Magnetek receives conditional IRS approval of pension funding waiver

Menomonee Falls-based Magnetek Inc. announced that it has received conditional approval of its request for a waiver of the minimum funding requirements of the company’s defined benefit pension plan for the 2011 plan year.
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 company said the Internal Revenue Service informed it that the agency is prepared to grant the waiver request subject to the following conditions: the company agrees to resume its required quarterly contributions in a timely manner beginning April 15, 2012; the company makes contributions to the plan sufficient to meet the minimum funding requirements for the plan years 2012-16; and the company provides collateral acceptable to the Pension Benefit Guarantee Corp. for the full amount of the 2011 plan year waiver.
Magnetek said it expects that the 2011 plan year scheduled contributions of $17 million will be deferred and amortized with interest over plan years 2012 through 2016.
The waiver application was filed in February and the company did not make its scheduled contributions in April, July, and October 2011 in an aggregate amount of more than $10 million.
Based upon receipt of the waiver, the company says it can now also defer contributions scheduled for January and September 2012 in an aggregate amount of nearly $7 million. The company said it did make a cash contribution of $1.9 million to the plan in September 2011, which represented the final amount due for plan year 2010.
“We believe this decision is in the best long-term interests of the company and our stakeholders, including our employees and our pensioners. We would like to thank all of those at both the IRS and the PBGC who worked diligently with us on this issue over the past several months,” said Marty Schwenner, Magnetek’s chief financial officer. “We expect the funding waiver will have a significant favorable impact on our cash flow over the next several quarters, as evidenced by our strong positive cash flow in our most recently reported fourth quarter. Foremost, the funding waiver should enable us to strengthen our balance sheet by building our cash reserves at a time of increasing economic uncertainty. To a lesser extent, it will also provide us with additional resources to prudently allocate to growth opportunities in our business.”