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PowerOne Inc. Reports Operating Results (10-K)

March 16, 2011 | About:
10qk

10qk

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PowerOne Inc. (PWER) filed Annual Report for the period ended 2011-01-02.

Powerone Inc. has a market cap of $943 million; its shares were traded at around $8.84 with a P/E ratio of 8 and P/S ratio of 0.9.

Highlight of Business Operations:

Increasing Demand for Renewable Energy. With global power needs expected to double by 2025, according to the U.S. Department of Energy, suppliers and users of electricity are seeking renewable sources of energy, with both public and private global investment driving the emerging market for renewable energy. Concern about the supply of traditional energy sources, including oil and natural gas, global warming and the need to minimize the carbon footprint of the power generation industry have prompted wide-spread legislation throughout the globe based on broad goals outlined in the Kyoto Protocol, an international agreement calling for the reduction of greenhouse gases. The outcome of this treaty has created a large number of country and local-level mandates and subsidies aimed at encouraging the emerging market for renewable forms of energy for electricity production. For example, certain European countries, such as Germany, Italy, France and the United Kingdom, have adopted Feed in Tariffs (FIT) whereby the government will pay approximately $0.30 to $0.40/ kWh over a 20-year time period for energy fed back into the utility grid. These incentives are intended to bring the production cost of electricity from renewable sources to parity with power generated from fossil and other fuels, thereby encouraging creation of energy from clean, renewable sources. See "Risk FactorsMuch of our business is subject to risks associated with operations in foreign countries."

Solar and wind energy generation systems require inverters to convert electricity to feed it back to the grid. In 2010, we estimate that the market for solar inverters was over $5.0 billion, and wind inverters were over $2.0 billion. Inverters represent approximately 5-7% of the cost to install a solar system and approximately 3-5% of the cost to install a wind system. They are sold through multiple channels, including directly to the end user, or through distributors, systems integrators and OEMS. In 2009, we estimate the market for solar and wind inverters was approximately $4.0 billion, comprised of $1.8 billion for solar inverters and $2.2 billion for wind inverters. In 2008, we estimate the market for solar and wind inverters was at $2.8 billion, comprised of $1.3 billion for solar inverters and $1.5 billion for wind inverters. The primary geographic market for PV installations has traditionally been in Europe, while Asia and North America are also beginning to see significant PV investment. Wind turbine installations also initially gained strength primarily in Europe, but have seen rapid adoption in North America, Asia and other regions in recent years.

During 2009, we announced and implemented a plan to restructure our global organization in response to ongoing demand uncertainty and to exit our factory in the Dominican Republic. As a result, we reduced our global headcount by approximately 1,300, or 29% of our workforce, and incurred restructuring charges of approximately $11.4 million during the two years ended January 2, 2011. The plan was completed during the second quarter of 2010. Through implementation of these actions, we were able to (i) realign global manufacturing and sourcing; (ii) improve operational performance; (iii) increase efficiencies in the supply chain and manufacturing process and (iv) improve our ability to respond to customer requirements in a cost effective manner. During the two years ended January 2, 2011, we recorded severance benefits of approximately $7.1 million, and facilities closure charges of approximately $4.3 million related to exiting our factory in the Dominican Republic, all of which were settled in cash.

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