Magnetek, Inc.: Fiscal 2008 Third Quarter Results

Tuesday April 29, 8:45 am ET
-- Net sales for Q3 FY 2008 increased 13% to $26.3 million from Q3 of FY 2007.
-- Earnings from continuing operations were $0.04 per share in Q3 FY 2008 vs. $0.01 per share in Q3 FY 2007.
-- Total cash balances increased by $6.7 million in the quarter.
-- Telecom Power Systems business to be divested.

MENOMONEE FALLS, Wis.-- Magnetek, Inc. (“Magnetek” or the “Company”) today reported the results of its fiscal 2008 third quarter ended March 30, 2008.

Third Quarter Results

In its fiscal 2008 third quarter Magnetek recorded revenue of $26.3 million compared to $23.3 million in the third quarter of fiscal 2007. All product lines with the exception of Telecom Power Systems achieved double-digit year-over-year sales growth which together with reduced operating expenses led to a significant improvement in operating income. Sales in Material Handling increased 17%, to $16.0 million compared to $13.7 million in the third quarter of the prior fiscal year. Elevator Systems revenue of $5.4 million represented a significant year-over-year and sequential sales gain. Energy Systems third quarter revenue was $3.2 million, an increase of $1.6 million from the prior year third quarter, primarily due to the delivery of 15 E-Force™ wind power inverters. Sales for Telecom Power Systems amounted to $1.7 million in the third quarter compared to $3.7 million in the prior year quarter, due to lower demand from key OEM’s.

Sales in Material Handling, the Company’s largest product line, tend to follow capital budgeting and spending patterns of its customer base which generally result in relatively lower revenues in the third fiscal quarter. This factor, combined with significantly lower Telecom Power Systems sales, resulted in a 9% sequential decline in third quarter sales from second quarter sales of $29.0 million. Excluding the results of Telecom Power Systems, third quarter sales increased 25% on a year-over-year basis and declined sequentially by 3%.

Third quarter gross profit amounted to $6.8 million (26% of sales) compared to $6.9 million (30% of sales) in the prior year third quarter. Gross profit was negatively impacted by the lower sales volume in Telecom Power Systems and relatively low margins on wind inverters.

Income from continuing operations, net of taxes, in the third quarter of fiscal 2008 amounted to $1.2 million or $.04 per share compared to income from continuing operations of $0.2 million or $.01 per share in the fiscal 2007 third quarter. Including the results of discontinued operations, Magnetek reported net income of $0.5 million or $.02 per share on a diluted basis in the third quarter of fiscal 2008, which reflects the impact of a net settlement gain of $2.9 million with Federal-Mogul Corporation and a charge of $3.2 million related to the Nilssen patent infringement judgment (see Discontinued Operations). The Company reported a net loss of $0.4 million or a $.01 loss per share in the third quarter of fiscal 2007.


Total bookings for the third quarter were $23.8 million, resulting in a book-to-bill ratio of 90%, which was impacted by the partial cancellation of a fuel cell power inverter order due to reduced customer requirements. However, Material Handling orders continued strong throughout the third quarter, and at $17.2 million, represented 108% of sales for the period. Order backlog at March 30, 2008 was $15.9 million compared to a December 2007 backlog of $18.0 million.

As previously announced, the Company has decided to divest its Telecom Power Systems business. Accordingly, the Telecom Power Systems business will be accounted for as a discontinued operation in the fourth quarter and results for prior periods will be restated to reflect this treatment. A pro forma comparison of certain operational metrics is included in this release for informational purposes with the results of the Telecom Power Systems business classified as discontinued operations.

Historically, the Company’s fiscal fourth quarter has been relatively strong in Material Handling. Based on this, together with expected continued demand for overhead material handling automation systems and the Company’s OmniPulse™ direct-current digital drives, the Company expects both sequential and year-over-year sales increases in Material Handling. Energy Systems revenue in the fourth quarter should be comparable to the third quarter as the Company continues scheduled deliveries of wind power inverter shipments.

On a continuing operations basis, revenue is expected to increase by more than 10% year-over-year in the fourth fiscal quarter of 2008. Fourth quarter operating profits are expected to increase as compared to the prior year fourth quarter due to expected higher revenue and gross profit than the prior year fourth quarter. On a sequential basis, consolidated revenue is expected to increase from the third quarter due to the expected seasonal increase in demand in Material Handling. In addition, both gross margin and operating profit margin as a percentage of sales are expected to increase sequentially, and as a result, the Company expects fourth fiscal quarter earnings to exceed third quarter results as well as prior year results.

Discontinued Operations

As previously reported by Magnetek, in April 1998, Ole K. Nilssen (“Nilssen”) filed a lawsuit in the U.S. District Court for the Northern District of Illinois alleging infringement by Magnetek of seven of his patents pertaining to electronic ballast technology. In April 2003, both parties agreed to submit limited issues in dispute to binding arbitration before an arbitrator with a relevant technical background. The arbitration occurred in November, 2004 and a decision awarding Nilssen $23.4 million was issued on April 29, 2005. On April 16, 2008, the arbitration award was confirmed in a judgment entered by the United States District Court for the Northern District of Illinois (the “Court”). The net amount due and unpaid on the award is $22.0 million.

The Court did not include any pre-judgment interest in the judgment it entered on April 16, 2008. Subsequent to the judgment date, the Company has been informed that Nilssen intends to seek interest for the period from the date of the award to the date of the judgment. While Magnetek intends to oppose the interest requested by Nilssen, the Company increased its accrual for the arbitration award by $3.2 million as of March 30, 2008. The actual amount awarded, if any, may be greater or less than the amount recorded by the Company. The Company filed an appeal of the judgment on April 21, 2008 and intends to appeal any award of pre-judgment interest.

As previously reported, Magnetek has been named in asbestos-related lawsuits associated with businesses previously acquired by the Company but which are no longer owned. During the Company’s ownership, none of these businesses produced or sold products containing asbestos and as a result, the Company aggressively seeks dismissal from these proceedings. Magnetek also filed claims in the Federal-Mogul bankruptcy proceedings to recover costs associated with the defense of these claims.

In May 2007, Magnetek and Federal-Mogul entered into a settlement agreement under which the Company is entitled to receive amounts from an insurance settlement trust established under Federal-Mogul’s reorganization plan, which plan was approved by the bankruptcy court on December 27, 2007. Under the terms of the settlement agreement, Magnetek is to receive 15% of the first $20 million and 10% of the next $25 million of deposits to the trust, up to a maximum of $5.5 million.

In March 2008, Magnetek received a payment of approximately $3.1 million from the trust. Of this amount, $2.9 million is included in income from discontinued operations in the third quarter of fiscal 2008. The amount represents primarily the recovery of previously incurred legal fees for the defense of these asbestos-related lawsuits. Cumulative proceeds received by the Company to date under the agreement are $4.5 million. In the event the Federal-Mogul settlement trust receives additional funds in the future, Magnetek will be entitled to receive a percentage of those funds based on the terms described above, up to a maximum remaining amount of $1.0 million.

Company Webcast

This morning, at 11:00 a.m. Eastern time, Magnetek management will host a conference call to discuss Magnetek’s fiscal 2008 third quarter results. The conference call will be carried live and a replay of the call will be available on the “Investor Relations” page of Magnetek's website A replay of the call also will be available through May 6, 2008 by phoning 617-801-6888 (passcode 27385308).

Magnetek, Inc. (NYSE: MAG - News) manufactures digital power and motion control systems used in material handling, people moving, and energy delivery. The Company is headquartered in Menomonee Falls, WI in the greater Milwaukee area and operates manufacturing plants in Pittsburgh, Pa., Canonsburg, Pa. and Mississauga, Ontario, Canada as well as Menomonee Falls.


Magnetek, Inc.
Marty Schwenner, 262-703-4282
[email protected]

Source: Magnetek, Inc.

Aktuell, seriös und kostenlos: Der ECOreporter-Newsletter. Seit 1999.
Nach oben scrollen
ECOreporter Journalistenpreise