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Magnetek Announces Fiscal 2010 Second Quarter Results

Posted by Dana in February 8th 2010

* Net sales for Q2 FY 2010 increased 8% sequentially to $19.2 million from Q1 of FY 2010.
* Q2 FY 2010 operating loss reduced to $0.8 million from $1.3 million in Q1 of FY 2010.
* Cash balances increased to $16.7 million as of December 27, 2009 from $16.0 million at September 27, 2009. Q2 FY 2010 cash provided by continuing operations (excluding pension contributions) was $4.3 million.
* Q2 FY 2010 book-to-bill ratio reaches 146%, including $11 million order for wind power inverters.

Magnetek, Inc. (“Magnetek” or “the Company”) (NYSE: MAG) reported the results of its fiscal 2010 second quarter ended December 27, 2009.

Second Quarter Results

In its fiscal 2010 second quarter Magnetek recorded revenue of $19.2 million, an 8% sequential increase from the first quarter of fiscal 2010, but a 28% decrease from the second quarter fiscal 2009 sales of $26.8 million. The sequential increase in sales from the Company’s first quarter sales was due primarily to higher sales of products for material handling applications, which increased sequentially $1.7 million to $12.6 million. The prior year second quarter sales figure includes $19.7 million of sales of products for material handling applications, which represented the peak sales period of the economic cycle for the Company.

Gross profit amounted to $5.9 million (31% of sales) in the second quarter of fiscal 2010 versus $9.4 million (35% of sales) in the same period a year ago. Lower sales volume across most major product lines, which was partially offset by savings from cost reduction actions implemented over the past nine months, was primarily responsible for the decrease in gross margin over the prior year second quarter.

Total operating expenses, consisting of research and development (R&D), pension expense and selling, general and administrative (SG&A) costs, decreased $0.8 million to $6.6 million in the second quarter of fiscal 2010 from the prior-year period. Current year second quarter operating expenses were impacted by significantly higher pension expense, which increased to more than $2.0 million in the second quarter of fiscal 2010 from $0.8 million in the prior year second quarter. Fiscal 2009 second quarter operating expenses include non-recurring separation charges of $0.9 million related to senior management reorganization. Absent the increase in pension expense in the current year, and the separation charges in the prior year, operating expenses decreased approximately $1.2 million, due primarily to cost reduction actions implemented by management.

In response to lower levels of sales throughout the economic downturn, the Company has reduced its workforce by nearly 60 positions, approximately 16% of its workforce, and implemented a wage and salary freeze that is expected to remain in place throughout fiscal 2010. More recently, the Company has taken actions to temporarily suspend its 401(k) plan matching contributions and also has changed the method of payment of the Company’s incentive compensation plan for fiscal 2010 from cash payments to payment in Company common stock in an effort to preserve cash. In addition, Company management continues to look for further actions to improve processes and production efficiency, as well as reduce the Company’s fixed cost structure.

The Company recorded a loss from continuing operations in the second quarter of fiscal 2010 of $0.9 million, or a $.03 loss per share versus income from continuing operations of $1.3 million, or $.04 earnings per share for the fiscal 2009 second quarter.

Including results of discontinued operations, the Company recorded a net loss of $1.2 million or a $.04 loss per share in the second quarter of fiscal 2010 versus net income of $1.9 million or $.06 per share in the second quarter of fiscal 2009. The Company’s prior year second quarter income from discontinued operations of $0.7 million included a gain of $0.5 million related to a May 2007 settlement agreement between the Company and Federal-Mogul Corporation.

Cash balances increased by $0.7 million during the second quarter of fiscal 2010 to $16.7 million at December 27, 2009, due mainly to lower working capital requirements, partially offset by second quarter cash contributions of $2.6 million to the Company’s defined benefit pension plan.