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MagneTek Inc. Reports Operating Results (10-Q)

May 05, 2010 | About:
10qk

10qk

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MagneTek Inc. (MAG) filed Quarterly Report for the period ended 2010-03-28.

Magnetek Inc. has a market cap of $50.7 million; its shares were traded at around $1.63 with and P/S ratio of 0.5. MAG is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, John Keeley of Keeley Fund Management.

Highlight of Business Operations:

Third quarter fiscal 2010 gross margin decreased to 28.5% of sales from prior year third quarter gross margin of 30.9%, due mainly to lower sales volume and a shift in sales mix from higher margin material handling products to relatively lower margin renewable energy products, partially offset by savings from cost reduction actions implemented throughout the economic slowdown. We reported a loss from operations of $1.2 million for the third quarter of fiscal 2010 compared to a prior year third quarter income from operations of $1.2 million, due mainly to lower sales volume and higher pension expense, which increased by $1.2 million in the third quarter of fiscal 2010 over prior year third quarter levels. Also during the third quarter of fiscal 2010, our cash balances decreased by $4.0 million as a result of additional contributions to our defined benefit pension plan of $2.6 million and an increase in working capital requirements mainly related to higher accounts receivable balances.

Selling, general and administrative (“SG&A”) expense was $3.6 million (18.6% of sales) for the three months ended March 28, 2010, versus $4.8 million (19.0% of sales) for the three months ended March 29, 2009. Selling expenses in the three months ended March 28, 2010, decreased to $1.8 million from $2.4 million in the three months ended March 29, 2009, due to lower volume-related commissions and lower payroll-related expenses. General and administrative (“G&A”) expense decreased to $1.8 million for the three months ended March 28, 2010, from $2.4 million for the three months ended March 29, 2009, mainly due to lower payroll-related costs and lower incentive compensation provisions.

We recorded a loss from discontinued operations for the three months ended March 28, 2010, of $0.2 million, or a $0.01 loss per share on both a basic and diluted basis, compared to a loss from discontinued operations of $1.1 million, or a $0.03 loss per share on both a basic and diluted basis, for the three months ended March 29, 2009. The loss from discontinued operations in the three months ended March 28, 2010, includes expenses of $0.2 million related to previously divested businesses. The loss from discontinued operations in the three months ended March 29, 2009 includes a lease termination expenses of $1.0 million as well as a loss of $0.1 million related to previously divested businesses.

Selling, general and administrative (“SG&A”) expense was $11.1 million (19.8% of sales) for the nine months ended March 28, 2010, versus $16.2 million (20.7% of sales) for the nine months ended March 29, 2009. Selling expenses in the nine months ended March 28, 2010, decreased to $5.9 million from $7.6 million in the nine months ended March 29, 2009, due to lower volume-related commissions and lower payroll-related expenses. General and administrative (“G&A”) expense decreased to $5.2 million for the nine months ended March 28, 2010, from $8.6 million for the nine months ended March 29, 2009, mainly due to lower payroll-related costs and lower incentive compensation provisions. G&A expense for the nine months ended March 29, 2009 includes a restructuring charge of $0.9 million related to management reorganization.

We recorded a loss from discontinued operations for the nine months ended March 28, 2010, of $0.8 million, or a $0.03 loss per share on both a basic and diluted basis, compared to a loss from discontinued operations of $1.2 million, or $0.04 loss per share on both a basic and diluted basis, for the nine months ended March 29, 2009. The loss from discontinued operations in the nine months ended March 28, 2010, is comprised entirely of expenses related to previously divested businesses. Our loss from discontinued operations for the nine months ended March 29, 2009, includes a loss from termination of a lease agreement of $1.0 million, a loss on the September 2008 disposal of our TPS business of $0.4 million, and expenses related to previously divested businesses of $0.3 million, partially offset by a settlement gain of $0.5 million from a previous agreement with Federal-Mogul Corporation.

Our cash and cash equivalent balance, including restricted cash, decreased $5.6 million during the nine months ended March 28, 2010, from $18.4 million at June 29, 2009, to $12.8 million at March 28, 2010. Our primary sources of cash during the nine months ended March 28, 2010, were from operations assisted by reduced working capital requirements of $1.2 million and a participation payment related to an annuity contract of $0.5 million, and our primary use of cash was for contributions of $9.5 million to our defined benefit pension plan. During the nine months ended March 28, 2010, our net inventories decreased by $1.9 million offset by an increase in our accounts receivable balances by $0.4 million. While we may make further investments to increase capacity for and to improve efficiency in the production of wind inverters, we do not anticipate that capital expenditures in fiscal 2010 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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