<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________
Commission file number 33-5261
______________
MAGNETEK, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3917584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11150 Santa Monica Boulevard, 15th floor
Los Angeles, California 90025
(Address of principal executive offices)
(Zip Code)
(310) 473-6681
(Registrant's telephone number, including area code)
____________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, as of November
11, 1994: 24,284,042 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to fairly present the financial position
as of September 30, 1994 and the results of operations and cash flows for
the three-month periods ended September 30, 1994 and 1993. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes included
in the Company's latest annual report on Form 10-K. Results for the three
months ended September 30, 1994 are not necessarily indicative of results
which may be experienced for the full fiscal year.
<PAGE>
ITEM 1 MAGNETEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 and JUNE 30, 1994
(amounts in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30 JUNE 30
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 5,704 $ 7,013
Accounts receivable 205,875 217,106
Inventories 191,367 196,527
Prepaid expenses and other 33,534 32,970
---------- -----------
Total current assets 436,480 453,616
---------- -----------
Property, plant and equipment 372,860 379,208
Less-accumulated depreciation
and amortization 179,660 172,163
---------- -----------
193,200 207,045
---------- -----------
Net assets of discontinued
operations 174,665 197,217
Goodwill 35,215 35,391
Deferred financing costs,
intangible and other assets 36,710 38,089
---------- -----------
$ 876,270 $ 931,358
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 110,097 $ 117,884
Accrued liabilities 79,914 80,287
Current portion of long-
term debt 51,304 49,998
---------- -----------
Total current liabilities 241,315 248,169
---------- -----------
Long-term debt, net
of current portion 419,215 473,781
Other long-term obligations 76,715 77,316
Deferred income taxes 19,096 19,010
Commitments and contingencies
Stockholders' equity
Common stock 242 242
Other 119,687 112,840
---------- -----------
Total stockholders' equity 119,929 113,082
---------- -----------
$ 876,270 $ 931,358
---------- -----------
---------- -----------
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net sales $ 274,755 $ 280,361
Cost of sales 223,035 222,839
--------- --------
Gross profit 51,720 57,522
Selling, general and administrative 38,375 45,749
--------- --------
Income from operations 13,345 11,773
Interest expense 7,716 8,137
Other expense, net 1,047 935
--------- --------
Income from continuing operations
before provision for income taxes 4,582 2,701
Income taxes 1,924 1,134
--------- --------
Income from continuing operations 2,658 1,567
Discontinued operations --
Income (loss) from operations
(net of taxes) -- ( 161)
Gain on sale of Controls business
(net of taxes) 3,100
--------- ---------
Net income $ 5,758 $ 1,406
--------- --------
--------- --------
Earnings per common share
Primary:
Income from continuing operations $ 0.11 $ 0.06
Gain on sale of Controls business
(net of taxes) 0.12 --
--------- --------
Net income $ 0.23 $ 0.06
--------- --------
--------- --------
Fully diluted:
Income from continuing operations $ 0.11 $ 0.06
Gain on sale of Controls business
(net of taxes) 0.12 --
--------- --------
Net income $ 0.23 $0.06
--------- --------
--------- --------
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 2,658 $ 1,567
-------- ---------
Adjustments to reconcile income from
continuing operations to net cash provided
by (used in) operating activities:
Depreciation and amortization 9,538 9,295
Changes in operating assets and
liabilities of continuing operations 8,838 ( 21,786)
-------- ---------
Total adjustments 18,376 ( 12,491)
-------- ---------
Net cash provided by (used in) operating
activities 21,034 ( 10,924)
-------- ---------
Cash flows from investing activities:
Proceeds from sale of businesses and assets 43,260 --
Capital expenditures ( 8,038) ( 14,890)
Annuity contract and other investments ( 55) ( 249)
-------- ---------
Net cash provided by (used in) investing
activities 35,167 ( 15,139)
-------- ---------
Cash flows from financing activities:
Borrowings under bank and other long-term
obligations 9,116 20,528
Proceeds from issuance of common stock 23 87
Repayment of bank and other long-term
obligations ( 62,376) ( 6,305)
Decrease in deferred financing costs 47 74
-------- ---------
Net cash provided by (used in)
financing activities ( 53,190) 14,384
-------- ---------
Net cash provided by (used in) continuing
operations 3,011 ( 11,679)
-------- ---------
-------- ---------
</TABLE>
(continued on next page)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from discontinued operations:
Income (loss) from discontinued
operations $ 3,100 $( 161)
Adjustments to reconcile income (loss) to
net cash provided by (used in)
discontinued operations:
Depreciation and amortization 1,879 2,591
(Gain) on sale of businesses (3,100) --
Changes in operating assets and
liabilities of discontinued
operations (5,794) 10,596
Capital expenditures ( 405) ( 1,706)
-------- --------
Net cash provided by (used in)
discontinued operations (4,320) 11,320
-------- --------
Net decrease in cash (1,309) ( 359)
Cash at the beginning of period 7,013 7,606
-------- --------
Cash at the end of period $ 5,704 $ 7,247
-------- --------
-------- --------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 8,753 $ 14,363
Income Taxes $ 648 $ 2,697
</TABLE>
(see accompanying notes)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(All dollar amounts are in thousands)
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL PERIOD - The Company uses a fifty-two, fifty-three week fiscal
year. Fiscal periods end on the Sunday nearest the end of the month. For
clarity of presentation, all periods are presented as if they ended on the
last day of the calendar period. The fiscal quarters ended September 30,
1994 and 1993 contained thirteen weeks and fourteen weeks, respectively.
2. INVENTORIES
Inventories at September 30, 1994 and June 30, 1994 consist of the
following:
<TABLE>
<CAPTION>
September 30 June 30
------------ --------
<S> <C> <C>
Raw materials and stock parts $ 63,700 $ 59,943
Work-in-process 43,289 43,198
Finished goods 84,378 93,386
--------- ---------
$ 191,367 $ 196,527
--------- ---------
--------- ---------
</TABLE>
3. RESTRUCTURING ACTIVITIES
During the first quarter of fiscal 1995, the Company's Board of Directors
adopted a formal plan of disposal for certain businesses in connection with
a restructuring program approved by the Board during fiscal 1994. As a
result, the Company's consolidated financial statements for the year ended
June 30, 1994 reflected continuing and discontinued operations, as do the
condensed consolidated financial statements included herein.
In July, 1994, the Company sold substantially all of the assets, subject to
certain liabilities, of the Controls business for a cash purchase price of
$46,000 subject to certain post-closing adjustments. The Company expects
to complete the remainder of the divestiture program during fiscal 1995.
During the first quarter of fiscal 1995, operating results of the
discontinued operations reflected net sales of approximately $80,700 and a
net loss of approximately $2,900. The loss has been charged to reserves
provided for estimated losses on disposal (including interim operating
losses) which were established in the prior fiscal year.
Total cash out flow associated with other restructuring actions, including
the consolidation and relocation of certain administrative facilities, is
estimated at $13,700 and will occur primarily during fiscal 1995. Of this
amount, approximately $3,500 was incurred during the first quarter of
fiscal 1995.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS:
Net sales and gross profit.
MagneTek's net sales in the first quarter of fiscal 1995 were $274.8
million, a 2% decrease from the first quarter of fiscal 1994 at $280.4
million. Due to the Company's use of a fifty-two, fifty-three week fiscal
year, the first quarter of fiscal 1995 contained thirteen weeks compared to
fourteen weeks in the first quarter of fiscal 1994. On a pro forma basis,
determined as if both quarters contained thirteen weeks, sales increased
6%. Sales in the Ballasts and Transformers segment decreased 6% due
primarily to lower sales of certain transformer products in Europe. On a
pro forma basis, sales increased 1% with higher sales of magnetic ballasts
in the U.S. offset by the lower sales in Europe. Sales in the Motors and
Controls segment increased 3% (11% on a pro forma basis) due to higher
sales of fractional horsepower motors and electronic adjustable speed
drives and systems.
The Company's gross profit dropped to $51.7 million in the first quarter of
fiscal 1995 from $57.5 million in the first quarter for fiscal 1994, while
its gross margin declined to 18.8% of net sales in fiscal 1995 from 20.5%
of net sales in fiscal 1994. The decline in both gross profit and margin
was largely related to price erosion in lighting products, notably
electronic ballasts, as well as generators and integral horsepower motors
due to increased costs together with a difficult pricing environment. The
declines in these product lines were partially offset by improved gross
profits and margins in certain fractional horsepower motor products and in
Europe, however gross margins in Europe continue well below gross margins
of the Company's U.S. businesses.
Operating expenses.
Selling, general & administrative (SG&A) expense was $38.4 million (14% of
net sales) in the first quarter of fiscal 1995, down from $45.7 million
(16.3% of net sales) in the first quarter of fiscal 1994. On a pro forma
basis, determined as if the fiscal 1994 quarter had 13 weeks, SG&A expense
in the quarter would have been $42.5 million. The decline in SG&A expense
is due to actions related to the Company's reorganization and restructuring
program which began in fiscal 1994. As part of this program, the Company
has reduced the number of administrative locations and the level of
personnel and discretionary spending associated with SG&A activities.
Interest and other expense
Interest expense of $7.7 million in the first quarter of fiscal 1995 was
down from $8.1 million in the first quarter of fiscal 1994. Overall
borrowings were down on a period-to-period basis, resulting in lower
overall interest expense, partially offset by higher interest rates which
resulted in a lower amount of interest expense allocated to continuing
operations. The Company expects overall interest expense to continue to
<PAGE>
ITEM 2 (continued)
decline as proceeds from divestitures are used to repay
outstanding borrowings. The amount of interest expense allocated to
continuing operations may also decline as a result.
Net income.
The Company recorded income from continuing operations of $2.7 million in
the first quarter of fiscal 1995 compared to $1.6 million in the first
quarter of fiscal 1994. Discontinued operations reflected income of $3.1
million in the 1995 quarter representing the net gain on the sale of the
Company's Controls business compared to a loss of $161 thousand in the 1994
quarter reflecting the operating results of the discontinued operations.
The first quarter of fiscal 1995 reflects no operating results as such
results (approximately $2.9 million net loss) were charged to reserves for
operating losses established in the prior fiscal year. Net income,
including the results of both continuing and discontinued operation was
$5.8 million in the first quarter of fiscal year 1995 compared to $1.4
million in the first quarter of fiscal year 1994.
LIQUIDITY AND CAPITAL RESOURCES:
In July, 1994, the Company sold its controls business for a cash purchase
price of $46 million subject to certain post-closing adjustments.
Approximately $43.7 million of the purchase price was received at the
closing of the transaction, with the remainder received after quarter end.
Proceeds were used to repay borrowings outstanding under the Company's
Revolving Loan Agreement.
During the first quarter, the Company generated cash from continuing
operations, net of capital expenditures, of approximately $13 million.
Cash used by discontinued operations was $4.3 million. The net proceeds
from the sale of the Controls business and operating activities, including
a $1.3 million reduction in cash balances, resulted in a $53.3 million net
reduction in long-term debt during the quarter, to $470.5 at the end of the
quarter from $523.8 at the beginning of the quarter.
The Company expects substantial reductions in long-term debt during the
course of the fiscal year through net proceeds from future divestitures and
continued positive net cash flow from operating activities. See Note 3
regarding cash outflows related to restructuring activities.
Amounts outstanding under the Company's 11.45% Senior Notes begin scheduled
amortization in December, 1994 with six semi-annual payments of $22.5
million each. The Company believes cash generated from divestitures,
operating activities and borrowings available under its Revolving Loan
Agreement will be sufficient to fund operating activities including planned
capital expenditures, and to pay interest and scheduled principal payments
on outstanding debt. At November 11, 1994 the Company had available
commitment of $75 million under its Revolving Loan Agreement.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedules
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAGNETEK, INC.
(Registrant)
Date: November 11, 1994 /s/ David P. Reiland
-------------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-04-1994
<PERIOD-END> SEP-30-1994
<CASH> 5,704
<SECURITIES> 0
<RECEIVABLES> 210,573
<ALLOWANCES> 4,968
<INVENTORY> 191,367
<CURRENT-ASSETS> 436,480
<PP&E> 372,860
<DEPRECIATION> 179,660
<TOTAL-ASSETS> 876,270
<CURRENT-LIABILITIES> 241,315
<BONDS> 419,215
<COMMON> 242
0
0
<OTHER-SE> 119,687
<TOTAL-LIABILITY-AND-EQUITY> 876,270
<SALES> 274,755
<TOTAL-REVENUES> 274,755
<CGS> 223,035
<TOTAL-COSTS> 223,035
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,716
<INCOME-PRETAX> 4,582
<INCOME-TAX> 1,924
<INCOME-CONTINUING> 2,658
<DISCONTINUED> 3,100
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,758
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
