Magnetek, Inc. (“Magnetek” or “the Company”, NASDAQ: MAG) today provided updated pension funding guidance based on recently passed pension funding legislation. Pension Funding Relief Legislation On June 29, 2012, the United States Congress passed highway reauthorization legislation known as the Moving Ahead for Progress in the 21 st Century Act (“MAP-21”), which among other things, provides defined benefit pension plan sponsors with funding relief. MAP-21, signed into law on July 6, 2012, includes provisions regarding interest rate stabilization for pension plans as well as amendments regarding additional required pension disclosures and an increase in future Pension Benefit Guarantee Corporation (“PBGC”) premiums. As previously disclosed, Magnetek has an underfunded defined benefit pension plan that was frozen in 2003. The MAP-21 legislation revises the rules for determining the interest rates used to compute a pension plan’s funding target liability. The current method uses a two-year average of high quality corporate bond rates in determining pension liabilities. The new legislation allows plan sponsors to use a 25-year average corporate bond rate, with a 10% corridor, if the rate determined under the current rules falls outside the range of the 25-year average as adjusted for the corridor. The corridor will grow 5% per year, reducing the amount of relief available to plan sponsors each year. The provisions are generally effective for plan years beginning on or after January 1, 2012. Impact on Magnetek’s Pension Funding Obligation The Internal Revenue Service (“IRS”) and the Department of the Treasury (“Treasury”) will begin work on regulatory guidance to allow plan sponsors, including Magnetek, to implement the funding stabilization provisions of MAP-21. Until the 2012 corridor rates are published, contributions due for the 2012 pension plan year are expected to continue to be made assuming no relief is provided. As a result, Magnetek is not anticipating significant changes to its previously disclosed funding amounts of approximately $12 million for calendar year 2012. However, preliminary estimates of required minimum pension contributions, taking into account the impact of the funding relief, for calendar years 2013 and 2014 are expected to decline by an aggregate amount of approximately $9 million from the previously disclosed amount of $52 million per the Company’s Transition Report on Form 10-K for the six-month period ended January 1, 2012. The actual impact on future effective interest rates, plan liabilities, and minimum contributions will also depend on underlying yields on high quality corporate bonds in the coming years. PBGC premiums for 2013 and 2014, paid out of plan assets, are expected to increase approximately $300 thousand annually.
Commenting on the funding relief, Marty Schwenner, Magnetek’s chief financial officer, said, “We’re pleased with this recent action by Congress to provide pension plan sponsors with funding relief, even though the relief does phase out over time. We would prefer to see permanent adoption of the long-term average interest rate methodology without the widening corridor, as we believe that method would be more consistent with the long-term nature of pension plans. While there are still a number of details to be finalized regarding the implementation of the new funding rules, we currently expect the funding relief to improve our cash flow through reduced pension contributions by approximately $7 million in 2013, and by about $2 million in 2014, from previously projected contributions.”The Company intends to provide an update of both the funding relief legislation and its pension funding obligations in its upcoming earnings release for the second quarter of fiscal 2012, scheduled for August 8, 2012. About Magnetek, Inc. Magnetek, Inc. provides digital power and motion control systems used in overhead material handling, elevator, and energy delivery applications. The Company is North America’s largest supplier of digital drive systems for industrial cranes, hoists, and monorails. Magnetek provides Energy Engineered ® drives, radio remote controls, motors, and braking and collision avoidance subsystems to North America’s foremost overhead material handling crane builders. The Company is also the world’s largest independent builder of highly integrated digital motion control systems for high-rise, high-speed elevators. In energy delivery, Magnetek develops and markets digital power inverters that connect renewable energy sources to the utility grid, and is a leading independent supplier of digital motion control systems for underground coal mining applications. Magnetek is headquartered in Menomonee Falls, Wis., in the greater Milwaukee area and operates manufacturing facilities in Pittsburgh, Pa., and Bridgeville, Pa., as well as Menomonee Falls. Special Note Regarding Online Availability of Magnetek Releases and Filings All Magnetek financial news releases and filings with the Security and Exchange Commission (“SEC”) are posted to the Magnetek website. Material and financial releases as well as SEC filings are available at www.magnetek.com . Automatic email alerts for these postings are available from the Investor Relations section of the site. Corporate and general releases as well as product information are also available at www.magnetek.com . Special Note Regarding Forward-Looking Statements This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the anticipated effect of the Moving Ahead for Progress in the 21 st Century Act, are based on the Company's expectations and are subject to risks and uncertainties that cannot be predicted or quantified and are beyond the Company's control. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying these forward-looking statements. These include, but are not limited to, economic conditions in general, business conditions in material handling, elevator, mining, and alternative energy markets, operating conditions, competitive factors such as pricing and technology, risks associated with acquisitions and divestitures, changes in financial market conditions including interest rate and asset return rates, further changes in pension funding legislation, legal proceedings and the risk that the Company’s ultimate costs of doing business exceed present estimates. Other factors that could cause actual results to differ materially from expectations are described in the Company's Form 10-K and other reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.