Magnetek: Q1 Fiscal 2013 Results
Magnetek, Inc. reported the results of its first quarter of fiscal year 2013, ended March 31, 2013.
First Quarter Results
In the first quarter of fiscal 2013, Magnetek recorded revenue of $25.1 million, a 13% decrease from the first quarter of fiscal 2012. The decrease in sales from the prior year quarter reflects sales declines of products for mining markets, and the Company’s decision to no longer pursue new sales opportunities in renewable energy markets. As a result of the lower sales volume, first quarter earnings per share from continuing operations decreased to $.16 per share compared to prior year earnings from continuing operations of $.68 per share.
“Challenging conditions in mining markets, combined with moderating demand and seasonal factors in material handling markets, resulted in both a sequential and a year-over-year decline in both sales and profitability. In response, we focused our actions during the quarter on controlling our payroll and other discretionary costs. Despite the lower sales levels, our continuing operations remained profitable, and our first quarter adjusted EBITDA achievement was more than 10% of sales,” said Peter McCormick, Magnetek’s president and chief executive officer.
Gross profit amounted to $8.1 million (32.5% of sales) in the first quarter of 2013 versus $10.6 million (37.0% of sales) in the same period a year ago. The decrease in gross profit and gross margin was primarily due to lower sales volume of products with mining and renewable energy applications.
Total operating expenses, consisting of research and development, pension expense and selling, general and administrative costs, were $7.3 million in the first quarter of 2013, compared to $8.2 million in the first quarter of fiscal 2012. Compared to the prior year, most of the decrease in operating expenses was due to lower payroll-related costs, including incentive and stock compensation provisions, as well as lower pension expense.
Income from continuing operations after provision for income taxes in the first quarter of fiscal 2013 was $0.5 million, or $.16 per diluted share, compared to after-tax income from continuing operations of $2.2 million, or $.68 per diluted share, in the same period last year.
Including the results of discontinued operations, the Company recorded net income of $.14 per diluted share in the first quarter of 2013 versus net income of $2.14 per diluted share in the first quarter of fiscal 2012. Fiscal 2012 first quarter results of discontinued operations included income of $5.0 million from a settlement agreement entered into between the Company and Kirkland and Ellis, LLP to resolve a legal matter.
Unrestricted cash balances decreased by $3.3 million during the first quarter of fiscal 2013 to $25.4 million at March 31, 2013, reflecting a $3.9 million contribution to the Company’s defined benefit pension plan.
Operations and Outlook
Total first quarter 2013 bookings were $25.3 million, resulting in a book-to-bill ratio for the quarter of 101%. Total Company order backlog was $13.6 million at March 31, 2013, up from $13.1 million at December 30, 2012.
“Overall business conditions remain mixed, and accordingly, we are expecting slow economic growth in 2013. Market conditions in our business have remained somewhat soft to date in 2013. Our quotation levels are high, but the mix of our orders booked doesn’t reflect as many large scale projects as we’ve received in recent periods, mainly in material handling markets. In addition, conditions in mining markets remain challenging, and we expect that to continue in the near-term. Offsetting that, conditions in our served elevator markets remain stable, and we’ve seen strong year-over-year growth in sales of our wireless radio control products, so again, conditions are mixed,” said Mr. McCormick. “As a result, while we are experiencing some near-term softness in our business, we do expect momentum to pick up somewhat in the second half of 2013, particularly with some of these larger quoted projects. Mid- to longer-term, we continue to believe that we have tremendous opportunity to enhance shareholder value through a combination of growth in sales and profits, effective asset management, and a reduction in our pension obligation,” concluded Mr. McCormick.
Historically the Company’s June quarter has been seasonally stronger from a sales standpoint, particularly in material handling markets. Accordingly, the Company currently expects a moderate sequential increase in its sales for the second quarter of 2013 from the recently completed first quarter. Operating profit for the second quarter of fiscal 2013 is also expected to increase moderately sequentially, mainly due to the expected increase in sales volume.
Marty Schwenner, 262-703-4282