Wisconsin Manufacturing News

Magnetek CEO says company’s financial bottom is in rearview mirror; Rexnord CEO says company is ‘well-positioned’; Grede Foundries intends to be sold in auction; Derco Aerospace signs exclusive spare parts contract with Belgian firm

Magnetek CEO says company’s financial bottom is in rearview mirror

Menomonee Falls-based Magnetek Inc. has reported a fiscal first quarter net loss of  $1.8 million, or 6 cents per share, compared with net income of $881,000, or 3 cents per share, in the same period a year ago.

Magnetek recorded revenue of $17.8 million, a 32-percent decrease from a year earlier and an 11-percent sequential decline from the fourth quarter of fiscal 2009.

The decline in sales from the prior year quarter reflects the continued slowdown in industrial activity in the United States and the resulting impact on capital spending levels, the company said.

Peter McCormick, Magnetek’s president and chief executive officer, said, "As expected, the difficult market conditions we experienced in the second half of fiscal 2009 continued throughout the first quarter of fiscal 2010. While industrial production in the U.S. increased slightly during the September quarter, capacity utilization rates remained well below historical averages and credit markets remained tight, resulting in sluggish capital spending levels which impacted our sales volume in the first quarter." Magnetek expects sales for the second quarter of fiscal 2010 to reflect a sequential double-digit percentage increase from the current year first quarter sales. Gross margins in the second quarter of fiscal 2010 are expected to be near the company’s 30-percent target, due to cost savings from actions taken to reduce the company’s cost structure.

"While we have not yet seen a robust recovery in our business to date, certain indicators seemingly support the assertion that the June quarter may have been the bottom in terms of order rates, and that the September quarter was the cyclical bottom in terms of revenue. As a result, we believe our sales for the second quarter will increase sequentially from the first quarter, and our current outlook projects improving quarterly trends for the remainder of the fiscal year," McCormick said.

Rexnord CEO says company is ‘well-positioned’

Milwaukee-based Rexnord LLC recently posted fiscal second quarter net income of $4.5 million, down from $14.3 million in the same period a year ago.

The manufacturer’s quarterly net sales fell to $369.7 million from $510.6 million a year earlier.

"We are pleased with our operating performance in the second quarter. Our adjusted EBITDA grew by $12.7 million dollars sequentially from our first quarter on similar sales resulting in an adjusted EBITDA margin of 18.6 percent, a 340 basis improvement from the first quarter,” said Todd Adams, Rexnord’s president and chief executive officer. “In comparison to last year, excluding the impact of pensions, our second quarter Adjusted EBITDA margins were 20.2 percent, an 80 basis point improvement over the prior year, and our free cash flow generation continues to be very strong as we have generated $71 million dollars of free cash flow in the first half of fiscal 2010 compared to $23 million dollars in the first half of last year. While the overall economy remains difficult, the pieces of our business that we expected to stabilize for the most part have done so, and we are well-positioned to deliver solid results in the second half of fiscal 2010 and beyond."

Grede Foundries intends to be sold in auction

Milwaukee-based Grede Foundries has asked a federal bankruptcy court to approve a timeline for auction of the company, which has reached an agreement for its assets to be purchased by an affiliate of Minnesota-based Wayzata Investment Partners LLC.

Wayzata will serve as a "stalking horse" or opening bid in the auction.

There are also ongoing, active discussions with other potential bidders interested in purchasing the company, said Grede board chairman Richard Koenings. The purchase agreement with the affiliate of Wayzata will be the starting point for continuation of purchase discussions with other parties during the auction period over the next several weeks, he said.

"Additional parties have expressed a strong interest in purchasing our company, and our request to the court is the next step in the process that we expect will lead to a sale of the company to the highest bidder before the year’s end," Koenings said. "The reorganization efforts we have undertaken in the last five months have strengthened our company and returned it to profitability, which has attracted the interest we have seen.  The agreement with Wayzata and the setting of the auction schedule puts our organization in a strong position to emerge from bankruptcy by year end as we have targeted."

Grede filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Wisconsin in June.

In this latest filing, the company asks the court to hold a Nov. 16 hearing on its timeline proposal. The proposed schedule calls for the auction to conclude by Dec. 9 and for a closing by Dec. 31, 2009.

"We anticipate there will be several substantive offers for the company, and our goal will be to get the best value possible," Koenings said. "With the structuring changes we have made and continuing indications that the economy may be rebounding, this is an excellent time to move this process forward and to an appropriate and successful conclusion."

The Grede facilities in Greenwood, S.C., and Vassar, Mich., are not part of the sale package and would be sold independently. Potential buyers have expressed interests in both of those plants, Koenings said.

"This is a significant step forward, and we are pleased to have made this progress during the last several months," Koenings said. "We would not be in this positive position but for the exceptional effort of every employee at every one of our facilities, under extremely challenging circumstances. We remain deeply committed to doing everything necessary to put the company on solid footing as the nation begins to rise out of the worst economic conditions since the Great Depression. When this process is completed by the end of the year, it will be beneficial for our customers, our employees, our vendors and the communities in which we operate."

Derco Aerospace signs exclusive spare parts contract with Belgian firm

Milwaukee-based Derco Aerospace Inc. has signed an exclusive two-year F-16 spare parts supply contract with Belgian-based company SABCA.

Under the agreement Derco will provide specified Hamilton Sundstrand, Honeywell and Argo-Tech F-16 spare parts for component repair and overhaul on a just-in-time basis in support of SABCA maintenance activities.

The contract further expands Derco’s role in supporting European maintenance facilities and enhances Derco’s F-16 inventory holdings. As partners, SABCA and Derco jointly will improve maintenance turn-around for F-16 operators.

"Derco values this opportunity to work with SABCA to provide support to European F-16 maintenance activities," said Brian Holt, Senior Vice President of Sales and Marketing. "This contract will allow Derco to support maintenance activities on a just-in-time basis to ensure European customers have improved fleet readiness."


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