<PAGE>
FORM 10-Q/A No. 1
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: December 31, 1993
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 1-10233
______________
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 February 7,
1994: 24,154,305 shares.
<PAGE>
PART I. FINANCIAL INFORMATION (as ammended February 22, 1994, to correct
certain clerical errors and revise disclosures in Note 3 and Item 2).
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 December 31, l993 and the results of operations and cash flows for
the three-month and six-month periods ended December 31, l993 and 1992. It
is suggested that these consolidated condensed 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 and six months ended December 31, l993 are not necessarily
indicative of results which may be experienced for the full fiscal year.
<PAGE>
ITEM 1 MAGNETEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, l993 and JUNE 30, l993
(amounts in thousands)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
----------- -------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash $ 5,042 $ 7,795
Accounts receivable 261,444 335,877
Inventories 270,006 264,140
Deferred income taxes,
prepaid expenses and other 37,471 24,460
---------- ----------
Total current assets 573,963 632,272
---------- ----------
Property, plant and equipment 452,375 428,730
Less-accumulated depreciation
and amortization 200,420 182,725
---------- ----------
251,955 246,005
---------- ----------
Cost in excess of fair value
of net assets acquired 126,539 130,350
Deferred charges, intangible
and other assets 44,677 44,163
---------- ----------
$ 997,134 $1,052,790
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 138,136 $ 162,671
Accrued liabilities 129,196 116,472
Current portion of long-
term obligations 35,160 7,949
---------- ----------
Total current liabilities 302,492 287,092
---------- ----------
Long-term debt, net
of current portion 490,708 515,807
Other long-term obligations 72,593 69,020
Deferred income taxes 13,816 17,842
Commitments and contingencies
Stockholders' equity
Common stock 241 241
Other 117,284 162,788
---------- ----------
Total stockholders' equity 117,525 163,029
---------- ----------
$ 997,134 $1,052,790
---------- ----------
---------- ----------
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
DECEMBER 31, l993 AND 1992
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Net sales $ 349,926 $ 372,032
Cost of sales 284,419 283,727
--------- ---------
Gross profit 65,507 88,305
Selling, general and administrative 55,055 59,711
Restructuring and other charges 58,562 -
--------- ---------
Income (loss) from operations (48,110) 28,594
Interest expense 11,637 12,207
Other (income) expense, net ( 604) 2,416
--------- ---------
Income (loss) before income taxes (59,143) 13,971
Income taxes (16,641) 5,728
--------- ---------
Net income (loss) $ (42,502) $ 8,243
--------- ---------
--------- ---------
Earnings per common share:
Primary $ (1.72) $ 0.34
--------- ---------
--------- ---------
Fully diluted $ * $ 0.31
--------- ---------
--------- ---------
See accompanying notes
<FN>
* Per share amounts on a fully diluted basis has been omitted as such amounts
are anti-dilutive in relation to the primary per share amounts.
</TABLE>
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
DECEMBER 31, l993 AND 1992
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Net sales $ 729,569 $ 707,830
Cost of sales 585,972 542,648
--------- ---------
Gross profit 143,597 165,182
Selling, general and administrative 116,868 111,602
Restructuring and other charges 58,562 -
--------- ---------
Income (loss) from operations (31,833) 53,580
Interest expense 23,791 23,413
Other expense, net 1,095 4,749
--------- ---------
Pretax income (loss) before
cumulative effect of
accounting changes (56,719) 25,418
Income taxes (15,623) 10,421
--------- ---------
Income (loss) before cumulative
effect of accounting changes (41,096) 14,997
Cumulative effect of change in
accounting for postretirement
welfare benefits, net of tax benefit - (35,734)
Cumulative effect of change in
accounting for income taxes - (13,000)
--------- ---------
Net loss $ (41,096) $ (33,737)
--------- ---------
--------- ---------
Earnings per common share:
Primary:
Income (loss) before cumulative
effect of accounting changes $ (1.66) $ 0.61
Cumulative effect of
accounting changes - (1.96)
--------- ---------
Net loss $ (1.66) $ (1.35)
--------- ---------
--------- ---------
Fully diluted:
Income (loss) before cumulative
effect of accounting changes $ * $ 0.57
Cumulative effect of
accounting changes * *
--------- ---------
Net loss $ * $ *
--------- ---------
--------- ---------
See accompanying notes
<FN>
* Per share amounts on a fully diluted basis has been omitted as such amounts
are anti-dilutive in relation to the primary per share amounts.
</TABLE>
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1993 AND 1992
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (41,096) $ (33,737)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 23,742 24,708
Provision for restructuring
and other charges 58,562 -
Cumulative effect of accounting changes - 48,734
Change in assets and liabilities net of
effects from acquired companies:
(Increase) decrease in accounts
receivable 74,133 (16,344)
(Increase) decrease in inventories (20,348) 2,999
Decrease in other current assets 1,885 516
Decrease in current liabilities (54,532) (37,573)
(Increase) decrease in deferred (18,932) 345
income taxes
Increase in other operating assets ( 2,603) ( 4,970)
Increase (decrease) in other
long-term liabilities 3,573 ( 1,743)
--------- ---------
Total adjustments 65,480 16,672
--------- ---------
Net cash provided (used) by
operating activities 24,384 (17,065)
--------- ---------
Cash flows from investing activities:
Purchase of companies, net of cash
acquired - (16,825)
Capital expenditures, net (29,013) (21,889)
Investment in annuity contract ( 249) ( 9,787)
--------- ---------
Net cash used in investing
activities (29,262) (48,501)
--------- ---------
</TABLE>
(continued on next page)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1993 AND 1992
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1993 l992
---- ----
<S> <C> <C>
Cash flows from financing activities:
Borrowings under bank and other long-term
obligations 13,064 69,573
Proceeds from issuance of common stock 201 839
Repayment of long-term obligations (10,952) ( 5,108)
Increase in deferred financing costs ( 188) ( 1,151)
--------- ---------
Net cash provided by
financing activities 2,125 64,153
--------- ---------
Net decrease in cash ( 2,753) ( 1,413)
Cash at the beginning of the period 7,795 2,034
--------- ---------
Cash at the end of the period $ 5,042 $ 621
--------- ---------
--------- ---------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 31,246 $ 23,695
Income Taxes $ 5,684 $ 12,363
Reconciliation of assets acquired and
liabilities assumed
Fair value of assets acquired $ - $ 33,819
Liabilities assumed - 16,994
--------- ---------
Cash Paid $ - $ 16,825
--------- ---------
--------- ---------
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(All dollar amounts are in thousands except per share data)
(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 three-month and six-month periods
ended December 31, l993 and l992 each contained thirteen weeks and twenty-
seven weeks, and thirteen weeks and twenty-six weeks, respectively.
2. INVENTORIES
Inventories at December 31, l993 and June 30, 1993 consist of the
following:
<TABLE>
<CAPTION>
December 31 June 30
----------- -------
<S> <C> <C>
Raw materials and stock parts $ 75,722 $ 88,163
Work-in-process 79,430 91,762
Finished goods 121,856 98,933
----------- ---------
277,008 278,858
Less - Progress billings 7,002 14,718
----------- ---------
$ 270,006 $ 264,140
----------- ---------
----------- ---------
</TABLE>
3. RESTRUCTURING AND OTHER CHARGES
On January 5, 1994, the Company's Board of Directors approved a
restructuring program with the objective of focusing the Company's
resources on its core product lines and reducing debt. In connection with
the program, the Company has identified certain businesses for potential
divestiture. Aggregate sales of these businesses represented approximately
29 percent of the Company's total sales volume for fiscal 1993. Estimated
proceeds from the sale of certain of these businesses are less than the
current book value of those respective businesses. As a result, the
Company has recorded a charge to income of approximately $27,300. This
amount is included under "Restructuring and other charges" in the
accompanying Condensed Consolidated Statements of Operations. While the
Company believes it will be able to sell all of the identified candidates
for divesture at prices acceptable to the Company, if such prices are not
obtained the Company may elect to retain certain of these businesses for an
indefinite period. As a result, the Company will classify the results of
these businesses as continuing operations until any related sale is
consummated.
<PAGE>
The Company has also undertaken a review of its core product lines with the
objective of developing actions to reduce costs and improve future
profitability. The Company has identified a substantial amount of excess
capacity and potentially obsolete or excess inventory levels related to the
Company's electronic ballast product line. Estimated exposure to these
issues is based upon current and projected demand and production rates for
this product line primarily over the next 24 months. The Company also
plans to relocate and consolidate a number of administrative functions in
connection with its overall restructuring program. As a result of the
review and restructuring program, the Company recorded charges to income of
approximately $26,500 related to the electronic ballast product line,
including approximately $12,400 related to potentially excess and obsolete
inventory and approximately $14,100 related to excess capacity, severance
and other issues. The Company has also recorded a charge of approximately
$4,800 related primarily to anticipated severance and relocation costs
associated with the planned consolidation of administrative functions.
These amounts are included under "Restructuring and other charges" in the
accompanying Condensed Consolidated Statements of Operations.
Of the approximately $58,600 total "Restructuring and other charges" as
detailed above and recorded during the second quarter of fiscal 1994,
approximately $47,900 represent a noncash write-off of recorded assets and
$10,700 relate to actions which will require future cash outflows,
primarily over the next 6 to 12 months.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
THREE MONTHS ENDED DECEMBER 31, 1993 VS. 1992 -- Net sales. Total net
sales decreased 6% to $349.9 million in the three months ended December 31,
1993, from $372.0 million in the corresponding period in the prior fiscal
year. Net sales in the Ballasts and Transformers segment decreased 12% due
primarily to lower sales of electronic lighting ballasts, small transformer
products in Europe and medium power transformers, partially offset by
increased sales of magnetic lighting ballasts. Net sales in the Motors and
Controls segment increased 2% due primarily to increased sales of
fractional horsepower motors and electronic adjustable speed drives,
partially offset by lower sales of generators, large custom motors and
defense related products.
Gross profit. Gross profit decreased 26% to $65.5 million (18.7% of net
sales) in the three months ended December 31, 1993 from $88.3 million
(23.7% of net sales) in the three months ended December 31, 1992. Gross
profit decreased due primarily to lower margins in the electronic ballast
business due to lower sales and increased fixed costs associated with
capacity increases implemented in the prior fiscal year; lower margins in
the medium power transformer and utility services businesses due to lower
sales prices; and lower margins in generator and large custom motors due
to lower sales volume.
Income (loss) from operations. For the three months ended December 31,
1993, the Company recorded a loss from operations of $48.1 million compared
to income of $28.6 million in the corresponding period in the prior fiscal
year. The loss from operations in the Ballasts and Transformers segment
was $29.6 million compared to income of $15.9 million due primarily to
Restructuring and other charges of $32.8 million recorded in the quarter
ended December 31, 1993, as a result of a restructuring program approved by
the Company's Board of Directors and a review of inventory and capacity
issues in the electronic ballast business (see Note 3 of Notes to
Condensed Consolidated Financial Statements). In addition to these
charges, the loss from operations was impacted by an operating loss in the
electronic ballast business and lower income from operations in the medium
power transformer business. In the Motors and Controls business, a loss
from operations of $18.5 million was recorded in the three months ended
December 31, 1993, compared to income from operations of $12.7 million in
the corresponding period in the prior fiscal year, due primarily to
Restructuring and other charges of $25.8 million recorded in the quarter
ended December 31, 1993. The loss from operations was also impacted by
lower income from operations in utility repair services, generators, large
custom motors and defense related products, partially offset by higher
income from operations in fractional horsepower motor and electronic drive
product lines.
<PAGE>
ITEM 2 (continued)
Interest expense. Interest expense decreased 5% to $11.6 million in the
three months ended December 31, 1993 from $12.2 million in the
corresponding period in the prior fiscal year. The decrease was due
primarily to lower variable interest rates, primarily related to the
Company's European borrowings.
Income (loss) before taxes and Net loss. The Company recorded a loss
before income taxes of $59.1 million in the three months ended December 31,
1993, compared to income before taxes of $14.0 million in the three months
ended December 31, 1992. Net loss in the fiscal 1994 period was $42.5
million compared to net income of $8.2 million. The income tax benefit in
the fiscal 1994 period was recorded at 28% compared to a statutory rate of
approximately 40%, reflecting a valuation allowance provided against the
Company's net deferred tax asset position.
SIX MONTHS ENDED DECEMBER 31, 1993 VS. 1992
Net sales. Total net sales increased 3% to $729.6 million in the six
months ended December 31, 1993, from $707.8 million in the corresponding
period in the prior fiscal year. As a result of the Company's use of a
fifty-two, fifty-three week fiscal year, the first six months of fiscal
1994 contained twenty-seven weeks compared to twenty-six weeks in the first
six months of 1993. The increase in total net sales was due to the
additional week of sales in the fiscal 1994 period as well as the inclusion
of the results of a power conversion business acquired in the second
quarter of the prior fiscal year. On a proforma basis, excluding the
effect of these items, total net sales in the fiscal 1994 period were
comparable to net sales in the fiscal 1993 period. Net sales in the
Ballasts and Transformers segment decreased 6% due primarily to the lower
sales of electronic lighting ballasts, small transformer products in Europe
and medium power transformers, partially offset by increased sales of
magnetic lighting ballasts. Net sales in the Motors and Controls segment
increased 15%. On a proforma basis, net sales increased 4% due primarily
to increased sales of fractional horsepower motors and electronic
adjustable speed drives, partially offset by lower sales of large custom
motors.
Gross profit. Gross profit decreased 13% to $143.6 million (19.7% of net
sales) in the six months ended December 31, 1993, from $165.2 million
(23.3% of net sales) in the six months ended December 31, 1992. Gross
profit decreased due primarily to lower margins in the electronic ballast
business due to lower sales and increased fixed costs associated with
capacity increases implemented in the prior fiscal year; lower margins in
the medium power transformer and utility service businesses due to lower
sales prices; and lower margins in generators and large custom motors due
to lower sales volume.
Income (loss) from operations. For the six months ended December 31,
1993, the Company recorded a loss from operations of $31.8 million compared
to income of $53.6 million in the corresponding period in the prior fiscal
year. The loss from
<PAGE>
ITEM 2 (continued)
operations in the Ballasts and Transformers segment was $22.1 million
compared to income of $31.9 million due primarily to Restructuring and
other charges of $32.8 million recorded in the period ended December 31,
1993, as a result of a restructuring program approved by the Company's
Board of Directors and a review of inventory and capacity issues in the
electronic ballast business (see Note 3 of Notes to Condensed Consolidated
Financial Statements). In addition to these charges, the loss from
operations was impacted by an operating loss in the electronic ballast
business and lower income from operations in the medium power transformer
business. In the Motors and Controls business, a loss from operations of
$9.7 million was recorded in the six months ended December 31, 1993,
compared to income from operations of $21.7 million in the corresponding
period in the prior fiscal year, due primarily to Restructuring and other
charges of $25.8 million recorded in the period ended December 31, 1993.
The loss from operations was also impacted by lower income from operations
in utility repair services, large custom motors and defense related
products, partially offset by higher income from operations in fractional
horsepower motor and electronic drive product lines.
Interest expense. Interest expense increased 2% to $23.8 million in the
six months ended December 31, 1993, from $23.4 million in the corresponding
period in the prior fiscal year. The increase was due primarily to the
additional week of interest expense in the fiscal 1994 period, partially
offset by interest income from the Company's investment in an annuity
contract and lower variable borrowing rates in Europe.
Income (loss) before taxes and Net loss. The Company recorded a loss
before income taxes of $56.7 million in the six months ended December 31,
1993 compared to income before taxes of $25.4 million in the six months
ended December 31, 1992. The loss before cumulative effect of accounting
changes was $41.1 million in the fiscal 1994 period compared to income
before cumulative effect of accounting changes of $15.0 million in fiscal
1993. Net loss was $41.1 million compared to net loss of $33.7 million.
The fiscal 1993 period reflects charges to income aggregating $48.7 million
reflecting the cumulative effect of changes in accounting for
postretirement welfare benefits and income taxes. The income tax benefit
in the fiscal 1994 period was recorded at 28% compared to a statutory rate
of approximately 40%, reflecting a valuation allowance provided against the
Company's net deferred tax asset position.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
The Company believes that internally generated funds and available credit
facilities will provide sufficient capital resources to finance operations,
fund planned capital expenditures and pay interest and scheduled maturity
payments on outstanding debt. The Company recorded approximately $58.6
million of Restructuring and other charges in the period ended December 31,
1993 (see note 3 of Notes to Condensed Consolidated Financial Statements).
Of the $58.6 million, approximately $10.7 million represents anticipated
future cash outflows, primarily over the next 6 to 12 months, from actions
associated with the planned restructuring program. However, the Company
also expects to generate substantial cash, primarily during the same
period, from anticipated divestitures associated with the program. Cash
generated from the restructuring program will be used primarily to repay
outstanding debt.
As of February 1, 1994, the Company had available borrowing capacity of
approximately $43 million under bank credit facilities. During the second
quarter of fiscal 1994, the Company amended certain financial covenants
under its Revolving Credit Agreement based upon projected operating
results. Primarily as a result of the announced restructuring program and
related charges recorded during the period ended December 31, 1993, the
Company has currently violated and may continue to violate certain
financial covenants in the Revolving Credit and Senior Note Agreements. The
Company has obtained waivers from the lenders under both agreements for the
current violations. The Company is currently negotiating amendments to
both lending agreements to address possible future violations. The Company
expects these amendments to become effective prior to March 31, 1994.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
Form 8-K (date of report October 27, 1993) announcing the Company's
adoption of a stockholder rights plan.
Form 8-K (date January 6, 1994) announcing the Company's restructuring
plans.
<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: February 22, 1993 /s/ David P. Reiland
--------------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)
