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MagneTek Inc. Reports Operating Results (10-Q)

February 09, 2011 | About:
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10qk

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MagneTek Inc. (MAG) filed Quarterly Report for the period ended 2011-01-02.

Magnetek Inc. has a market cap of $54.7 million; its shares were traded at around $2.39 with and P/S ratio of 0.7. Hedge Fund Gurus that owns MAG: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns MAG: Chuck Royce of Royce& Associates, Mario Gabelli of GAMCO Investors, Chuck Royce of Royce& Associates, John Keeley of Keeley Fund Management, John Keeley of Keeley Fund Management.

Highlight of Business Operations:

Second quarter fiscal 2011 sales were $26.1 million, a 36% increase over prior year second quarter sales of $19.2 million, as we experienced year-over-year sales growth in each of our major served markets. Fiscal 2011 second quarter gross profit increased to $8.5 million, or 32.5% of sales, compared to $5.9 million, or 30.6% of sales in the second quarter of fiscal 2010. We reported a pre-tax income from operations of $1.4 million in the second quarter of fiscal 2011 compared to a prior year pre-tax loss from operations of $0.8 million, due mainly to higher sales volume and lower pension expense, which decreased by $0.5 million to $1.6 million in the second quarter fiscal 2011 from second quarter fiscal 2010 levels. In summary, the majority of our key indicators, including order rates, sales levels, and profit margins, improved significantly over the levels of one year ago.

We currently anticipate continued improvement in our future operating performance, supported by recent healthy levels of incoming orders received (“bookings”) as well as backlog amounts. Bookings during the second quarter of fiscal 2011 (ended January 2, 2011) were $25.4 million, which represented a 2.1% increase from bookings of $24.8 million in the first quarter of fiscal 2011, and included bookings for material handling products of $14.4 million. We entered the third quarter of fiscal 2011 with a total backlog of $22.4 million and, in the first week of our third quarter, we received additional wind inverter orders valued at more than $6 million, increasing our backlog in mid-January 2011 to more than $28 million.

Selling, general and administrative (“SG&A”) expense was $4.4 million (16.9% of sales) for the three months ended January 2, 2011, versus $3.6 million (18.7% of sales) for the three months ended December 27, 2009. Selling expenses in the three months ended January 2, 2011, increased to $2.2 million from $2.1 million in the three months ended December 27, 2009, due to higher volume-related commissions. General and administrative (“G&A”) expense increased to $2.3 million for the three months ended January 2, 2011, from $1.5 million for the three months ended December 27, 2009, mainly due to higher incentive compensation provisions.

SG&A expense was $8.3 million (16.3% of sales) for the six months ended January 2, 2011, versus $7.5 million (20.4% of sales) for the six months ended December 27, 2009. Selling expenses in the six months ended January 2, 2011, increased to $4.3 million from $4.1 million in the six months ended December 27, 2009, due to higher volume-related commissions. General and administrative (“G&A”) expense increased to $2.2 million for the three months ended January 2, 2011, from $1.5 million for the three months ended December 27, 2009, mainly due to higher incentive compensation provisions.

Our unrestricted cash and cash equivalent balance decreased approximately $1.6 million during the first six months of fiscal 2011, from $8.2 million at June 27, 2010, to $6.6 million at January 2, 2011. Restricted cash balances remained unchanged during the first six months of fiscal 2011 at $0.3 million. The primary source of cash during the first six months of fiscal 2011 was from adjusted income from continuing operating activities of $6.7 million (net income from continuing operations adjusted to add back non-cash depreciation, amortization, pension, stock compensation and deferred income tax provisions).

The primary uses of cash in the first six months of fiscal 2011 were $5.4 million in contributions to our defined benefit pension plan, net increases in operating assets and liabilities of $2.1 million (mainly changes in inventory, accounts receivable and accounts payable balances), $0.8 million of disbursements related to previously divested businesses and $0.2 million for capital expenditures. Inventory increased during the first six months of fiscal 2011 by $4.4 million, due to increased lead times for certain raw materials and new product introductions, and to meet expected increased production based on the increased order backlog. Accounts receivable decreased during the first six months of fiscal 2011 by $0.6 million due to a reduction in days sales outstanding from 61 days at June 2010 to 55 days at the end of the second quarter of fiscal 2011, partially offset by higher sale volume. Accounts payable and other accrued liabilities balances increased by $1.0 million during the first six months of fiscal 2011, again mainly due to higher volume. In addition, other assets decreased more than $0.6 million, due mainly to a participation payment of $0.5 million related to an annuity contract.

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