VANCOUVER, BC – Xantrex Technology Inc. (TSX:XTX) announced today a strategic expansion of its programmable power business. Xantrex has entered into a definitive agreement to acquire Elgar Electronics Corporation for US$108 million in cash. Elgar, headquartered in San Diego, California, is a leading provider of programmable power products and systems with the broadest product portfolio in the industry.
Elgar, established in 1965, is a world leader in programmable power supplies and related power electronic products. Its comprehensive product line includes AC power sources, DC power systems, electronic loads, solar array simulators, integrated power systems and services that address test and measurement, process control and power conditioning applications. Elgar's advanced power electronic solutions serve customers in the automotive, aerospace, government, medical, telecom and semiconductor industries.
”The acquisition of Elgar is a strategically compelling transaction for Xantrex,” said Xantrex Chairman, Mossadiq S. Umedaly. ”Elgar is highly complementary to Xantrex's portfolio of businesses and growth strategies. With this acquisition, Xantrex will become a leading player in the global programmable power market with a significantly expanded product line and customer base. Elgar's strong cash flow, profitability and growth, as well as its experienced management team, will immediately contribute to Xantrex's financial and operational performance.”
Elgar's unaudited financial results for the year ended December 30, 2006 included revenue of US$64.5 million, gross profit of US$29.5 million (45.8% margin), normalized earnings before interest, taxes, depreciation and amortization (EBITDA) of US$11.4 million (17.7% margin) and normalized net income of US$6.3 million (9.8% margin). Elgar's unaudited net income before stock option expense for the year ended December 30, 2006 under Generally Accepted Accounting Principles (GAAP) was US$20.5 million. The reconciliation between GAAP net income and normalized net income is provided in the notes below.
Xantrex's CEO John Wallace commented, ”In addition to creating world leadership in programmable power, this transaction brings to Xantrex advanced power electronics technology and know-how applicable to all of our product lines, including renewable solar and backup power. The combination of an expanded and enhanced programmable power business with our rapidly growing renewable business is a powerful platform to drive our business going forward.”
Elgar's President and CEO Joe Budano added, ”We are very excited about joining the Xantrex team and look forward to capitalizing on the expanded opportunities available to us as a significantly larger and stronger enterprise. We believe that Xantrex is the logical acquirer of Elgar and that this combination will produce substantial long-term benefits for our customers and employees.”
The acquisition of Elgar will be financed with US$55 million of cash on hand and US$53 million from a new senior credit facility provided by HSBC Bank Canada. The transaction is expected to be immediately accretive to Xantrex's earnings per share. Xantrex will acquire Elgar free of debt and cash, and with adequate working capital at closing.
The transaction is expected to close in March 2007, subject to customary closing conditions and obtaining usual regulatory approvals.
RBC Capital Markets acted as exclusive financial advisor to Xantrex. Dorsey & Whitney LLP and Stikeman Elliot LLP acted as legal advisors to Xantrex. Houlihan Lokey Howard & Zukin Capital, Inc. acted as exclusive financial advisor to Elgar. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Elgar.
A conference call to discuss the transaction will be held on Tuesday, January 30, 2007, at 6:00 a.m. Pacific Time (9:00 a.m. Eastern Time).
Conference call access: To access the live webcast of the conference call, please click on this link to register http://www.xantrex.com/invevents.asp. To access the conference call by telephone, please call 416-644-3416 or 604-677-8677. Callers should dial in 10 minutes prior to the call. The replay of the conference call and webcast will be available on the Xantrex website shortly after the conclusion of the conference call.
About Xantrex
Xantrex Technology Inc. (www.xantrex.com) is a world leader in the development, manufacturing and marketing of advanced power electronic products and systems for the renewable, portable, mobile, and programmable power markets. The company's products convert and control raw electrical power from any central, distributed, renewable, or backup power source into high-quality power required by the power grid as well as electronic and electrical equipment. Headquartered in Vancouver, British Columbia, the company has facilities in Arlington, Washington; Livermore, California; Elkhart, Indiana; Barcelona, Spain; and Reading, England. Xantrex is publicly listed on the Toronto Stock Exchange under the ticker symbol ”XTX”.
Note that this news release contains forward-looking statements related to Xantrex Technology Inc. Such statements reflect the current views of Xantrex with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in these forward-looking statements.
EBITDA is not a defined measure under Canadian Generally Accepted Accounting Principles (GAAP). However, we believe that EBITDA is a useful measure for investors and we use this measure in evaluating our performance. Elgar's normalized EBITDA excludes stock option expense and non-recurring corporate restructuring, excess management bonuses and consulting and other product development costs incurred for a new product platform which is now substantially complete.
Reconciliation of unaudited financial statement amounts to normalized amounts as follows:
(all figures in US$ Millions)
| EBITDA | Net Income | |
|---|---|---|
| Unaudited Financial Statement Amounts (1) | $9.5 | $20.5 |
| Plus: Interest Expense (pre-tax) (2) | - | 3.1 |
| Excess | 0.9 | 0.9 |
| Research & Development Costs (pre-tax) | 0.7 | 0.7 |
| Corporate Restructuring (pre-tax) | 0.3 | 0.3 |
| Less: Gain on Restructuring Net of Costs (pre-tax) | - | (15.1) |
| Normalization of Tax Expense (3) | - | ( 4.1 ) |
| $11.4 | $6.3 |
(1) Amounts exclude stock option expense. EBITDA for Elgar of US$9.5 million was determined by taking net income of US$20.5 million and adding interest expense of US$3.1 million, tax expense of US$200,000, depreciation and amortization of US$810,000 and deducting a gain on capital restructuring net of costs of US$15.1 million.
(2) Assumes an unlevered capital structure.
(3) Assumes a 40% effective tax rate.
For further information, please contact:
Donna Clark
604-422-2601