Q2 Highlights
- Q2 net sales of $28.3 million
increased 5% from the prior year second quarter, due to higher
sales into material handling markets.
- Q2 gross margin improved to 36.7% of
sales, up 70 basis points over prior year Q2 gross margin of 36.0%
of sales.
- Earnings per share from continuing
operations increased 18% to $.87 per share, compared to $.74 per
share in Q2 last year.
Magnetek, Inc. (“Magnetek” or “the Company,” NASDAQ: MAG) today
reported the results of its second quarter of fiscal year 2015,
ended June 28, 2015.
Second Quarter Results
In the second quarter of fiscal 2015, Magnetek recorded revenue
of $28.3 million, a 5% increase from the prior year second quarter
sales of $27.0 million, as sales of products for material handling
applications increased $1.3 million year-over-year to $21.1
million. Income from continuing operations and earnings per share
were both up year-over-year, due to higher sales volume, lower
pension expense, and lower tax provisions. As a result, second
quarter earnings per share from continuing operations increased 18%
to $.87 per share compared to prior year earnings from continuing
operations of $.74 per share.
“Most of our end markets remained healthy throughout our second
quarter, and we achieved organic sales growth of 5% over last
year’s second quarter. We expanded our profit margins on a
year-over-year basis, with increased gross profit, operating
profit, and net income,” said Peter McCormick, Magnetek’s president
and chief executive officer.
Gross profit amounted to $10.4 million (36.7% of sales) in the
second quarter of 2015 versus $9.7 million (36.0% of sales) in the
same period a year ago. The increase in gross profit and gross
margin was primarily due to higher sales volume and improved sales
mix into material handling markets.
Total operating expenses, consisting of research and
development, pension expense, and selling, general and
administrative costs, were $7.2 million in the second quarter of
2015, compared to $7.0 million in the second quarter of fiscal
2014. Compared to the prior year, the increase in operating expense
was mainly due to higher variable selling expenses and
discretionary spending, partially offset by lower pension expense.
In addition, prior year operating expenses include the favorable
impact of an adjustment to stock compensation expense of
approximately $0.2 million.
Income from continuing operations after provision for income
taxes in the second quarter of fiscal 2015 was $3.2 million, or
$.87 per diluted share, compared to after-tax income from
continuing operations of $2.5 million, or $.74 per diluted share,
in the same period last year.
Including the results of discontinued operations, the Company
recorded net income of $.83 per diluted share in the second quarter
of 2015 versus net income of $.68 per diluted share in the second
quarter of fiscal 2014.
Pension Update
The Company did not make any contributions to its pension plan
during the first six months of fiscal 2015, and currently does not
expect to make any for the remainder of fiscal 2015. Actuarial
projections as of June 28, 2015, indicate that minimum required
pension contributions beyond the current fiscal year are estimated
at between $2 million and $4 million for each of the next six
fiscal years.
The net change in the Company’s pension liability based on
interest rate movements and asset returns was not material during
the first six months of fiscal 2015, as the benefit of higher
interest rates was largely offset by lower than expected returns on
pension plan assets in the six months ended June 28, 2015.
The actual timing and amount of future pension plan
contributions are dependent upon many factors, including returns on
invested assets, the level of certain market interest rates, the
discount rate used to determine pension obligations, voluntary
contributions the Company may elect to make to the plan, and other
potential regulatory actions.
Subsequent Event
Subsequent to the end of the second quarter, on July 27, 2015,
Magnetek and Columbus McKinnon Corporation (NASDAQ: CMCO), a
leading designer, manufacturer, and marketer of material handling
products, announced that they have entered into a definitive
agreement for Columbus McKinnon to acquire all of the outstanding
shares of Magnetek for $50 per share for a total value of $188.9
million. Columbus McKinnon, through a wholly owned subsidiary,
expects to commence a cash tender offer for all of the outstanding
shares of Magnetek on or about August 5, 2015. The tender offer is
subject to the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and other customary closing conditions. The tender offer
requires as a condition to consummation that at least a majority of
the outstanding shares of Magnetek's common stock be tendered. The
transaction is expected to close within 90 days.
About Magnetek
Magnetek, Inc. (NASDAQ: MAG) manufactures digital power and
motion control systems used in material handling, elevator, and
mining applications. The Company is headquartered in Menomonee
Falls, Wis. in the greater Milwaukee area and operates
manufacturing plants in Pittsburgh, Pa. and Bridgeville, Pa. as
well as Menomonee Falls.
ADDITIONAL INFORMATION AND WHERE YOU CAN FIND IT: This
news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities. The tender offer
for the outstanding shares of the Company’s common stock described
in this news release has not commenced. At the time the tender
offer is commenced, Columbus McKinnon Corporation will file or
cause to be filed a Tender Offer Statement on Schedule TO with the
Securities and Exchange Commission (“SEC”) and the Company will
file a Solicitation/Recommendation Statement on Schedule 14D-9 with
the SEC related to the tender offer. The Tender Offer Statement
(including an Offer to Purchase, a related Letter of Transmittal
and other tender offer documents) and the
Solicitation/Recommendation Statement will contain important
information that should be read carefully before any decision is
made with respect to the tender offer. Those materials will be made
available to the Company’s stockholders at no expense to them by
the information agent to the tender offer, which will be announced.
In addition, all of those materials (and any other documents filed
with the SEC) will be available at no charge on the SEC’s website
at www.sec.gov.
Safe Harbor Statement
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 2015 through 2021 fiscal years. Statements
contained in this news release regarding the proposed transaction
between the Company and Columbus McKinnon Corporation and the
expected timetable for completing the transaction are also
forward-looking statements. 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, and mining 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 assumes no obligation to update the forward-looking
statements contained in this news release, except as expressly
required by law.
Non-GAAP Financial Measures
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. Company
management believes that adjusted EBITDA is useful to investors as
it provides a measure of the Company’s cash flow prior to capital
investments, changes in working capital, and pension contributions.
As a result, management believes investors can use this metric as a
measure of the Company’s ability to fund its growth initiatives and
its pension obligations.
Magnetek, Inc. Consolidated Results of
Operations (in thousands except per share data)
Three months ended Six months
ended (Unaudited) (Unaudited) (13 weeks)
(13 weeks) (26 weeks) (26 weeks) June
28, June 29, June 28, June 29, Results
of Operations: 2015 2014
2015 2014 Net sales $ 28,348 $ 27,009 $ 54,960
$ 51,122 Cost of sales 17,937
17,294 35,150 33,255
Gross profit 10,411 9,715 19,810 17,867 Operating expenses:
Research and development 800 790 1,699 1,589 Pension expense 502
925 1,004 1,850 Selling, general and administrative
5,884 5,250 11,374
10,240 Total operating expenses 7,186
6,965 14,077
13,679 Income from operations 3,225 2,750 5,733 4,188
Provision for income taxes 41
240 82 480 Income from
continuing operations 3,184 2,510 5,651 3,708 Income (loss) from
discontinued operations (146 ) (213 )
(309 ) (357 ) Net income $ 3,038
$ 2,297 $ 5,342 $ 3,351
Earnings per common share - basic:
Income from continuing
operations $ 0.89 $ 0.77 $ 1.59 $ 1.14 Income (loss) from
discontinued operations $ (0.04 ) $ (0.07 ) $ (0.09 ) $ (0.11 ) Net
income per common share $ 0.85 $ 0.70
$ 1.50 $ 1.03
Earnings per
common share - diluted:
Income from continuing operations $ 0.87 $ 0.74 $
1.54 $ 1.10 Income (loss) from discontinued operations $ (0.04 ) $
(0.06 ) $ (0.09 ) $ (0.11 ) Net income per common share $
0.83 $ 0.68 $ 1.45 $ 0.99
Weighted average shares outstanding: Basic
3,566 3,267 3,558 3,265 Diluted 3,679
3,372 3,678 3,375
Reconciliation of
Non-GAAP Financial Measures:
The following table reconciles operating income, the most directly
comparable GAAP measure, to adjusted operating income and adjusted
EBITDA, non-GAAP financial measures:
Three months
ended Six months ended (Unaudited)
(Unaudited) June 28, June 29, June 28,
June 29, 2015 2014 2015
2014 Income from operations (GAAP) $ 3,225 $ 2,750 $ 5,733 $
4,188 As a percent of sales 11.4 % 10.2 % 10.4 % 8.2 % Add: pension
expense 502 925
1,004 1,850 Adjusted income from
operations (non-GAAP) $ 3,727 $ 3,675 $
6,737 $ 6,038 As a percent of sales 13.1 %
13.6 % 12.3 % 11.8 % Add: depreciation and amortization 200 203 399
405 Add: stock compensation expense 208
48 389 231
Adjusted EBITDA (non-GAAP) $ 4,135 $ 3,926
$ 7,525 $ 6,674 As a percent of sales
14.6 % 14.5 % 13.7 % 13.1 %
Three months ended Six
months ended (Unaudited) (Unaudited) June
28, June 29, June 28, June 29, Other
Data: 2015 2014 2015
2014 Depreciation expense $ 186 $ 189 $ 372 $ 378
Amortization expense 14 14 27 27
Capital expenditures
491 188 698 359
Consolidated Balance Sheet (in
thousands ) June 28,
2015 December 28, (Unaudited) 2014 Cash
$ 13,072 9,702 Restricted cash 262 262 Accounts receivable 17,515
16,975 Inventories 14,234 13,626 Prepaid and other current assets
546 801 Total current assets 45,629
41,366 Property, plant & equipment, net 3,253 2,931
Goodwill 30,323 30,364 Other assets 4,010
4,039 Total assets $ 83,215 $ 78,700
Accounts payable $ 9,989 $ 10,375 Accrued liabilities
5,524 6,703 Total current liabilities
15,513 17,078 Pension benefit obligations, net 25,012 27,360
Other long-term obligations 780 845 Deferred income taxes
9,828 9,798 Total liabilities 51,133
55,081 Common stock 36 35 Paid in
capital in excess of par value 150,576 150,641 Accumulated deficit
(4,833 ) (10,175 ) Accumulated other comprehensive loss
(113,697 ) (116,882 ) Total stockholders' equity
32,082 23,619 Total liabilities and
stockholders' equity $ 83,215 $ 78,700
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150804005421/en/
Magnetek, Inc.Marty
Schwenner262-703-4282mschwenner@magnetek.com
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