Magnetek: Q2 2015 Results

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Menomonee Falls, Wisconsin -  Magnetek, Inc. reported the results of its second quarter of fiscal year 2015, ended June 28, 2015.

Second Quarter Results

In the second quarter of fiscal 2015, Magnetek recorded revenue of $28.3 million, a 5% increase from the prior year second quarter sales of $27.0 million, as sales of products for material handling applications increased $1.3 million year-over-year to $21.1 million. Income from continuing operations and earnings per share were both up year-over-year, due to higher sales volume, lower pension expense, and lower tax provisions. As a result, second quarter earnings per share from continuing operations increased 18% to $.87 per share compared to prior year earnings from continuing operations of $.74 per share.

“Most of our end markets remained healthy throughout our second quarter, and we achieved organic sales growth of 5% over last year’s second quarter. We expanded our profit margins on a year-over-year basis, with increased gross profit, operating profit, and net income,” said Peter McCormick, Magnetek’s president and chief executive officer.

Gross profit amounted to $10.4 million (36.7% of sales) in the second quarter of 2015 versus $9.7 million (36.0% of sales) in the same period a year ago. The increase in gross profit and gross margin was primarily due to higher sales volume and improved sales mix into material handling markets.

Total operating expenses, consisting of research and development, pension expense, and selling, general and administrative costs, were $7.2 million in the second quarter of 2015, compared to $7.0 million in the second quarter of fiscal 2014. Compared to the prior year, the increase in operating expense was mainly due to higher variable selling expenses and discretionary spending, partially offset by lower pension expense. In addition, prior year operating expenses include the favorable impact of an adjustment to stock compensation expense of approximately $0.2 million.

Income from continuing operations after provision for income taxes in the second quarter of fiscal 2015 was $3.2 million, or $.87 per diluted share, compared to after-tax income from continuing operations of $2.5 million, or $.74 per diluted share, in the same period last year.

Including the results of discontinued operations, the Company recorded net income of $.83 per diluted share in the second quarter of 2015 versus net income of $.68 per diluted share in the second quarter of fiscal 2014.

Pension Update

The Company did not make any contributions to its pension plan during the first six months of fiscal 2015, and currently does not expect to make any for the remainder of fiscal 2015. Actuarial projections as of June 28, 2015, indicate that minimum required pension contributions beyond the current fiscal year are estimated at between $2 million and $4 million for each of the next six fiscal years.

The net change in the Company’s pension liability based on interest rate movements and asset returns was not material during the first six months of fiscal 2015, as the benefit of higher interest rates was largely offset by lower than expected returns on pension plan assets in the six months ended June 28, 2015.

The actual timing and amount of future pension plan contributions are dependent upon many factors, including returns on invested assets, the level of certain market interest rates, the discount rate used to determine pension obligations, voluntary contributions the Company may elect to make to the plan, and other potential regulatory actions.

Subsequent Event

Subsequent to the end of the second quarter, on July 27, 2015, Magnetek and Columbus McKinnon Corporation (CMCO), a leading designer, manufacturer, and marketer of material handling products, announced that they have entered into a definitive agreement for Columbus McKinnon to acquire all of the outstanding shares of Magnetek for $50 per share for a total value of $188.9 million. Columbus McKinnon, through a wholly owned subsidiary, expects to commence a cash tender offer for all of the outstanding shares of Magnetek on or about August 5, 2015. The tender offer is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. The tender offer requires as a condition to consummation that at least a majority of the outstanding shares of Magnetek's common stock be tendered. The transaction is expected to close within 90 days.

About Magnetek

Magnetek, Inc. (MAG) manufactures digital power and motion control systems used in material handling, elevator, and mining applications. The Company is headquartered in Menomonee Falls, Wis. in the greater Milwaukee area and operates manufacturing plants in Pittsburgh, Pa. and Bridgeville, Pa. as well as Menomonee Falls.

Magnetek, Inc.
Marty Schwenner
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