<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, 1996
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)
26 Century Blvd.
P. O. Box 290159
Nashville, Tennessee 37229-0159
(Address of principal executive offices)
(Zip Code)
(615) 316-5100
(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 CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, as of
November 5, 1996: 25,555,114 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments necessary to fairly present the
financial position as of September 30, 1996 and the results of operations and
cash flows for the three-month periods ended September 30, 1996 and 1995. 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, 1996 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, 1996 and JUNE 30, 1996
(amounts in thousands)
ASSETS September 30 June 30
- ------- ------------ --------
(unaudited)
Current assets:
Cash $ 6,437 $ 871
Accounts receivable 186,691 201,814
Inventories 209,059 203,265
Prepaid expenses and other 23,281 26,902
Total current assets 425,468 432,852
Property, plant and equipment 399,789 383,498
Less-accumulated depreciation
and amortization 219,300 207,079
------------ ----------
180,489 176,419
------------ ----------
Net assets of discontinued operations -- 1,174
Goodwill 33,172 30,668
Deferred financing costs,
intangible and other assets 38,208 37,661
------------ ----------
Total Assets $ 677,337 $ 678,774
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 103,103 $ 104,273
Accrued liabilities 132,756 126,399
Current portion of long-term debt 3,051 2,895
------------ ----------
Total current liabilities 238,910 233,567
------------ ----------
Long-term debt, net of current portion 307,229 319,128
Other long-term obligations 73,088 71,633
Deferred income taxes 12,936 12,888
Commitments and contingencies
Stockholders' equity
Common stock 255 255
Other 44,919 41,303
------------ ----------
Total stockholder's equity 45,174 41,558
------------ ----------
Total Liabilities and Stockholders' Equity
$ 677,337 $ 678,774
------------ ----------
------------ ----------
See accompanying notes
<PAGE>
ITEM 1 (Continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996 and 1995
(amounts in thousands except per share data)
(unaudited)
1996 1995
--------- ---------
Net sales $ 291,410 $ 272,670
Cost of sales 236,568 229,579
--------- ---------
Gross profit 54,842 43,091
Selling, general and administrative 38,923 37,845
--------- ---------
Income from operations 15,919 5,246
Interest expense 7,532 8,558
Other expense, net 1,076 1,110
--------- ---------
Income (loss) before provision (benefit)
for income taxes 7,311 (4,422)
Income taxes 2,996 ( 884)
--------- ---------
Net income $ 4,315 $ (3,538)
--------- ---------
--------- ---------
EARNINGS (LOSS) PER COMMON SHARE
Primary:
Net income (loss) $ 0.17 $( 0.14)
--------- ---------
--------- ---------
Fully diluted:
Net income (loss) * *
--------- ---------
--------- ---------
* Per share amounts on a fully diluted basis have been omitted as such
amounts are anti-dilutive in relation to primary per share amounts.
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(amounts in thousands)
(unaudited)
1996 1995
------ ------
Cash flows from operating activities:
Income (loss) from continuing operations $ 4,315 $( 3,538)
--------- --------
Adjustments to reconcile income from continuing
operations to net cash provided by
operating activities:
Depreciation and amortization 9,619 9,931
Changes in operating assets and liabilities
of continuing operations 6,409 5,079
--------- -------
Total adjustments 16,028 15,010
Net cash provided by operating activities: 20,343 11,472
--------- -------
Cash flows from investing activities:
Proceeds from sale of businesses and assets 2,425 75,367
Capital expenditures ( 6,953) ( 8,910)
Annuity contract and other investments 1,659 808
--------- --------
Net cash provided by (used in) investing
activities ( 2,869) 67,265
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 30 147
Repayment of bank and other long-term
obligations (11,743) (76,273)
Increase in deferred financing costs ( 195) ( 3)
--------- --------
Net cash used in financing activities (11,908) (76,129)
--------- --------
Net cash provided by continuing operations 5,566 2,608
--------- --------
(continued on next page)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(amounts in thousands)
(unaudited)
1996 1995
------ ------
Net cash used in discontinued operations -- ( 1,608)
--------- --------
Net increase in cash 5,566 1,000
Cash at the beginning of period 871 311
--------- --------
Cash at the end of period $ 6,437 $ 1,311
========= ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 4,832 $ 6,856
Income Taxes $ 200 $ 50
(see accompanying notes)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(All dollar amounts are in the 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 three month periods ended
September 30, 1996 and 1995 each contained thirteen weeks.
2. INVENTORIES
Inventories at September 30, 1996 and June 30, 1996 consist of the
following:
September 30 June 30
------------ ---------
Raw materials and stock parts $ 66,180 $ 60,018
Work-in-process 44,309 46,354
Finished goods 98,570 96,893
--------- ---------
$ 209,059 $ 203,265
========= =========
3. REPOSITIONING COSTS AND DISCONTINUED OPERATIONS
As a result of significant declines in sales and profit margins in both
electronic and magnetic ballast product lines during fiscal 1996, the
Company conducted a review and analysis of actions required to reduce costs
and improve future flexibility and profitability, largely focused on the
lighting products business. Upon completion of the review and approval by
the Company's Board of Directors, certain reserves were established and
charges recorded in the year ended June 30, 1996 to reflect costs
associated with repositioning operations, primarily for severance,
termination benefits and asset write-downs related to facility closures and
consolidation. Reserves were also established for estimated increases in
warranty (primarily related to the electronic ballast product line) and
other costs. During the first quarter of fiscal year 1997, approximately
$1.9 million of cash outlays were made in connection with the repositioning
reserves, primarily for severance and warranty.
In July 1994, the Company's Board of Directors adopted a formal plan of
disposal for certain businesses in connection with an overall restructuring
program designed to focus the Company's resources on the core product lines
and reduce debt. During the year ended June 30, 1996, the Company had
completed the sale of substantially all remaining discontinued operations
with the total net proceeds aggregating over $200 million, which was used
to repay debt.
<PAGE>
4. LONG TERM DEBT AND BANK BORROWING ARRANGEMENTS
Effective September 16, 1996, the Company amended its Bank Loan Agreement,
as a result of certain covenant violations, to adjust covenants to reflect
the impact of charges associated with the Company's repositioning program.
As a result of the amendment, the lending commitment under the Bank Loan
Agreement was reduced to $170 million from $200 million. All other terms
and conditions remained substantially unchanged. Due to the positive
operating cash performance in the first quarter of fiscal 1997, the
Company's borrowing rates will be reduced effective in the second quarter
by fifty basis points. Short term debt rates previously quoted as LIBOR
plus two and one quarter percent or prime rate plus one percent will be
reduced to LIBOR plus one and three quarters percent or prime plus one half
percent.
<PAGE>
ITEM 2
MANAGEMENT DISCUSSION
- ---------------------
RESULTS OF OPERATIONS:
- ----------------------
THREE MONTHS ENDED SEPTEMBER 29, 1996 VS 1995
---------------------------------------------
Net Sales and Gross Profit.
MagneTek's net sales for the first quarter of fiscal 1997 were $291.4
million, a 6.9% increase from the first quarter of fiscal 1996 at $272.7
million. Sales in the Lighting Products segment increased by 11.7% due
primarily to higher revenues in electronic ballasts. Revenue levels for
the Power Supplies segment increased 7.9% with a continuation of strong
demand for custom power supplies in Europe. Motors and Controls sales
increased 2.6% with stronger results in both commercial and fractional
horsepower motors, partially offset by weaker generator and standard drive
sales.
The Company's gross profit increased to $54.8 million in the first quarter
of fiscal 1997 from $43.1 million in the first quarter of fiscal 1996.
First quarter results in fiscal 1996 included the effect of approximately
$1.7 million of severance related costs. The gross margin increased in the
first quarter of fiscal 1997 to 18.8% versus 15.8% for the fiscal 1996
period. Gross profit improvement for the first quarter of fiscal 1997 was
heavily influenced by increased profit and margin in the Lighting Products
segment. Increased production levels and a lower cost structure
significantly improved fixed cost coverage. Increased revenues and higher
manufacturing levels also resulted in improved results for fractional
horsepower motors. Gross profit and margin levels for generators and
drives were reduced due to lower revenues and, in the case of drives, a
higher mix of standard product with lower margins. Power Supply gross
profit levels were comparable to the year earlier period.
Operating Expenses.
Selling, general and administrative (SG&A) expense was $38.9 million (13.4%
of net sales) in the first quarter of fiscal 1997 versus $37.8 million
(13.9% of net sales) in the first quarter of fiscal 1996. Increased
spending was focused in Motors and Controls and domestic Lighting Products
operations. Motors and Controls reflected additional marketing costs
associated with higher levels of motor revenues. Lighting Products
(domestic) included administrative expense (consulting costs) directed at
process efficiencies to reduce both manufacturing cost and inventory
levels.
Interest and Other Expense.
Interest expense of $7.5 million in the first quarter of fiscal 1997 was
down from $8.6 million in the first quarter of fiscal 1996. Lower working
capital levels were primarily responsible for the reduced levels of overall
debt and the associated interest expense.
Net Income.
The Company recorded an after-tax profit of $4.3 million in the first
quarter of fiscal year 1997 compared to a loss of $3.5 million in the first
quarter of fiscal 1996. The tax provision in the first quarter of fiscal
1997 was $3.0 million versus a $.9 million benefit recorded in the first
quarter of fiscal 1996. The tax benefit in the first quarter of fiscal
1996 was less than the statutory rate due to the Corporation's inability to
tax effect losses incurred in Germany for the period.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Effective September 16, 1996, the Company amended its Bank Loan Agreement,
as a result of certain covenant violations, to adjust covenants to reflect
the impact of charges associated with the Company's repositioning program.
As a result of the amendment, the lending commitment under the Bank Loan
Agreement was reduced to $170 million from $200 million (see Note 4). As of
September 30, 1996, the Company had approximately $79 million of
available borrowings under the Bank Loan Agreement.
In September of 1996, the Company sold the assets and liabilities of
its Jefferson Transformer business for cash and a long term note
receivable. The proceeds from the transaction were used to reduce borrowings
under the Company's bank loan agreement. The Company intends to focus in
future periods on the further reduction of working capital balances with
the objective of further reductions in debt.<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) The Annual Meeting of Stockholders of the Company was held on October
24, 1996.
(b) The following named persons were elected as directors, such persons
constituting all of the directors of the Company.
Andrew G. Galef
Ronald N. Hoge
Dewain K. Cross
Paul J. Kofmehl
Crocker Nevin
Marguerite W. Sallee
Robert E. Wycoff
(c) The votes cast for and withheld with respect to each nominee for
director is as follows:
Nominee For Withheld
------- --- --------
Andrew G. Gales 20,262,675 149,387
Ronald N. Hoge 20,295,998 116,064
Dewain K. Cross 20,296,998 115,064
Paul J. Kofmehl 20,293,898 118,164
Crocker Nevin 20,289,897 122,165
Marguerite W. Sallee 20,293,098 118,964
Robert E. Wycoff 20,290,898 121,164
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None<PAGE>
<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, 1996 ________________________________
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,437
<SECURITIES> 0
<RECEIVABLES> 192,498
<ALLOWANCES> 5,807
<INVENTORY> 209,059
<CURRENT-ASSETS> 425,468
<PP&E> 399,789
<DEPRECIATION> 219,300
<TOTAL-ASSETS> 677,337
<CURRENT-LIABILITIES> 238,910
<BONDS> 310,280
0
0
<COMMON> 255
<OTHER-SE> 44,919
<TOTAL-LIABILITY-AND-EQUITY> 677,337
<SALES> 291,410
<TOTAL-REVENUES> 291,410
<CGS> 236,568
<TOTAL-COSTS> 236,568
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,532
<INCOME-PRETAX> 7,311
<INCOME-TAX> 2,996
<INCOME-CONTINUING> 4,315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,315
<EPS-PRIMARY> .17
<EPS-DILUTED> 0<F1>
<FN>
<F1>Per share amounts on a fully diluted basis have been omitted as such amounts
are anti-dilutive in relation to primary per share amounts.
</FN>
</TABLE>
