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