MAGNETEK COM USD0.01 (NASDAQ:MAG)

Magnetek to Exit Power Electronics Business; Fiscal 2006 Results Reflect Pending Divestiture.
The Company's objectives for calendar 2007, following the divestiture of PEG, include:

-- Paying off debt. While the patent arbitration case referenced above will have a bearing on this, a decision unfavorable to Magnetek would not prevent the Company from substantially reducing its debt with divestiture proceeds.
-- Making a sufficiently large cash contribution to Magnetek's pension trust fund to reduce or potentially eliminate the need for further contributions, potentially restoring stockholders' equity to over $100 million.
-- Reducing general and administrative expense, much of which is currently incurred through corporate overhead and recognition of pension costs, and interest expense that would be reduced or eliminated by the aforementioned debt repayment.
-- Focusing on the Power Control Systems business, enabling Magnetek as a whole to realize expected gross margins of around 30% with positive operating profit, income and cash flow.
-- Using the Company's $146 million of net operating loss carry-forwards (NOLs), most of which do not expire until after 2020, to shelter income from taxes.

In sum, given three to six months following the divestiture of PEG to consolidate operations and relocate administrative functions, management expects Magnetek to emerge as a solidly profitable company with positive cash flow, negligible debt and outstanding growth opportunities.