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Press
Release
Contacts: Don R. Madison, CFO
FOR IMMEDIATE RELEASE
Powell Industries, Inc.
713-947-4422
DRG&E / 713-529-6600
Conference call to discuss this transaction scheduled for August 9, 2006 at
11:00 a.m. EDT
HOUSTON — August 7, 2006 — Powell Industries, Inc. (NASDAQ: POWL), a leading
manufacturer of equipment and systems for the management and control of
electrical energy and other critical processes, today announced that it has
purchased the medium-voltage ANSI (American National Standards Institute)
switchgear product line and certain related assets from GE Consumer & Industrial
of Louisville, KY for $32 million in cash.
The initial payment of $8.5 million was paid at closing, and the balance
will be paid in four installments ranging from $5.5 million to $6.25 million
over the next 40 months. The
transaction will be financed with a portion of Powell’s existing cash and credit
facility.
In connection with the transaction, Powell has entered into an exclusive
long-term commercial alliance with GE Consumer & Industrial.
Powell will supply all the
medium-voltage ANSI switchgear needs for the GE Consumer & Industrial sales
channel, which will open new markets for Powell and expose Powell products to a
greater number of industries and customers. Powell will design, engineer,
manufacture and sell the acquired medium-voltage ANSI switchgear products to GE.
Additionally, Powell will supply GE with
products to which GE has not previously had access, including equipment with
extended ratings such as 38,000 volt switchgear and a complete line of
arc-resistant electrical equipment.
Thomas W. Powell, Chairman and Chief Executive Officer of Powell, stated, “We are excited with this opportunity, which strengthens our strategic position in the electrical power products business. This agreement is clearly a win for both companies as it allows Powell to reach an even broader base of business and provides GE access to an expanded product portfolio. I want to assure our customers that as we grow, we are not going to change who we are. For our customers that have come to expect highly-engineered, customized solutions on our traditional Powell products, nothing will change. This acquisition allows us to provide Powell quality to a new set of customers. We will continue to work closely with our customers to provide solutions tailored to meet end-user requirements.”
Powell will move the acquired GE product line to its facilities in
Incremental revenues from this acquisition are anticipated to range between $75 and $85 million during the first 12 months of ownership. During the integration process the Company expects the earnings results to be anti-dilutive, and once the integration period has been completed, expects an annualized benefit from the acquisition to earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $7 million to $8 million. This acquisition will change Powell’s historical financial comparisons primarily due to the impact of amortization of intangibles. Historically, Powell has had minimal depreciation and amortization expenses; therefore, the Company believes EBITDA should be presented because it a financial measure that is frequently used by third parties including investors and lenders. EBITDA is a non-GAAP financial measure, and a reconciliation of expected EBITDA from this transaction can be found at the end of this press release.
In connection with this
acquisition and to expand its financing capacity, Powell also announced that it
has amended its existing credit agreement with Bank of America, N.A. as
administrative agent and with certain other financial institutions.
This amended revolving line of credit
increases Powell’s existing senior credit facility to $42 million, which expires
on December 31, 2010.
The transaction advisor to
Powell on this acquisition was Hayes Novus.
CONFERENCE CALL
Powell Industries will host a conference call on Wednesday, August 9,
2006 at 11:00 a.m. EDT (
Powell Industries, Inc., headquartered in
Non-GAAP
Financial Measures
The following table represents a reconciliation of the expected incremental EBITDA to Powell anticipated to be derived after the integration by the Company from the business acquired today.
Projected Annualized
EBITDA
(In millions) Low High
Case Case
Income before interest, income taxes and minority interest.................... $ 3.2 $ 4.2
Interest expense....................................................................................... 1.8 1.8
Depreciation and amortization................................................................. 2.0 2.0
Expected EBITDA.................................................................................. $ 7.0 $ 8.0
EBITDA represents net income before income tax expense, interest expense, depreciation, and amortization. Other companies may define EBITDA differently. EBITDA should not be considered an alternative to income from operations, net income or cash flows.
Any
forward-looking statements in the preceding paragraphs of this release are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward-looking statements
involve risks and uncertainty in that actual results may differ materially from
those projected in the forward-looking statements.
In the course of operations, we are subject to certain risk factors,
including but not limited to competition and competitive pressures, sensitivity
to general economic and industrial conditions, international political and
economic risks, availability and price of raw materials and execution of
business and acquisition strategies.
For further information, please refer to the Company's filings with the
Securities and Exchange Commission, copies of which are available from the
Company without charge.
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