Magnetek Inc. has a market cap of $41.1 million; its shares were traded at around $1.29 with and P/S ratio of 0.5. MAG is in the portfolios of Mario Gabelli of GAMCO Investors, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, John Keeley of Keeley Fund Management.
Highlight of Business Operations:The global economic recession resulted in a U.S. industrial slowdown and decline in capital spending, which began to negatively impact our business during the second half of fiscal 2009 and continued to impact us throughout much of fiscal 2010. Demand for material handling product offerings is influenced by cyclical forces in the industrial marketplace, and during fiscal 2010, we experienced softening demand in certain of our served markets, principally in the automotive and primary metals industries. As a result, our sales decreased 18% in fiscal 2010 from fiscal 2009 levels. However, over the past two fiscal quarters, we have seen indicators of improvements in certain of our served markets, including material handling markets, our largest served market. Accordingly, we believe our sales and operating results will continue to improve at a measured pace during fiscal 2011 as U.S. manufacturing capacity utilization rates continue to increase. The anticipated improvement in our future operating performance is supported by $24.9 million of incoming orders received (“bookings”) during the first quarter of fiscal 2011 (ended October 3, 2010), an increase of 32% from bookings of $18.8 million in the prior year first quarter. In addition, bookings of product for material handling applications were $16.1 million in the first quarter of fiscal 2011, an increase of 26% over the prior year first quarter bookings. We entered the second quarter of fiscal 2011 with a total backlog of $22.8 million, an increase of 112% from our backlog entering the second quarter one year ago.
First quarter fiscal 2011 sales were $24.9 million, a nearly 40% increase over prior year first quarter sales of $17.8 million, as we experienced year-over-year sales growth in each of our major served markets. Fiscal 2011 first quarter gross profit increased to $7.5 million, or 30.3% of sales, compared to $5.6 million, or 31.5% of sales in the first quarter of fiscal 2010. We reported a pre-tax income from operations of $0.9 million in the first quarter of fiscal 2011 compared to a prior year pre-tax loss from operations of $1.3 million, due mainly to higher sales volume and lower pension expense, which decreased by $0.3 million to $1.7 million in fiscal 2011 from fiscal 2010 levels. In addition, our cash balances increased by $1.7 million during the first quarter of fiscal 2011 to nearly $10 million, even after contributing $2.4 million to our defined benefit pension plan. In summary, the majority of our key indicators, including order rates, sales levels, profit margins and cash flow, improved significantly over the levels of one year ago.
Selling, general and administrative (“SG&A”) expense was $3.9 million (15.7% of sales) for the three months ended October 3, 2010, versus $4.0 million (22.2% of sales) for the three months ended September 27, 2009. Selling expenses in the three months ended October 3, 2010, increased to $2.1 million from $2.0 million in the three months ended September 27, 2009, due to higher volume-related commissions. General and administrative (“G&A”) expense decreased to $1.8 million for the three months ended October 3, 2010, from $2.0 million for the three months ended September 27, 2009, mainly due to lower legal fees and currency exchange losses.
Our net income was $0.3 million in the three months ended October 3, 2010, or a $0.01 income per share, basic and diluted, compared to a net loss of $1.8 million in the three months ended September 27, 2009, or $0.06 per share on a basic and diluted basis.
Our unrestricted cash and cash equivalent balance increased $1.7 million during the first quarter of fiscal 2011, from $8.2 million at June 27, 2010, to $9.9 million at October 3, 2010. Restricted cash balances remained unchanged during the quarter at $0.3 million. The primary sources of cash during the first quarter of fiscal 2011 were income from continuing operating activities of $3.1 million (net income from continuing operations adjusted to add back non-cash depreciation, amortization, pension, stock compensation and deferred income tax provisions) and cash from net reductions in operating assets and liabilities of $1.3 million. Accounts receivable decreased during the first quarter of fiscal 2011 by $3.0 million due to a reduction in days sales outstanding from 61 days at June 2010 to 49 days at September 2010. Inventory increased during the first quarter of fiscal 2011 by $1.9 million, to meet expected increased usage based on our current order backlog. There was no significant change in accounts payable and other accrued liabilities balances during the first quarter of fiscal 2011.
The primary uses of cash in the first quarter of fiscal 2011 were $2.4 million in contributions to our defined benefit pension plan, $0.4 million of disbursements related to previously divested businesses and $0.1 million for capital expenditures. While we may make further investments to increase capacity and improve efficiency, we do not anticipate that capital expenditures in fiscal 2011 will exceed $1.5 million. The expected amount of capital expenditures could change depending upon changes in revenue levels, our financial condition and the general economy.
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