Magnetek (NYSE:MAG)
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3 Years : From May 2010 to May 2013
Magnetek, Inc. (“Magnetek” or “the Company”, NYSE: MAG) today reported
the results of its 2011 fiscal second quarter ended January 2, 2011.
Second Quarter Results
In its second quarter of fiscal 2011, Magnetek recorded revenue of $26.1
million, a 36% increase from the second quarter of fiscal 2010 and a 5%
sequential increase from the first quarter of fiscal 2011. The increase
in sales from the prior year quarter reflects significant year-over-year
sales growth in the Company’s renewable energy product line as well as
sales growth in its served traditional markets. Gross profit was $8.5
million (32% of sales) in the second quarter of fiscal 2011 versus $5.9
million (31% of sales) in the same period a year ago, while second
quarter income from operations improved more than $2.1 million
year-over-year. Increased sales volume and cost containment contributed
to the expansion in both gross profit and operating income.
“During the second quarter we continued to build on the positive
momentum of the past couple of quarters, as evidenced by achieving our
highest levels of sales, profit margin and earnings per share since the
economic downturn began. Our end markets showed signs of continuing
recovery during the quarter, as each of our primary served markets
experienced a sales increase over prior year second quarter levels.
Total company sales through the first six months of fiscal 2011 are back
to pre-recession levels, led mainly by growth in sales of our E-Force®
wind inverters. Our prospects for continued growth with renewable energy
opportunities, combined with expected increasing demand for our
traditional products, have us well positioned to outpace overall
economic growth rates,” said Peter McCormick, Magnetek’s president and
chief executive officer.
Total operating expenses, consisting of research and development (R&D),
pension expense, and selling, general and administrative (SG&A) costs,
were $7.1 million in the second quarter of fiscal 2011 compared to
operating expenses of approximately $6.7 million in the prior-year
period. Compared to the prior year second quarter, current year
operating expenses were impacted by higher R&D expenses, higher variable
selling expenses and increased incentive compensation provisions,
partially offset by lower pension expense.
Income from operations in the second quarter of fiscal 2011 was $1.4
million compared to a loss from operations of $0.8 million for the same
period last year. Income from continuing operations after provision for
income taxes in the second quarter of fiscal 2011 was $1.4 million or
$.04 per share, compared to a loss from continuing operations of $0.8
million, or a $.03 loss per share, in the same period last year.
Including results of discontinued operations, the Company recorded net
income of $.04 per share in the second quarter of fiscal 2011 versus a
net loss of $.04 per share in the second quarter of fiscal 2010.
Unrestricted cash balances decreased by $3.3 million during the second
quarter of fiscal 2011 to $6.6 million at January 2, 2011, reflecting
higher working capital requirements and cash contributions of $3.0
million to the Company’s defined benefit pension plan in the second
quarter.
Operations and Outlook
Total bookings for the second quarter of fiscal 2011 were $25.4 million,
resulting in a book-to-bill ratio for the quarter of 97%. Total Company
order backlog of $22.4 million at January 2, 2011, represents a 10%
increase from the $20.4 million backlog at the end of the prior year
second quarter. Included in the Company’s backlog are nearly $1 million
of orders for inverters for combined heat and power alternative energy
applications, a new market for the Company. Bookings of products for
material handling applications were $14.4 million in the second quarter
of fiscal 2011, a 24% increase over prior year second quarter bookings
of $11.6 million. In addition, subsequent to the end of the second
quarter, the Company received additional orders valued at more than $6
million for its E-Force® wind inverters, increasing the
Company’s backlog at January 9, 2011, to more than $28 million.
“Recent order rates and backlog levels have remained healthy in both our
traditional markets as well as in renewable energy. Current economic
data points to a continuing expansion in U.S. manufacturing activity,
and as a result, we remain optimistic that conditions will continue to
improve in our business throughout fiscal 2011,” said Mr. McCormick. “In
addition, we remain encouraged about our growth prospects in renewable
energy markets and expect that part of our business to be a significant
contributor to our sales growth and profitability going forward,” added
McCormick.
The Company currently expects sales for the third quarter of fiscal 2011
to reflect a slight sequential decrease from the current year second
quarter sales of $26.1 million, mainly due to expected lower seasonal
demand in material handling markets, partially offset by higher sales of
inverters for renewable energy applications. Gross margins in the third
quarter of fiscal 2011 are expected to decrease slightly from the 32%
achieved in the second quarter of fiscal 2011, due mainly to a slight
shift in the Company’s projected sales mix. The Company also expects
operating expenses in the third quarter of fiscal 2011 to decrease
slightly sequentially from second quarter levels.
As previously disclosed, Magnetek has an underfunded defined benefit
pension plan that was frozen in 2003. Fiscal 2011 annual pension expense
is expected to total $6.5 million, a decrease of approximately $1.7
million from the prior year pension expense. Pension expense for
accounting purposes for fiscal 2011 was measured using asset and
liability values as of June 27, 2010. Asset values at June 2010 were
approximately $118 million, while asset values as of the end of December
2010 increased to approximately $130 million. Over the same period, the
Company’s projected benefit obligation has remained relatively flat,
resulting in an estimated improvement in the Company’s net pension
liability of approximately $12 million since June 2010. This estimated
reduction in the Company’s pension liability is not reflected in the
Company’s balance sheet as of January 2, 2011, as pension values for
accounting purposes are re-measured annually in June. Looking forward,
pension expense for fiscal year 2012 will be dependent on the value of
pension plan assets at the end of June 2011. However, using the
Company’s pension plan asset value at the end of December 2010 and
actuarial assumptions regarding asset returns (8.5%) and interest rates
(5.1%), the Company would expect pension expense for fiscal 2012 to
decrease to approximately $4.5 million from $6.5 million in fiscal 2011.
Company Webcast
This morning, at 11:00 a.m. Eastern Standard Time, Magnetek management
will host a conference call to discuss Magnetek’s fiscal 2011 second
quarter results. The conference call will be carried live and individual
investors can listen to the call at www.earnings.com
while institutional investors can access the call at www.streetevents.com.
A replay of the call will be available on the “Investor Relations” page
of Magnetek's website www.magnetek.com
for at least ninety days. A replay of the call also will be available
through February 16, 2011, by phoning 706-645-9291 (Conference ID #
37128609).
Magnetek, Inc. (NYSE: MAG) manufactures digital power and motion control
systems used in material handling, people moving and energy delivery.
The Company is headquartered in Menomonee Falls, Wis. in the greater
Milwaukee area and operates manufacturing plants in Pittsburgh, Pa. and
Canonsburg, Pa. as well as Menomonee Falls.
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding the Company's anticipated financial
results for its third quarter of fiscal year 2011 and for fiscal 2012.
These forward-looking statements are based on the Company's
expectations and are subject to risks and uncertainties that cannot be
predicted or quantified and are beyond the Company's control. Future
events and actual results could differ materially from those set forth
in, contemplated by, or underlying these forward-looking statements.
These include, but are not limited to, economic conditions in general,
business conditions in material handling, elevator, mining, and
renewable energy markets, operating conditions, competitive factors such
as pricing and technology, risks associated with acquisitions and
divestitures, legal proceedings and the risk that the Company’s ultimate
costs of doing business exceed present estimates. Other factors
that could cause actual results to differ materially from expectations
are described in the Company's reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
The Company may, in the course of its financial presentations,
earnings releases, earnings conference calls, and otherwise, publicly
disclose certain numerical measures which are or may be considered
"non-GAAP financial measures” under SEC Regulation G. "GAAP"
refers to generally accepted accounting principles in the United States.
Non-GAAP financial measures disclosed by management are provided as
additional information to investors in order to provide them with an
alternative method for assessing the Company’s financial condition and
operating results. These measures are not in accordance with, or
a substitute for, GAAP, and may be different from or inconsistent with
non-GAAP financial measures used by other companies. The
Company’s public disclosures may include non-GAAP measures such as
EBITDA and adjusted EBITDA. EBITDA represents its GAAP results
adjusted to exclude interest, taxes, depreciation and amortization. Adjusted
EBITDA represents EBITDA adjusted to exclude non-cash pension and stock
compensation expenses.
Magnetek, Inc.
Consolidated Results of Operations
(in thousands except per share data)
Three months ended
Six months ended
(Unaudited)
(Unaudited)
(13 weeks)
(13 weeks)
(27 weeks)
(26 weeks)
January 2,
December 27,
January 2,
December 27,
Results of Operations:
2011
2009
2011
2009
Net sales
$
26,066
$
19,232
$
50,943
$
37,066
Cost of sales
17,596
13,354
34,929
25,566
Gross profit
8,470
5,878
16,014
11,500
Research and development
1,073
995
2,069
1,896
Pension expense
1,594
2,051
3,311
4,103
Selling, general and administrative
4,411
3,588
8,308
7,547
Income (loss) from operations
1,392
(756
)
2,326
(2,046
)
Interest income
-
(6
)
(1
)
(16
)
Income (loss) from continuing operations before
provision for income taxes
1,392
(750
)
2,327
(2,030
)
Provision for income taxes
15
130
287
361
Income (loss) from continuing operations
1,377
(880
)
2,040
(2,391
)
Loss from discontinued operations
(141
)
(345
)
(533
)
(629
)
Net income (loss)
$
1,236
$
(1,225
)
$
1,507
$
(3,020
)
Per common share - basic and diluted:
Income (loss) from continuing operations
$
0.04
$
(0.03
)
$
0.07
$
(0.08
)
Loss from discontinued operations
$
(0.00
)
$
(0.01
)
$
(0.02
)
$
(0.02
)
Net income (loss) per common share
$
0.04
$
(0.04
)
$
0.05
$
(0.10
)
Weighted average shares outstanding:
Basic
31,284
31,010
31,271
30,985
Diluted
31,558
31,010
31,513
30,985
Three months ended
Six months ended
(Unaudited)
(Unaudited)
January 2,
December 27,
January 2,
December 27,
Other Data:
2011
2009
2011
2009
Depreciation expense
$
185
$
257
$
439
$
515
Amortization expense
14
13
27
26
Capital expenditures
75
419
155
693
Magnetek, Inc.
Consolidated Balance Sheet
(in thousands )
January 2,
2011
June 27,
(Unaudited)
2010
Cash
6,579
$
8,244
Restricted cash
262
262
Accounts receivable
15,849
16,436
Inventories
14,695
10,285
Prepaid and other current assets
730
480
Total current assets
38,115
35,707
Property, plant & equipment, net
3,554
3,825
Goodwill
30,485
30,443
Other assets
5,472
6,125
Total assets
$
77,626
$
76,100
Accounts payable
$
10,558
$
9,887
Accrued liabilities
5,428
4,953
Current portion of long-term debt
3
4
Total current liabilities
15,989
14,844
Pension benefit obligations, net
72,345
77,914
Long-term debt, net of current portion
6
-
Other long-term obligations
1,322
1,461
Deferred income taxes
6,311
5,818
Common stock
313
312
Paid in capital in excess of par value
139,447
138,965
Accumulated deficit
(5,115
)
(6,622
)
Accumulated other comprehensive loss
(152,992
)
(156,592
)
Total stockholders' deficit
(18,347
)
(23,937
)
Total liabilities and stockholders' deficit
$
77,626
$
76,100
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