Q1 Highlights
- Net sales of $26.6 million increased
10% from the prior year first quarter, due to higher sales into
material handling and elevator markets. Q1 bookings totaled $28.6
million.
- Q1 gross margin improved to 35.3% of
sales, up 150 basis points over prior year Q1 gross margin of 33.8%
of sales.
- Q1 income from operations increased
74% to $2.5 million, compared to $1.4 million in last year’s first
quarter.
- Earnings per share from continuing
operations increased 91% to $.67 per share, compared to $.35 per
share in Q1 last year.
Magnetek, Inc. (“Magnetek” or “the Company”, NASDAQ: MAG) today
reported the results of its first quarter of fiscal year 2015,
ended March 29, 2015.
First Quarter Results
In the first quarter of fiscal 2015, Magnetek recorded revenue
of $26.6 million, a 10% increase from the prior year first quarter
sales of $24.1 million, as sales of products for material handling
applications increased $1.4 million year-over-year to $19.5
million, and sales of products for elevator applications increased
nearly $1.0 million year-over-year to $6.2 million.
The higher sales volume, together with lower pension expense and
tax provisions, resulted in an increase in first quarter earnings
per share from continuing operations to $.67 per share compared to
prior year earnings from continuing operations of $.35 per
share.
“We remain encouraged by the strong year-over-year growth in our
sales and profitability, as well as by the positive book-to-bill
ratio in the first quarter. We experienced the typical seasonal
softness in material handling markets, which resulted in a slow
start to the year. However, as the quarter progressed, order and
sales activity increased substantially. In addition, our
profitability improved significantly over last year despite the
uneven demand, as we drove our gross margins higher and benefitted
from reduced pension expense,” said Peter McCormick, Magnetek’s
president and chief executive officer.
Gross profit amounted to $9.4 million (35.3% of sales) in the
first quarter of 2015 versus $8.2 million (33.8% of sales) in the
same period a year ago. The increase in gross profit and gross
margin was primarily due to higher sales volumes in the current
year first quarter.
Total operating expenses, consisting of research and development
(“R&D”), pension expense, and selling, general, and
administrative costs, were $6.9 million in the first quarter of
2015, compared to $6.7 million in the first quarter of fiscal 2014.
Compared to the prior year, operating expenses increased due to
higher R&D spending related to new product development, higher
variable selling expenses, and higher expenses related to
information systems, partially offset by lower pension expense. In
addition, prior year administrative costs include a non-recurring
favorable adjustment related to a change in the Company’s paid time
off policies.
Income from continuing operations after provision for income
taxes in the first quarter of fiscal 2015 was $2.5 million, or $.67
per diluted share, compared to after-tax income from continuing
operations of $1.2 million, or $.35 per diluted share, in the same
period last year.
Including the results of discontinued operations, the Company
recorded net income of $.63 per diluted share in the first quarter
of 2015 versus net income of $.31 per diluted share in the first
quarter of fiscal 2014.
Unrestricted cash balances decreased by $2.6 million during the
first quarter of fiscal 2015 to $7.1 million at March 29, 2015.
Operations and Outlook
Total first quarter 2015 bookings were $28.6 million, resulting
in a book-to-bill ratio for the quarter of nearly 108%. Total
Company order backlog was $15.4 million at March 29, 2015, up 12%
from $13.7 million at the end of the first quarter of fiscal
2014.
“As expected, market conditions in our largest served market,
material handling, were quite soft early in 2015, but our business
activity picked up strongly later in the quarter. We booked nearly
50% of our first quarter orders during the month of March, so we
would expect sales in the second quarter to increase moderately
from the level of the first quarter,” said Mr. McCormick. “In
addition, first quarter margins were impacted not only by uneven
demand patterns, but also by the west coast port shutdown. The port
issue resulted in higher freight costs and increased inventory
balances, and presented some real challenges to our supply chain
and plant efficiency. With that now behind us, if demand as
expected becomes more linear going forward, we should see higher
profit margins and better asset management in the second quarter.
We’re cautiously optimistic that the momentum we experienced late
in the first quarter can continue into the second quarter and the
remainder of the year,” continued Mr. McCormick.
“Our strategy for some time now has been to increase the value
of the Company by focusing on organic sales growth, consistent cash
generation, and a reduction in our pension obligation. Over the
past several years, we’ve been very successful with cash
generation, and have deployed that cash through investments in our
business and contributions to our pension plan. We’re now seeing
the benefit of years of significant contributions to our pension
plan in the form of lower pension funding obligations and reduced
pension expense, which has increased our earnings and certainly
enhanced the value of the Company,” continued Mr. McCormick. “What
we’ve also seen in our business over the past several quarters is
fairly robust organic growth, which is very encouraging. We believe
this growth has largely been a function of market share gains,
combined with end market conditions characterized by a growing
willingness to invest, as evidenced by the fact that our sales mix
continues to shift toward larger projects. We’re also continuing
our efforts to enter new markets and geographies, but some of those
growth initiatives have a longer-term horizon. We’ll continue to
efficiently align our cost structure with our sales volume to
better assure achievement of growing profitability as our business
grows. In summary, we believe our strategy to enhance value remains
sound, and we believe we are well-positioned to continue to grow
our sales and profitability over time,” concluded Mr.
McCormick.
Company Webcast
This morning, at 11:00 a.m. Eastern daylight time, Magnetek
management will host a conference call to discuss Magnetek’s first
quarter 2015 results. The conference call and accompanying slide
presentation will be webcast live on the “Investor Relations” page
of the Company’s website at www.magnetek.com. Institutional
investors may also access the webcast at www.streetevents.com. A
replay of the webcast will be available on the “Investor Relations”
page of Magnetek's website for at least ninety days. A replay of
the call will also be available through May 14, 2015, by phoning
630-652-3042 (passcode 3935 9356 #).
Magnetek, Inc. (NASDAQ: MAG) manufactures digital power and
motion control systems used in material handling, people moving and
energy delivery. 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.
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 fiscal quarter ending June 28, 2015, and its fiscal
year 2015. 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 include, but are not limited to,
economic conditions in general, business conditions in material
handling, elevator, and mining markets, operating conditions,
competitive factors such as pricing and technology, risks
associated with acquisitions and divestitures, legal proceedings
and the risk that the Company’s ultimate costs of doing business
exceed present estimates. 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.
The Company may, in the course of its financial presentations,
earnings releases, earnings conference calls, and otherwise,
publicly disclose certain numerical measures which are or may be
considered "non-GAAP financial measures” under SEC Regulation G.
"GAAP" refers to generally accepted accounting principles in the
United States. Non-GAAP financial measures disclosed by management
are provided as additional information to investors in order to
provide them with an alternative method for assessing the Company’s
financial condition and operating results. These measures are not
in accordance with, or a substitute for, GAAP, and may be different
from or inconsistent with non-GAAP financial measures used by other
companies. The Company’s public disclosures may include non-GAAP
measures such as EBITDA and adjusted EBITDA. EBITDA represents its
GAAP results adjusted to exclude interest, taxes, depreciation and
amortization. Adjusted EBITDA represents EBITDA adjusted to exclude
non-cash pension and stock compensation expenses. Company
management believes that adjusted EBITDA is useful to investors as
it provides a measure of the Company’s cash flow prior to capital
investments, changes in working capital, and pension contributions.
As a result, management believes investors can use this metric as a
measure of the Company’s ability to fund its growth initiatives and
its pension obligations.
Magnetek, Inc. Consolidated Results of Operations
(in thousands except per share data) Three
months ended (Unaudited) (13 weeks) (13
weeks) March 29, March 30, Results of
Operations: 2015 2014 Net sales $
26,612 $ 24,113 Cost of sales 17,213
15,961 Gross profit 9,399 8,152 Operating expenses:
Research and development 899 799 Pension expense 502 925 Selling,
general and administrative 5,490
4,990 Total operating expenses 6,891
6,714 Income from operations 2,508 1,438
Provision for income taxes 41
240 Income (loss) from continuing operations 2,467 1,198
Income (loss) from discontinued operations (163 )
(144 ) Net income (loss) $ 2,304
$ 1,054
Earnings (loss) per common share -
basic: Income (loss) from
continuing operations $ 0.69 $ 0.37 Income (loss) from discontinued
operations $ (0.04 ) $ (0.05 ) Net income per common share $
0.65 $ 0.32
Earnings (loss) per
common share - diluted: Income
(loss) from continuing operations $ 0.67 $ 0.35 Income (loss) from
discontinued operations $ (0.04 ) $ (0.04 ) Net income (loss) per
common share $ 0.63 $ 0.31
Weighted average shares outstanding: Basic 3,550 3,263
Diluted 3,683 3,392
Reconciliation of
Non-GAAP Financial Measures:
The following table reconciles operating income, the most directly
comparable GAAP measure, to adjusted operating income and adjusted
EBITDA, non-GAAP financial measures:
Three months
ended (Unaudited) March 29, March 30,
2015 2014 Operating income (GAAP) $ 2,508 $
1,438 As a percent of sales 9.4 % 6.0 % Add: pension expense
502 925 Adjusted operating
income (non-GAAP) $ 3,010 $ 2,363 As a
percent of sales 11.3 % 9.8 % Add: depreciation and amortization
199 202 Add: stock compensation expense 181
183 Adjusted EBITDA (non-GAAP) $ 3,390
$ 2,748 As a percent of sales 12.7 % 11.4 %
Three months ended (Unaudited) March
29, March 30, Other Data: 2015
2014 Depreciation expense $ 186 $ 189
Amortization expense 13 13
Capital expenditures 207
171
Magnetek, Inc. Consolidated Balance
Sheet (in thousands ) March 29,
2015 December 28, (unaudited) 2014 Cash
7,129 9,702 Restricted cash 262 262 Accounts receivable 17,476
16,975 Inventories 14,289 13,626 Prepaid and other current assets
785 801 Total current assets 39,941
41,366 Property, plant & equipment, net 2,945 2,931
Goodwill 30,307 30,364 Other assets 4,072
4,039 Total assets $ 77,265 $ 78,700
Accounts payable $ 9,192 $ 10,375 Accrued liabilities
4,374 6,703 Total current liabilities
13,566 17,078 Pension benefit obligations, net 26,186 27,360
Other long-term obligations 828 845 Deferred income taxes
9,813 9,798 Total liabilities 50,393
55,081 Common stock 36 35 Paid in
capital in excess of par value 150,254 150,641 Accumulated deficit
(7,871 ) (10,175 ) Accumulated other comprehensive loss
(115,547 ) (116,882 ) Total stockholders' equity
26,872 23,619 Total liabilities and
stockholders' equity $ 77,265 $ 78,700
Magnetek, Inc.Marty
Schwenner262-703-4282mschwenner@magnetek.com
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