Exhibit 99.1
Magnetek Announces Fiscal 2006 Third-Quarter Results
CHATSWORTH, Calif.--(BUSINESS WIRE)--May 12, 2006--Magnetek, Inc.
(NYSE:MAG):
-- Revenue from continuing operations was $57.2 million, compared
to $57.0 million in the third quarter of fiscal 2005.
-- Gross profit declined to $12.4 million from $14.2 million in
the prior-year third quarter, resulting in a net loss of $.15
per share.
-- Quarterly bookings of $65.1 million exceeded billings by 14%;
and backlog increased 15% to $72.7 million, the highest level
in over a year.
-- Quarterly sales of Magnetek's newly introduced alternative
energy and utility grid management systems increased 30% to
$1.7 million.
Magnetek, Inc. (NYSE:MAG) today reported its results for the third
quarter and first nine months of fiscal 2006, which ended on April 2,
2006(a).
The Company's continuing operations recorded revenue of $57.2
million, compared to $57.0 million in the third quarter of fiscal
2005.
Gross profit amounted to $12.4 million, compared to $14.2 million
in the corresponding period a year ago. Gross profit as a percentage
of sales decreased from the third quarter of last year as well as the
second quarter of this year due primarily to manufacturing
dislocations created by product-line moves and ramp-up inefficiencies
associated with new products.
Reduced gross profit resulted in a $2.6 million third-quarter
operating loss from continuing operations, versus a $0.9 million
operating loss in the prior year third quarter.
The operating loss, together with interest expense related to debt
refinancing and income taxes, including non-cash tax consequence of
tax-basis goodwill amortization, resulted in a third-quarter net loss
from continuing operations of $4.4 million or $.15 per share. This
compares with a net loss from continuing operations of $1.9 million or
$.07 per share in last year's third quarter.
Including results of discontinued operations, Magnetek's fiscal
2006 third-quarter net loss also amounted to $4.4 million or $.15 per
share, compared to a net loss of $25.0 million or $.88 per share in
the same period a year earlier; $22.0 million of this was attributable
to a non-cash charge stemming from a patent arbitration award that the
Company is contesting in Federal Court.
Third-Quarter Results
Third-quarter sales of power-electronic products increased
sequentially from the second quarter of fiscal 2006, due to
strengthening in embedded power supplies markets such as information
technology, communications and consumer appliances. Due primarily to
seasonal factors affecting industrial markets, sales of the Company's
power-control systems declined in the third quarter. Power-electronic
products accounted for 58% of Magnetek's revenues in the third
quarter, while power-control systems accounted for 42% of revenues.
A change in product mix from the fiscal 2006 second quarter, when
higher-profit systems sales accounted for 45% of revenue, was partly
responsible for the decline in gross profits and margins in the third
quarter. However, the greatest impact on short-term profitability was
caused by manufacturing inefficiencies associated with retraining
personnel and retooling the Company's factory in Italy to build new
systems products.
Product mix is expected to rebound to more profitable levels but
operating inefficiencies will likely continue to affect profits
through calendar 2006.
Sales of power-electronic products increased sequentially to $33.4
million in the third quarter from $32.6 million in the second quarter,
reflecting gradual improvement in markets for embedded power supplies
in general. Shipments of power-electronic products are expected to
accelerate in the current quarter due to continued strong bookings and
commencement of new programs by four of Magnetek's largest OEM
customers.
Sales of power-control systems declined from the second fiscal
quarter as a result of seasonal industry budget cycles and unusually
strong second-quarter sales of telecom power subsystems in Europe.
However, inquiry activity in the industrial sector is picking up as
usual at this time of year; and in March, Magnetek entered into an
agreement with Eaton Corporation to design, manufacture, market and
service Eaton integrated direct DC (DDC) drive systems for cranes and
hoists under Magnetek's OmniPulse(TM) brand. Responding to customer
demand, Magnetek has quoted $2.4 million of these systems to date.
Alternative Energy Developments
Sales of Magnetek alternative energy interfaces and utility grid
management systems reached $1.7 million in the third quarter, up 30%
from the second quarter.
In April, Manhattan's largest functioning Building Integrated
Photovoltaic (BIPV) power system began harvesting energy from the sun
thanks to Magnetek solar inverter technology. Whitehall Ferry Terminal
has been the home of the Staten Island Ferry for a century. Although
designed for residential installations, Magnetek Aurora(TM)
photovoltaic (PV) power inverters were chosen for the Whitehall
Terminal BIPV project because of their wide input voltage range and
their ability to glean energy from PV panels arrayed at different
angles under varying light conditions.
Also in April, Magnetek announced that it has secured distribution
agreements for its Aurora solar inverters with channel partners in
Italy and Spain. These agreements are valued at more than $3 million
in sales during calendar 2006, subject to demand and availability.
Italy and Spain each have adopted solar PV incentive programs aimed at
installing up to 100-megawatts (MW) of new solar energy capacity,
emerging as the fourth and fifth largest potential solar power markets
in the world.
Legal Matters
On October 19, 2005 a motion to confirm a $23.4 million patent
infringement award levied against Magnetek on May 3, 2005 and
Magnetek's motion to vacate the award on grounds that it was obtained
fraudulently were heard in the Federal District Court of Northern
Illinois. The presiding judge indicated that he would issue his
decision by mail, but did not indicate when that might occur. As of
this date, no decision has been received by Magnetek.
However, there have been developments in other cases concerning
the validity of the plaintiff's lighting ballast patents. A trial in
the Federal District Court of Middle Tennessee involving a lighting
ballast business formerly owned by Magnetek has been postponed
indefinitely, pending U.S. Patent and Trademark Office reexamination
of the plaintiff's patents. No verdict has been reached yet in another
trial in the Federal District Court of Northern Illinois involving a
former Magnetek competitor in the lighting ballast business.
Future Outlook
The Company's book-to-bill ratio in the third quarter was
1.14:1.00, up from 1.07:1.00 in the second fiscal quarter; and backlog
at the end of the third quarter stood at $72.7 million, up from $63.4
million at the end of the second quarter. Hence, revenues from
continuing operations in the current quarter are expected to exceed
$60 million for the first time in more than a year.
Magnetek's return to profitability is primarily dependent upon
sustained improvement in revenues, gross margins and product mix.
Management believes that the Company's global borrowing capacity and
internally generated cash flows will be sufficient to fund operations,
capital expenditures and other near-term commitments. However, future
cash flows will be impacted by scheduled debt maturities and
anticipated pension contributions beginning in fiscal years 2007 and
2008. Consequently, Magnetek has engaged Stephens Inc. to assist
management in evaluating various cash-raising alternatives, which may
include asset sales and capital market transactions, to meet these
obligations.
Conference Call Webcast
This morning at 11:00 a.m. Eastern time Magnetek management will
host a conference call to discuss Magnetek's fiscal 2006 third-quarter
results. The call will be carried live and a replay will be accessible
from the "Investor Information" page of Magnetek's website:
www.magnetek.com.
Magnetek, Inc. manufactures digital power control products and
systems used in applications requiring very reliable, precise,
energy-efficient power, including communications, industrial
automation, information technology, consumer products, alternative
energy, transportation and energy management. The Company reported
sales of $242 million for its 2005 fiscal year, ended on July 3,
2005(a).
(a) Magnetek's fiscal quarters end on the Sundays nearest
September 30, December 31, March 31 and June 30.
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding the Company's anticipated financial
results for its first quarter and fiscal year ending July 2, 2006.
These forward-looking statements are based on the Company's
expectations and are subject to risks and uncertainties that cannot be
predicted or quantified and are beyond the Company's control. Future
events and actual results could differ materially from those set forth
in, contemplated by, or underlying these forward-looking statements.
These risks and uncertainties include economic and market conditions,
audit-related costs and findings and legal proceedings and their
effects on the Company's expected financial results. Other factors
that could cause actual results to differ materially from expectations
are described in the Company's reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
Magnetek, Inc.
Consolidated Results of Operations
(in thousands except per share data)
Three months ended Nine months ended
(Unaudited) (Unaudited)
--------------------- -----------------------
(13 weeks) (13 weeks) (39 weeks) (40 weeks)
April 2, April 3, April 2, April 3,
Results of Operations: 2006 2005 2006 2005
- ---------------------- ----------- ----------- ----------- -----------
Net sales $ 57,212 $ 57,038 $ 173,056 $ 185,245
Cost of sales 44,833 42,874 130,882 139,358
- ---------------------- ----------- ----------- ----------- -----------
Gross profit 12,379 14,164 42,174 45,887
Research and
development 4,214 3,991 11,690 11,180
Selling, general and
administrative 10,717 11,053 30,935 32,136
- ---------------------- ----------- ----------- ----------- -----------
Income (loss) from
operations (2,552) (880) (451) 2,571
Interest expense, net 863 418 2,065 999
Other (income)
expense (1) 175 68 700 (1,115)
- ---------------------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations
before provision for
income taxes (3,590) (1,366) (3,216) 2,687
Provision for income
taxes (2) 850 550 2,550 1,725
- ---------------------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations (4,440) (1,916) (5,766) 962
Income (loss) from
discontinued
operations, net of
tax (3) 10 (23,085) (1,443) (25,261)
- ---------------------- ----------- ----------- ----------- -----------
Net income (loss) $ (4,430) $ (25,001) $ (7,209) $ (24,299)
- ---------------------- ----------- ----------- ----------- -----------
Per common share:
Net income (loss) from
continuing
operations - basic &
diluted $ (0.15) $ (0.07) $ (0.20) $ 0.04
Net income (loss) from
discontinued
operations - basic &
diluted $ 0.00 $ (0.81) $ (0.05) $ (0.89)
- ---------------------- ----------- ----------- ----------- -----------
Net loss - basic &
diluted $ (0.15) $ (0.88) $ (0.25) $ (0.85)
- ---------------------- ----------- ----------- ----------- -----------
Weighted average
shares outstanding:
Basic 28,911 28,544 28,905 28,525
Diluted 29,460 28,544 28,905 29,229
(1) Includes write-off of deferred financing of $0.4 million in the
nine-month period ended April 2, 2006, related to the refinancing
of senior debt. Includes $1.3 million income from sale and
license of rights and patents in the nine-month period ended
April 3, 2005.
(2) Includes $0.4 million and $1.2 million non-cash provision related
to deductible tax basis goodwill amortization in U.S. in both
three- and nine-month periods respectively.
(3) Includes a $22.0 million patent arbitration charge in the three-
and nine-month periods ended April 3, 2005
Three months ended Nine months ended
(Unaudited) (Unaudited)
April 2, April 3, April 2, April 3,
Other Data: 2006 2005 2006 2005
- ---------------------- ----------- ----------- ----------- -----------
Depreciation and
amortization $ 2,301 $ 2,436 $ 6,746 $ 7,270
Capital expenditures $ 964 $ 2,156 $ 4,146 $ 6,068
April 2,
2006 July 3,
Balance Sheet Data: (Unaudited) 2005
- ---------------------------------------------- ----------- -----------
Working capital (excluding current portion of
long-term debt) $ 76,776 $ 51,947
Total assets 251,302 229,180
Total long-term debt (including current
portion) 48,527 25,230
Stockholders' equity 40,852 46,060
Magnetek, Inc.
Consolidated Balance Sheet
(in thousands)
April 2,
2006 July 3,
(Unaudited) 2005
------------- -------------
Cash $ 1,426 $ 6,854
Restricted cash 22,602 -
Accounts receivable, net 54,918 54,022
Inventories 55,335 49,950
Prepaid and other 4,943 5,713
Assets held for sale 6,339 4,727
------------- -------------
Total current assets 145,563 121,266
Property, plant & equipment, net 30,298 31,939
Goodwill 63,820 63,656
Other assets 11,621 12,319
------------- -------------
Total assets $ 251,302 $ 229,180
============= =============
Accounts payable $ 33,598 $ 36,974
Accrued liabilities 11,017 8,523
Accrued arbitration award 22,602 22,602
Liabilities held for sale 1,570 1,220
Current portion of long-term debt 29,359 5,702
------------- -------------
Total current liabilities 98,146 75,021
Long-term debt, net of current portion 19,168 19,528
Pension benefit obligations 73,418 70,568
Other long-term obligations 8,196 7,627
Deferred income taxes 11,522 10,376
Common stock 287 286
Paid in capital in excess of par value 129,260 128,664
Retained earnings 32,809 40,018
Accumulated other comprehensive loss (121,504) (122,908)
------------- -------------
Total stockholders' equity 40,852 46,060
Total liabilities and equity $ 251,302 $ 229,180
============= =============
CONTACT: Magnetek, Inc.
Robert Murray, 818-727-2216 (ext. 111)
bmurray@magnetek.com