/15/2018
Strategic Synergies & Importance #2 (Cont) – R&D Resources And Technologies • 90% of products are digital implementations with micro/DSP and software – – – Fewer competitors - less commoditization Higher margins over time Greater functionality - market diversity Higher performance Software-driven with reduced parts count, higher reliability • Augments Power-One’s board-level ZOne® digital power management capabilities DSP-based Motor Controls Digital Smart Appliance Control & Management 21 3/15/2018
Strategic Synergies & Importance #3 – Size & Purchasing Power Of Larger Company • Catapults Power-One into becoming the 6 th largest power supply company in the world – from 16 th position • Combined sales in 2007 is forecast to be in the range of $530 M to $550 M • Economy-of-scale facilitates ability to compete with the largest competitors in purchasing components • Size and breadth of products are important in servicing the Server/Storage markets • Material purchases is largest part of COGS; this is the most significant and fastest way to achieve synergy 22 3/15/2018
Strategic Synergies & Importance #4 – High-volume, Low-cost China Operation • China manufacturing expertise – 500+ manufacturing people; local management for 5+ years – 230, 000 sq. ft. of operations - with capacity & scaling capability • Factory is close to current Power. One factory that builds the Power Systems product line • Added manufacturing in China addresses high-volume need for future growth • Critical mass in Asia has been reached with Power-One factories handling high-volume demand; Contract Manufacturers (CM) will continue to support mid-volume 23 3/15/2018
Strategic Synergies & Importance #4 (Cont. ) – High-volume, Low-cost China Operation • New China operation reduces cost and increases control. Reduces issues with current CM arrangement • Acquisition will increase profitability with highervolume jobs. No “dual” profits required • Customers are driving for more control over the mfg. process. Main Competitors do not use CM’s • Allows better service and support of local customers 24 3/15/2018
Strategic Synergies & Importance #5 – Alternative Energy Initiative In Power Inverters Solar – Wind – Fuel Cells • High reliability and efficiency power converters Compact Fuel Cell Power Conditioners • High power-density & compact size • Primary energy source control • Grid interactive control • System level control Wind Power Converters Photovoltaic Inverters 25 3/15/2018
Strategic Synergies & Importance #5 (Cont) – Alternative Energy Systems Aurora® PVI-Wind Interface adapts solar PV power inverter for use with wind turbines Aurora Pre. Pack Panels (Integrated Solar PV power inversion system) Multi. Mode World Inverter (MWI) Tailors power input from any Alternative Energy Source to any AC or DC power application (grid interface and/or local load) Power conditioners and interfaces for Compact Fuel Cells 26 3/15/2018
Strategic Synergies & Importance #6 – European Operations Expanded • Italy – 180, 000 sq. ft. of R&D, Admin, & Operations – Impressive R&D center – Specialized products and manufacturing • Alternative Energy Systems • Intelligent digital Motor Driver and Controls • Specialty transportation – Excellent mid-volume/complex product capability • Low-cost “feeder plant” in Hungary (30 K sq. ft. ) • Local support for European regional customers 27 3/15/2018
Strategic Synergies & Importance #7 – Acquisition Augments Premier Customer Base Bottom Row Shows Significant Additions to PWER Base 28 3/15/2018
Strategic Synergies & Importance #8 – Customs & New Applications Widen Market • Adds “custom” capability to Power. One’s standard product offerings • Large Custom market – AC/DC Custom market in 2007 is ~$7 B, which is more than twice as large as Standard + Modified AC/DC market. Additionally, the Custom market is growing ~7 -9%. . . more than twice as fast as the Standard market. Digital Business Machines – Customers have been asking Power. One to do more Customs; the issue has been R&D resources. The acquisition will greatly expand the resources. Segway “HT” 29 3/15/2018
Strategic Synergies & Importance #8 (Cont) -- Customs & New Applications Widen Market Other New Applications • Intelligent motor drive and controls – Embedded, Variable-Speed Motor Drives – Temperature Control Boards – User Interfaces • Specialty transportation products DISSIPAT . PICCOLO 3 E 864500000 – 55 k. W multi-voltage APSS for European Intercity Trains TRASF. CARICABATTERIE 82100016 ATM CAMBIOTENSIO NE 3 E 864800000 TRASFORMATORE TRIFASE 82100019 ATM I NDUTTANZE CARICABATTERIE 82100017 ATM ALIMENTATORE 3 E 864300000 COND. 1 E COND. 2 80102358 ATM INDUTTANZE DI SCITA U 82100021 ATM SCHEDA CONTROLLO 9153 E 860203 ASSIEME SENSORI 1 C. B 3 E 864600000 ASSIEME MODULI IGBT 3 E 864100000 ASSIEME SENSORI 2 3 E 864700000 INDUTTANZA FILTRO LINEA 82100020 ATM 30 3/15/2018
Synergistic with Other Products • Purchasing power of high-volume components will carryover to lower-volume components • Engineering collaboration between AC/DC R&D • Digital techniques in AC/DC • Standardization of Custom products • Capitalize on Power-One distributors and channels • Cross-selling opportunities, e. g. , Telecom products DC Power Systems Rectifiers Electronic Power Distribution Unit Control Unit ‘Smart’ Solid-State Circuit Breakers 31 3/15/2018
Integration Plan • Objective is to combine both into a stronger company • Will be integrated into Power-One’s functional structure • Allows quick actions and savings – functional orientation will facilitate integration • Materials & purchasing cost reductions will be 1 st priority • Move high-volume products from CM to new China factory. Note: new China factory in Baoan is very close to our current factory in Shekou. Both are in Shenzhen. • Shift Italy’s R&D team to focus on much larger business deals; from smaller to larger ($5 M - $10 M) projects. Power One has several large deals pending. • Globally – Operations, Engineering, and Marketing & Sales forces will be combined “Day 1” 32 3/15/2018
Integration Status Synergy leadership teams have been identified and planning is in place to timely capture savings In-depth discussions, meetings, and site visits were used both for Due Diligence and “Fast-track” integration 33 3/15/2018
Acquisition Supports PWER’s 2006 Goals (In Prior IR Presentations – and Acquisition Impact) Pre-acquisition Goals Acquisition Impact 10 -15% growth forecast in 2006 $160 M+ added $530 -550 M in 2007 Decrease material costs Combination will benefit Execution of higher-volume projects with Server & Storage customers Adding resources in Europe (Slovakia & Switzerland) Increase AC/DC presence both in channel & products China factory will be used for Introduce new products/applications Increase engineering capabilities high-volume manufacturing Italy & Hungary Custom AC/DC products Alternative Energy, Transportation, Smart Motor Drive & Control Systems Superb R&D Center with 80+ experienced engineers 34 3/15/2018
Power-One’s History & Strategic Direction Custom Products & China Mfg. Acquiring PEG of MAG Silicon Division Silicon POL’s + 1 st Power Mgt. Acquired di/dt High-density Bricks & POL’s Silicon Initiative Acquired Power Systems (Europe/Asia) Powec Power Systems (North America) Acquired HC DC/DC Bricks (North America) Acquired IPD Acquired DC/DC Conversion (Europe) Melcher AC/DC – North America Silicon R&D Center Startup 1973 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Strategic Direction Founded as AC/DC power conversion company Initial Public Offering (IPO) Strategic shift to communications infrastructure markets & acquisitions A technology leader in powering communications. Integrated five acquisitions, developed silicon & digital power mgt. Entered Server/Storage markets & acquiring Custom capability 35 3/15/2018
Power-One’s New Global Footprint Ireland Andover, MA San Jose, CA Chatsworth, CA Camarillo, CA Carlsbad, CA Switzerland Italy Slovakia Hungary Baoan, Shenzhen, China Shekou, Shenzhen, China Dallas, TX Dominican Rep. Penang, Malaysia Singapore Australia Manufacturing Centers R&D Centers NEW Mfg Centers NEW R&D Centers 36 3/15/2018
Summary of Potential Synergies P. E. G. Product Orientation Operations Increased Sales Financials Orientation Technology/ R&D • Customs Power-One • Standards Combined Synergy • Full Product Portfolio – the best in power • Strong AC in China (China); • Excellent Italy midvolume/complex product capability • Strong Customer Relationships • Diverse Customer Base • $160 M • Strong DC/DC in Asia & • Can compete with the largest competitors Dom. Rep. • Combined purchasing power • Strong AC in mid-volume in D. R. • Largest datacom • Increased market share customers • Cross-selling opportunities • ATE & Transportation • Customers are different; increased Customers penetration • Server/Storage ramping • ½ Billion! • Global Sales Presence • $300 M+ in 2006 • Largest Distribution Base * Sound Balance Sheet • $75 M in Cash • Very secure financially • Zero debt • Ability to fund future growth & opportunities • Power Only • The ONLY top-10 power company that is exclusively power • Top Brand-name recognition • Innovation AC/DC • DC/DC Bricks • The best in the industry • Very High Power • Digital Power Mgt (Board • IC’s to AC • Digital Implementations (DSP Level) • New Applications (Solar/Wind/Utility) & u. Controllers) • High efficiency • Engineering collaboration • Software/Firmware • Increased IP portfolio 37 • Very Diverse Applications 3/15/2018
Growth Opportunities CORE GROWTH 1. Technology Leadership 2. High Density/Efficiency 3. Broad Product Portfolio Communications & Industrial Markets Standard Products NEW OPPORTUNITIES 1. New Markets 2. New Products 3. Digital Power Server & Storage Markets Custom Products Power Systems (Indoor) Power Systems (Outdoor & Access) AC/DC Power Supplies AC/DC Front-ends DC/DC Bricks Analog POLs Z-One™ Digital Power -Digital POLs -Digital Power Mgt. Acquisitions 38 3/15/2018
Significance of Acquisition for Investors • Power-One is a consolidator and can compete with biggest competitors • More opportunities with large, global, well-funded company in fast-growing markets • Acquisition is very accretive, very quickly • Power-One is the only significant “Pure Power” play • High synergistic and strategic value in the acquisition • Augments and helps fund continuing digital power developments • Power-One forecasts 4 th quarter range to be between $120 -130 M with acquisition, depending upon closing date; $530 -550 M in 2007. 39 3/15/2018
Other Power-One “Take-a-ways” • 2005 was a return to profitability year (Q 3 & Q 4) • 2006 is a return to growth; Bookings & Backlog are at the highest levels since 2000. Q 3 Guidance: $74 -78 M • Telecom Power Systems should be high-growth business • Server & Storage design wins will turn into revenue (‘ 06 forward) • AC/DC Front-End business is strong, especially with new products • DC/DC products continued strength in market with bricks & POLs • Z-One™ digital power management gaining momentum – – Z-Alliance includes C&D Technology, Atmel, and now Silicon Laboratories! Design-wins growing, multiple platforms, top 10 customers “No-bus” Z-1000 addresses lower end systems – power mgt. for free! 2 nd generation Digital Power Manager now controls non-Z-One devices • Continuing to forecast 10 -15% organic growth for 2006 40 3/15/2018
Thank You! TM
Disclaimer & Forward Looking Statements This presentation contains forward-looking statements, which are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “forecast, ” “expect, ” “anticipate, ” “will, ” “looking, ” “believe” and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Forward-looking statements are not guarantees, but rather are predictions of and make certain assumptions regarding anticipated future results. Achievement of actual results are dependent upon and will involve a variety of risks and uncertainties that could cause actual results to differ materially from assumptions and predictions. Such risks and uncertainties include, but are not limited to, the risk that Power-One’s and Magnetek’ businesses will not be integrated successfully; distraction of management as a result of, and the challenges of integration and restructuring associated with the transaction or other acquisitions, and the challenges of achieving anticipated synergies in whole or in part; costs related to the transaction; the possibility that the market for the sale of certain products and services may not develop as expected; Power-One’s ability to manage its international operations; the risk that the process of reconciling certain Magnetek, Inc. financial information to U. S. GAAP could result in changes to Magnetek’ financial statements that adversely impact the Power-One’s pro forma estimates regarding the transaction; the existence or enactment of adverse U. S. and foreign government regulation; the risk that the development of products and services may not proceed as planned; adverse general domestic and international economic conditions including interest rate and currency exchange rate fluctuations; the difficulty of efficiently managing the company’s cost structure for capital expenditures, materials and overhead, as well as operating expenses such as wages and benefits due to the vertical integration of the company’s manufacturing processes; the possibility that the transaction or other contemplated acquisitions may not close; the impact of competitive products or technologies and competitive pricing pressures; potential business disruptions, including labor unrest, work stoppages, or other short or longer term labor disruptions; and other risks that are described from time to time in Power-One's Securities and Exchange Commission reports. See “Risk Factors” in the Company’s 2005 Form 10 -K on file with the Securities and Exchange Commission for greater detail regarding factors that constitute cautionary statements with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Readers of this information are cautioned not to place undue reliance on these forward-looking statements, since, while we believe the assumptions on which the forwardlooking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in these materials. We undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. 42 3/15/2018
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