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MAGNETEK, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) Overview
Magnetek, Inc. ("Magnetek," "the Company," "we," or "us") is a global provider
of digital power control systems that are used to control motion and power
primarily in material handling, elevator, mining and renewable energy
applications. Our digital power control systems serve the needs of selected
niches of traditional and emerging markets that are becoming increasingly
dependent on "smart" power. We are North America's largest independent supplier
of digital drives, radio controls, software and accessories for industrial
cranes and hoists, and we are also the largest independent supplier of digital
direct current ("DC") motion control systems for elevators. Customers include
most of the industrial crane and hoist companies in North America and the
world's leading elevator builders. In addition, we have a growing range of
products for energy delivery applications, including motion control systems for
mining equipment and power inverters for renewable energy applications. We are
focused on providing our customers cost-effective power solutions that will
improve efficiency, reduce costs, and save energy. Other trends in our served
markets we believe we can capitalize on include the adoption of wireless control
solutions, modernization and upgrade of installed equipment, and an increasing
desire in our markets for added features, enhanced performance, and safer
workplace environments. We believe that with our focus on innovation and our
application expertise, combined with strong brand name recognition, broad
product offerings and sales channel capabilities, we are well positioned to grow
our business by gaining share in both our served markets as well as in new
markets. Our operations are located in North America, predominantly in Menomonee
Falls, Wisconsin, our Company headquarters.
Our product offerings for material handling applications include innovative
power control systems, radio remote controls, and braking, collision-avoidance,
and electrification subsystems, sold primarily to original equipment
manufacturers ("OEMs") of overhead cranes and hoists. While we sell primarily to
OEMs of overhead cranes and hoists, we spend a great deal of effort
understanding the needs of end users to gain specification. We can combine our
products with engineered services to provide complete customer-specific systems
solutions. A primary driver of our growth in this market is our ability to
improve our customers' operations and provide them with quantifiable, and in
many cases, significant returns on invested capital.
Our product offerings for elevator applications are comprised of highly
integrated subsystems and drives used to control motion primarily in high rise,
high speed elevator applications. Our products are sold mainly to elevator OEMs
and we have a significant share of the available market for DC drives and
subsystems used in high-rise
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elevators. We believe we have opportunities for growth in available elevator
markets by introducing new energy-saving product offerings for both alternating
current ("AC") and DC applications, expanding the breadth of our product
offerings for lower performance AC applications, and using our new product
offerings to expand geographically.
Our product offerings for energy delivery applications include AC and DC drives
for mining applications, as well as power inverters for renewable energy
applications. We believe that energy needs will continue to grow significantly
for the foreseeable future, and with our product offerings, we are positioned to
capitalize on that growth. We have a wide variety of product offerings which are
engineered to efficiently use available power, or which convert energy to usable
power in an energy efficient manner. We have been a leading supplier of AC and
DC digital motion control systems to underground coal mining equipment
manufacturers for over 25 years. More recently we've developed and introduced
power inverters which convert DC power from renewable energy sources to
utility-grade AC power.
We intend to continue to build on our competitive strengths in established
material handling, elevator, and mining markets, while also continuing to market
our product portfolio aimed at penetrating growing and emerging markets for
digital power-based systems. We further intend to continue to pursue internal
growth opportunities in our core product lines, seeking to increase our market
share, enter new markets, and expand our current business model geographically.
Continuing Operations
We focus on a variety of key indicators to monitor our business performance.
These indicators include order rates, sales growth, gross profit margin,
operating profit margin, net income, earnings per share, and working capital and
cash flow measures. These indicators are compared to our operating plans as
well as to our prior year actual results, and are used to measure our success
relative to our objectives. Our Company objectives are to grow sales at least
10% on a year-over year basis, to achieve 30% gross margins and 10% operating
profit margins, and to generate sufficient cash flow to fund our growth
initiatives, our operations and our obligations.
Throughout calendar year 2011, we experienced improving conditions and
increasing demand in most of our major served markets, mainly in traditional
industrial markets. Accordingly, both our sales and operating results improved
steadily throughout 2011, and that trend has continued into fiscal 2012. While
our 2012 third quarter sales decreased 8% from the comparable period last year,
the majority of the decline was due to lower sales of wind power inverters and
products for mining applications. We also recorded an adjustment to our
renewable energy sales related to the resolution of order cancellations with our
wind customer, which reduced our third quarter sales by $1.4 million. Sales of
products with material handling applications, our largest served market,
continued to grow in the third quarter of fiscal 2012, and increased nearly 9%
over the comparable period last year to more than $21 million.
Our third quarter 2012 gross profit decreased from the comparable period last
year, however our gross profit as a percentage of sales increased due mainly to
a favorable shift in our sales mix, with higher sales volumes into traditional
served industrial markets where margins are typically higher, and lower sales of
lower margin products with renewable energy applications. We reported pre-tax
income from operations of $1.9 million, or approximately 6.7% of sales, in the
third quarter of 2012, compared to prior year pre-tax income from operations of
$2.3 million, or 7.7% of sales. The reduction in pre-tax income from operations
was mainly due to higher pension expense in the current year. Diluted earnings
per share from continuing operations totaled $0.46 per share in the third
quarter of 2012, compared to $0.54 per share in the same period of 2011. In
addition, our cash balances increased slightly during the third quarter of 2012,
even after contributing $3.9 million to our defined benefit pension plan.
Our incoming order rate was strong during the third quarter of fiscal 2012, as
demand levels remain healthy in our traditional served industrial markets,
mainly for products with material handling applications. While growth in
manufacturing activity is moderating, manufacturing continues to be an area of
strength in the U.S. economy.
Challenging conditions have persisted in renewable energy markets for some time,
and we expect conditions in the wind market to remain soft for the foreseeable
future. Renewable energy markets, like many emerging industries, are
characterized by rapid changes in technology, market conditions, and available
product solutions. Factors influencing end market conditions include the cost of
competing traditional energy sources and the availability of government
subsidies. Market conditions for inverter manufacturers have deteriorated
considerably over the past year. A growing number of competitors combined with
high levels of investment in research and development have led to a great deal
of pricing pressure and significant reductions in profitability. We also believe
that scale is becoming increasingly important in order to compete effectively.
Given the lack of backlog in renewable energy and our expectations regarding
future sales levels, we've taken actions to reduce our cost structure in that
part of our business, and also
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intend to allocate resources in the future to those areas of our business where
we believe we have sustainable competitive advantages and better growth
opportunities.
Entering the fourth quarter, we have an order backlog of $18 million, comprised
entirely of orders for our traditional served material handling, elevator, and
mining markets. We believe we can offset the decline in revenue from renewable
energy in the short-term with higher sales of products for material handling
applications, and we believe we have numerous near-term and long-term growth
opportunities with our radio control products. Sales of our industrial products
have higher gross margins than our renewable energy product offerings, and as a
result, our sales mix in the third quarter was more favorable than the past
several quarters, and we expect that trend to continue in the future.
Longer-term, we believe we can further grow our business beyond our core
material handling market by gaining a greater share of the AC elevator controls
market, and by reducing our reliance on the coal industry by entering new mining
markets, further diversifying our customer base with new products for mining
applications beyond coal.
Current forecasts indicate the U.S. economic recovery is slowing, and
macro-economic conditions remain dynamic and fragile. As a result, it remains
challenging to predict the duration or the magnitude of the current economic
recovery, whether in the U.S. overall or in the specific end markets we serve.
For the remainder of 2012, we intend to focus our development and marketing
efforts on organic sales growth opportunities in our traditional served markets.
In addition, we are executing actions to prudently expand our reach into new end
markets and geographical areas, and are also taking actions to reduce our cost
structure and reallocate resources from those parts of our business which are
not growing.
Discontinued Operations
Certain expenses related to previously divested businesses have been classified
as discontinued operations in the accompanying condensed consolidated financial
statements and footnotes for all periods presented (see Note 2 of Notes to
Condensed Consolidated Financial Statements). Expenses related to previously
divested businesses include environmental matters, asbestos claims and product
liability claims (see Note 4 of Notes to Condensed Consolidated Financial
Statements). All of these issues relate to businesses we no longer own and most
relate to indemnification agreements that we entered into when we divested those
businesses.
Going forward, our results of discontinued operations may include additional
costs incurred related to businesses no longer owned, and may include additional
costs above those currently estimated and accrued related to the divestiture of
our telecom power systems ("TPS") business, which was divested in September
2008, and our power electronics business, which was divested in October 2006.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", included in our
Transition Report on Form 10-K for the six-month transition period ended
January 1, 2012.
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Results of Operations - Three Months Ended September 30, 2012, and October 2,
2011
Net Sales and Gross Profit
Net sales for the three months ended September 30, 2012, were $26.9 million, a
decrease of 8% from the three months ended October 2, 2011, sales of $29.2
million. The decrease in sales was primarily due to lower sales of wind power
inverters into renewable energy markets and lower sales of products in mining
markets, both of which are included in energy systems in the table below,
partially offset by higher sales volumes into traditional served material
handling markets. In addition, net sales for the three months ended September
30, 2012, reflect an adjustment to our renewable energy sales related to the
resolution of order cancellations with our wind customer, which reduced our
sales by $1.4 million. Net sales by major market were as follows, in millions:
Three Months Ended
September 30, 2012 October 2, 2011
Material handling $ 21.0 78 % $ 19.4 67 %
Elevator motion control 6.2 23 % 5.9 20 %
Energy systems (0.3 ) (1 )% 3.9 13 %
Total net sales $ 26.9 100 % $ 29.2 100 %
Gross profit for the three months ended September 30, 2012, was $9.7 million, or
36.0% of sales, versus $9.8 million, or 33.6% of sales, for the three months
ended October 2, 2011. The increase in gross profit as a percentage of sales for
the three months ended September 30, 2012, as compared to the three months ended
October 2, 2011, was mainly due to a favorable shift in the Company's sales mix,
with increased sales of higher margin material handling products.
Research and Development, Pension Expense, and Selling, General and
Administrative
Research and development ("R&D") expense was $1.0 million, or 3.8% of sales, for
the three months ended September 30, 2012, comparable to R&D expense of $1.0
million, or 3.5% of sales, for the three months ended October 2, 2011.
Pension expense was $1.7 million and $1.4 million for the three months ended
September 30, 2012 and October 2, 2011, respectively (see Note 7 of Notes to
Condensed Consolidated Financial Statements). The increase in pension expense
was mainly due to increased amortization of actuarial losses resulting from
declining interest rates experienced during 2011.
Selling, general and administrative ("SG&A") expense was $5.1 million (18.9% of
sales) for the three months ended September 30, 2012, versus $5.2 million (17.7%
of sales) for the three months ended October 2, 2011. Selling expenses in the
three months ended September 30, 2012, increased to $3.0 million from $2.7
million in the three months ended October 2, 2011, mainly due to higher
commissions and higher discretionary spending. General and administrative
("G&A") expense decreased to $2.1 million for the three months ended
September 30, 2012, from $2.5 million for the three months ended October 2,
2011, mainly due to lower incentive compensation provisions.
Income from Operations
Income from operations for the three months ended September 30, 2012, was $1.9
million compared to income from operations of $2.3 million for the three months
ended October 2, 2011. The decrease in income from operations for the three
months ended September 30, 2012, as compared to the three months ended
October 2, 2011, was mainly due to higher pension expense in the three months
ended September 30, 2012.
Interest Income
Interest income was negligible for the three months ended September 30, 2012 and
October 2, 2011.
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Provision for Income Taxes
We recorded a provision for income taxes of $0.2 million and $0.3 million for
the three months ended September 30, 2012, and October 2, 2011,
respectively. The income tax provision in both periods includes non-cash
deferred income tax provisions of $0.2 million related to changes in deferred
tax liabilities from goodwill amortization for tax purposes.
Income from Continuing Operations
We recorded income from continuing operations of $1.7 million for the three
months ended September 30, 2012, or $0.51 per diluted share, compared to income
from continuing operations of $2.0 million for the three months ended October 2,
2011, or $0.61 per diluted share.
Loss from Discontinued Operations
We recorded a loss from discontinued operations for the three months ended
September 30, 2012, of $0.2 million, or a $0.05 loss per share on a diluted
basis, compared to a loss from discontinued operations of $0.2 million, or a
$0.07 loss per share on a diluted basis, for the three months ended October 2,
2011. The loss from discontinued operations in the three months ended September
30, 2012, and October 2, 2011, is comprised entirely of expenses related to
previously divested businesses.
Net Income
Our net income was $1.5 million in the three months ended September 30, 2012, or
$0.46 per diluted share, compared to net income of $1.7 million in the three
months ended October 2, 2011, or $0.54 per share on a diluted basis.
Results of Operations - Nine Months Ended September 30, 2012, and October 2,
2011
Net Sales and Gross Profit
Net sales for the nine months ended September 30, 2012, were $84.6 million, a
decrease of 4% from the nine months ended October 2, 2011, sales of $88.1
million. The decrease in sales was primarily due to lower sales of wind power
inverters into renewable energy markets, which decreased to $3.5 million in the
first nine months of fiscal 2012 from $13.1 million in the comparable period
last year, most of which was offset by higher sales volumes into traditional
served material handling markets. Net sales by major market were as follows, in
millions:
Nine Months Ended
September 30, 2012 October 2, 2011
Material handling $ 58.2 69 % $ 50.9 58 %
Elevator motion control 16.7 20 % 17.8 20 %
Energy systems 9.7 11 % 19.4 22 %
Total net sales $ 84.6 100 % $ 88.1 100 %
Gross profit for the nine months ended September 30, 2012, was $30.5 million, or
36.0% of sales, versus $29.0 million, or 32.9% of sales, for the nine months
ended October 2, 2011. The increase in gross profit as a percentage of sales for
the nine months ended September 30, 2012, as compared to the nine months ended
October 2, 2011, was mainly due to a favorable shift in the Company's sales mix,
with increased sales of higher margin material handling and fewer sales of lower
margin wind power inverters.
Research and Development, Pension Expense, and Selling, General and
Administrative
R&D expense was $3.0 million, or 3.5% of sales, for the nine months ended
September 30, 2012, a decrease compared to R&D expense of $3.3 million, or 3.8%
of sales, for the nine months ended October 2, 2011, due mainly to completion of
development of the Company's solar inverter product in early 2012.
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Pension expense was $5.0 million and $4.6 million for the nine months ended
September 30, 2012 and October 2, 2011, respectively (see Note 7 of Notes to
Condensed Consolidated Financial Statements). The increase in pension expense
was mainly due to increased amortization of actuarial losses resulting from
declining interest rates experienced during 2011.
SG&A expense was $15.6 million (18.4% of sales) for the nine months ended
September 30, 2012, comparable to SG&A expense of $15.7 million (17.8% of sales)
for the nine months ended October 2, 2011. Selling expenses in the nine months
ended September 30, 2012, increased to $8.9 million from $7.6 million in the
nine months ended October 2, 2011, mainly due to higher commissions from
increased sales of material handling products, higher payroll costs, and higher
discretionary spending. G&A expense decreased to $6.7 million for the nine
months ended September 30, 2012, from $8.1 million for the nine months ended
October 2, 2011, mainly due to lower incentive compensation provisions.
Income from Operations
Income from operations for the nine months ended September 30, 2012, was $6.9
million compared to income from operations of $5.4 million for the nine months
ended October 2, 2011. The increase in income from operations for the nine
months ended September 30, 2012, as compared to the nine months ended October 2,
2011, was mainly due to higher gross profit on increased sales of material
handling, and lower R&D and G&A expenses in the nine months ended September 30,
2012, partially offset by increased pension expense and selling expenses.
Interest Income
Interest income was negligible for the nine months ended September 30, 2012 and
October 2, 2011.
Provision for Income Taxes
We recorded a provision for income taxes of $0.8 million and $0.6 million for
the nine months ended September 30, 2012, and October 2, 2011, respectively,
which includes non-cash deferred income tax provisions of $0.7 million and $0.6
million, respectively, related to changes in deferred tax liabilities from
goodwill amortization for tax purposes.
Income from Continuing Operations
We recorded income from continuing operations of $6.1 million for the nine
months ended September 30, 2012, or $1.87 per diluted share, compared to income
from continuing operations of $4.7 million for the nine months ended October 2,
2011, or $1.48 per diluted share.
Income (Loss) from Discontinued Operations
We recorded income from discontinued operations for the nine months ended
September 30, 2012, of $5.5 million, or $1.68 per share on a diluted basis,
compared to a loss from discontinued operations of $0.9 million, or a $0.27 loss
per share on a diluted basis, for the nine months ended October 2, 2011. Income
from discontinued operations in the nine months ended September 30, 2012,
includes a gain of $5.0 million from a settlement agreement resulting in
resolution of a legal matter (see Notes 2 and 4 of Notes to Condensed
Consolidated Financial Statements). Income from discontinued operations in the
nine months ended September 30, 2012, also includes a gain of $1.1 million from
non-cash adjustments of liabilities related to previously owned businesses,
partially offset by certain legal and other expenses related to previously owned
businesses. The loss from discontinued operations in the nine months ended
October 2, 2011, is comprised entirely of expenses related to previously
divested businesses.
Net Income
Our net income was $11.6 million in the nine months ended September 30, 2012, or
$3.55 per diluted share, compared to net income of $3.9 million in the nine
months ended October 2, 2011, or $1.21 per share on a diluted basis.
Liquidity and Capital Resources
Our unrestricted cash and cash equivalent balance increased approximately $6.5
million during the first nine months of fiscal 2012, from $20.6 million at
January 1, 2012, to $27.1 million at September 30, 2012. Restricted cash
balances remained unchanged during the first nine months of fiscal 2012 at $0.3
million. The primary source of cash during the first nine months of fiscal 2012
was income from continuing operations of $6.1 million, which included
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non-cash charges aggregating $7.0 million for depreciation, amortization,
pension, stock compensation, and deferred income tax provisions. In addition,
our income from discontinued operations of $5.5 million included receipt of $5.0
million from a settlement agreement entered into during the first nine months of
fiscal 2012 to resolve a long-standing legal issue (see Note 4 of Notes to
Condensed Consolidated Financial Statements).
The primary uses of cash in the first nine months of fiscal 2012 included $7.7
million in contributions to our pension plan and a $2.8 million net increase in
operating assets and liabilities. Accounts receivable increased by $0.5 million
during the first nine months of fiscal 2012, due mainly to an increase in days
sales outstanding, which increased from 51 days at January 1, 2012, to 58 days
at September 30, 2012. Accounts payable and other accrued liabilities decreased
by $2.8 million during the first nine months of fiscal 2012, due to lower trade
accounts payable balances as well as payment of incentive compensation amounts
accrued as of January 1, 2012. In addition, $1.1 million of the reduction in
accounts payable and other accrued liabilities resulted from non-cash
adjustments to liabilities related to previously owned businesses. We also
consumed cash of $0.6 million for disbursements related to previously divested
businesses and $0.7 million for capital expenditures.
While we may make further investments to increase capacity and improve
efficiency, we do not anticipate that capital expenditures in fiscal 2012 will
exceed $1.5 million. The expected amount of capital expenditures could change
depending upon changes in revenue levels, our financial condition, and the
general economy.
In November 2007 we entered into an agreement with Associated Bank, N.A.
("Associated Bank") providing for a $10 million revolving credit facility (the
"revolving facility"). Borrowings under the revolving facility bore interest at
the London Interbank Offering Rate ("LIBOR") plus 1.5%, with borrowing levels
determined by a borrowing base formula as defined in the agreement, based on the
level of eligible accounts receivable. The revolving facility also supports the
issuance of letters of credit, places certain restrictions on our ability to pay
dividends or make acquisitions, and includes covenants which require minimum
operating profit levels and limit annual capital expenditures. Borrowings under
the revolving facility were collateralized by our accounts receivable and
inventory. We have subsequently entered into four amendments to the revolving
facility, the primary purpose of which was to extend the maturity dates of the
revolving facility and to broaden the security interest of Associated Bank to
include all assets of the Company.
In December 2011, we entered into the most recent fourth amendment to the
revolving facility with Associated Bank, the purpose of which was to (i) extend
the maturity date of the revolving facility to June 15, 2013; (ii) increase the
commitment amount of Associated Bank to $12.5 million; (iii) establish minimum
adjusted earnings before interest, taxes, depreciation and amortization
requirements for the three-month periods ending December 31, 2011, through March
31, 2013; and (iv) establish maximum cash amounts that we can contribute to our
defined benefit pension plan during the term of the agreement. There were no
amounts outstanding on the amended revolving facility as of September 30,
2012. We are currently in compliance with all covenants of the revolving
facility, as amended.
Primarily as a result of the decline in interest rates over the past decade, the
accumulated benefit obligation of our defined benefit pension plan currently
exceeds plan assets. We contributed $30 million to our pension plan in December
2006 following the divestiture of our power electronics business, and
subsequently have made contributions to the plan aggregating $46 million from
April 2008 through September 30, 2012, funded by cash generated from operations
and existing cash on hand.
In response to the level of our projected pension funding obligations relative
to our current operating cash flows, we filed an application with the Internal
Revenue Service ("IRS") in February 2011 for a waiver of our minimum funding
requirements (contributions) for the pension plan year 2011. The amount of the
funding waiver requested was approximately $17 million, scheduled to be funded
in quarterly installments from April 2011 through January 2012, with a final
installment due in September 2012. The waiver request was approved by the IRS
in October 2011, and as a result, we did not make any contributions to the plan
for the pension plan year 2011. Rather, the 2011 plan year required
contributions of $17 million will be deferred and amortized with interest at a
rate of approximately 6% over plan years 2012 through 2016.
Required quarterly contributions to the pension plan resumed in 2012, and
accordingly, we contributed $7.7 million to our pension plan assets in the first
nine months of fiscal 2012. In October 2012, subsequent to the end of the third
quarter of fiscal 2012, we made the third required quarterly pension
contribution of fiscal 2012 in an amount of $3.9 million. We expect to make our
final contribution for plan year 2012 in January 2013, also in an amount of $3.9
million.
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In our Transition Report on Form 10-K for the six-month transition period ended
January 1, 2012, we disclosed that our estimated minimum contributions to our
pension plan for fiscal years 2013 and 2014 aggregated $52 million. Federal
legislation signed into law in July 2012 allows pension plan sponsors to use an
adjusted 25-year average corporate bond rate versus the current two-year
average. Use of the 25-year average rate is expected to result in higher
interest rate assumptions in valuing plan liabilities and in determining funding
obligations, which in turn will result in lower minimum required contributions
for plan sponsors in the near term. As a result of these legislative changes, we
now estimate that our fiscal 2013 and 2014 minimum required pension
contributions will decrease to $20 million each from the previously expected
amount of $26 million for each year. In addition, fiscal 2015 minimum required
contributions are currently estimated at $13 million from the previously
estimated amount of $20 million. Estimated future contributions to achieve 100%
funded status, as measured using current actuarial assumptions and in accordance
with the recently enacted legislation, are projected to be approximately $96
million. The net present value of the estimated future contributions, discounted
using the post-relief average interest rate of 5.05%, total approximately $77
million.
These estimates and the actual timing and amount of required plan contributions
are dependent upon many factors, including returns on invested assets, the level
of certain market interest rates, the discount rate used to determine pension
obligations, the regulations to be adopted that implement the legislation, and
other potential regulatory actions.
Based upon current plans and business conditions, we believe that current cash
balances and internally generated cash flows will be sufficient to fund
anticipated operational needs, capital expenditures, required pension plan
contributions and other commitments over the next 12 months.
Caution Regarding Forward-Looking Statements and Risk Factors
This document, including documents incorporated herein by reference, contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The words "believe," "expect," "estimate,"
"anticipate," "intend," "may," "might," "will," "would," "could," "project," and
"predict," or similar words and phrases generally identify forward-looking
statements. Forward-looking statements are inherently subject to risks and
uncertainties which in many cases are beyond our control and which cannot be
predicted or quantified. As a result, future events and actual results could
differ materially from those set forth in, contemplated by, or underlying
forward-looking statements. Forward-looking statements contained in this
document speak only as of the date of this document or, in the case of any
document incorporated by reference from another document, the date of that
document. We do not have any obligation to publicly update or revise any
forward-looking statement contained or incorporated by reference in these
documents to reflect changed assumptions, the occurrence of unanticipated events
or changes to future operating results over time.
Our future results of operations and the other forward-looking statements
contained in this filing, including this section titled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," involve a number
of risks and uncertainties. In particular, the statements regarding future
economic conditions, our goals and strategies, new product introductions,
penetration of new markets, projections of sales revenues and sales growth,
manufacturing costs and operating costs, pricing of our products and raw
materials required to manufacture our products, gross margin expectations,
relocation and outsourcing of production capacity, capital spending, research
and development expenses, the outcome of pending legal proceedings and
environmental matters, payment of certain claims by insurance carriers, tax
rates, sufficiency of funds to meet our needs including contributions to our
defined benefit pension plan, and our plans for future operations, as well as
our assumptions relating to the foregoing, are all subject to risks and
uncertainties.
A number of factors could cause our actual results to differ materially from our
expectations. We are subject to all of the business risks facing public
companies, including business cycles and trends in the general economy,
financial market conditions, changes in interest rates, demand variations and
volatility, potential loss of key personnel, supply chain disruptions,
government legislation and regulation, and natural causes. Additional risks and
uncertainties include but are not limited to industry conditions, competitive
factors such as technology and pricing pressures, business conditions in our
served markets, dependence on significant customers, increased material costs,
risks and costs associated with acquisitions and divestitures, environmental
matters and the risk that our ultimate costs of doing business exceed present
estimates. This list of risk factors is not all-inclusive, as other factors and
unanticipated events could adversely affect our financial position or results of
operations. Further information on factors that could affect our financial
results can be found in our Transition Report on Form 10-K filed with the
Securities and Exchange
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Commission for the six-month transition period ended January 1, 2012, under the
heading "Risk Factors" as well as below in Part II, Item 1A under the
heading "Risk Factors".
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