FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ------------------------------ Commission file number 1-10233 ------------------------------ MAGNETEK, INC. (Exact name of registrant as specified in its charter) Delaware 95-3917584 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 26 Century Blvd. Nashville, Tennessee 37214 (Address of principal executive offices) (Zip Code) (615) 316-5100 (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of Registrant's Common Stock, as of November 5, 1999, 24,101,133 shares. 2000 MAGNETEK FORM 10-Q TABLE OF CONTENTS FOR THE QUARTERLY REPORT ON 10Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1999 MAGNETEK, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits on form 8-K PART I. FINANCIAL INFORMATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to fairly present the financial position as of September 30, 1999 and the results of operations and cash flows for the three-month periods ended September 30, 1999 and 1998. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Company's latest annual report on Form 10-K. Results for the three-months ended September 30, 1999 are not necessarily indicative of results which may be experienced for the full fiscal year. This document contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties which, in many cases, are beyond the control of the Company. These include but are not limited to economic conditions in general, business conditions in electrical and electronic equipment markets, competitive factors such as pricing and technology, and the risk that the Company's ultimate costs of doing business exceed present estimates. Further information on factors which could affect MagneTek's financial results are described in the Company's filings with the Securities and Exchange Commission. ITEM 1 MAGNETEK, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 1999 and JUNE 30, 1999 (amounts in thousands) SEPTEMBER 30 JUNE 30 ------------ --------- ASSETS (unaudited) Current assets: Cash $ 17,010 $ 6,880 Accounts receivable 123,119 111,105 Inventories 129,316 116,316 Prepaid expenses and other 35,723 35,404 --------- --------- Total current assets 305,168 269,705 --------- --------- Property, plant and equipment 243,064 238,554 Less-accumulated depreciation and amortization 138,139 133,489 --------- --------- 104,925 105,065 --------- --------- Net assets of discontinued operations -- 173,779 Goodwill 61,371 37,548 Deferred financing costs, intangible and other assets 59,926 59,477 --------- --------- Total Assets $531,390 $645,574 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 75,913 $ 73,266 Accrued liabilities 96,146 87,742 Current portion of long-term debt 4,186 4,141 --------- --------- Total current liabilities 176,245 165,149 --------- --------- Long-term debt, net of current portion 14,946 179,093 Other long-term obligations 50,120 54,262 Deferred income taxes 62,437 43,139 Commitments and contingencies Stockholders' equity Common stock 283 300 Paid in capital in excess of par value 144,821 160,574 Retained earnings 104,218 66,210 Accumulated other comprehensive loss (21,680) (23,153) --------- --------- Total stockholders' equity 227,642 203,931 --------- --------- Total Liabilities and Stockholders' Equity $531,390 $645,574 --------- --------- --------- --------- MAGNETEK, INC. CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDED September 30, 1999 and 1998 (amounts in thousands except per share data) (unaudited) 1999 1998 ---- ---- Cash flows from operating activities: Net income from continuing operations $ 3,489 $ 3,291 Adjustments to reconcile income to net cash used in operating activities: Depreciation and amortization 6,289 5,214 Changes in operating assets and liabilities of continuing operations (18,532) (20,568) --------- --------- Total adjustments (12,243) (15,354) --------- --------- Net cash used in operating activities (8,754) (12,063) --------- --------- Cash flows from investing activities: Proceeds from sale of Motor business and other assets 253,000 -- Purchase of and investment in companies, net of cash acquired (38,245) -- Capital expenditures (3,426) (6,107) Other investments (5) (197) --------- --------- Net cash provided by (used in) investing activities 211,324 (6,304) --------- --------- Cash flow from financing activities: Borrowings under bank and other long-term obligations -- 24,649 Proceeds from issuance of common stock 1,582 642 Stock repurchases (17,248) (5,353) Repayment of bank and other long term obligations (164,102) -- Increase in deferred financing costs (467) -- --------- --------- Net cash provided by (used in) financing activities (180,235) 19,938 --------- --------- Net cash provided by continuing operations 22,335 1,571 --------- --------- Cash flow from discontinued operations: Income (loss) from discontinued operations (528) 5,726 Adjustments to reconcile income to net cash provided by discontinued operations: Depreciation and amortization 1,039 4,360 Changes in operating assets and liabilities of discontinued operations, including fees and expenses of disposal (11,713) (10,694) Capital expenditures (1,003) (5,138) --------- --------- Net cash used in discontinued operations (12,205) (5,746) --------- --------- Net increase (decrease) in cash $ 10,130 $ (4,175) Cash at the beginning of the period 6,880 5,976 --------- --------- Cash at the end of the period $ 17,010 $ 1,801 --------- --------- --------- --------- ITEM 1 (continued) MAGNETEK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (amounts in thousands) (unaudited) 1999 1998 ---- ---- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $3,738 $5,796 Income taxes $3,577 $ 832 (see accompanying notes) ITEM 1 (Continued) MAGNETEK, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE THREE MONTHS ENDED September 30, 1999 and 1998 (amounts in thousands except per share data) (unaudited) 1999 1998 ---- ---- Net sales $182,053 $165,683 Cost of sales 147,456 132,512 --------- --------- Gross profit 34,597 33,171 Selling, general and administrative 28,126 27,186 --------- --------- Income from operations 6,471 5,985 Interest expense 309 567 Other expense, net 534 579 --------- --------- Income from continuing operations before provision for income taxes 5,628 4,839 Provision for income taxes 2,139 1,548 --------- --------- Income from continuing operations 3,489 3,291 Discontinued operations - Income (loss) from operations (net of taxes) (528) 5,726 Gain on Motor sale (net of taxes) 35,047 -- --------- --------- Net income $ 38,008 $ 9,017 --------- --------- --------- --------- EARNINGS PER COMMON SHARE Basic: Income from continuing operations 0.12 0.11 Income (loss) from discontinued operations (0.02) 0.18 Gain on Motor sale (net of taxes) 1.19 -- --------- --------- Net income $ 1.29 $ 0.29 --------- --------- --------- --------- Diluted: Income from continuing operations 0.12 0.11 Income (loss) from discontinued operations (0.02) 0.18 Gain on Motor sale (net of taxes) 1.19 -- --------- --------- Net income $ 1.29 $ 0.29 --------- --------- --------- --------- See accompanying notes MAGNETEK, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (All dollar amounts are in thousands) (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL PERIOD - The Company uses a fifty-two, fifty-three week fiscal year. Fiscal periods end on the Sunday nearest the end of the month. For clarity of presentation, all periods are presented as if they ended on the last day of the calendar period. The three-month periods ended September 30, 1999 and 1998 contained fourteen weeks and thirteen weeks respectively. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of MagneTek, Inc. and its subsidiaries (the Company). All significant inter-company accounts and transactions have been eliminated. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. 2. INVENTORIES Inventories at September 30, 1999 and June 30, 1999 consist of the following: SEPTEMBER 30 JUNE 30 ------------ ------- Raw materials and stock parts $ 50,849 $ 51,489 Work-in-process 17,770 19,244 Finished goods 60,697 45,583 ------------ --------- $129,316 $116,316 ------------ --------- 3. COMMITMENTS AND CONTINGENCIES The Company is a party to a number of product liability lawsuits, many of which involve fires allegedly caused by defective ballasts. All of these cases are being defended by the Company, and management believes that its insurers will bear all liability, except for applicable deductibles, and that none of these proceedings individually or in the aggregate will have a material effect on the Company. In April 1998, Ole K. Nilssen filed a lawsuit in the U.S. District Court for the Northern District of Illinois alleging the Company is infringing seven of his patents pertaining to electronic ballast technology. The plaintiff seeks an unspecified amount of damages and an injunction to preclude the Company from making, using or selling those products allegedly infringing his patents. The Company denies that it has infringed, or is infringing, any of the plaintiff's patents, and has asserted several affirmative defenses. The Company also filed a counterclaim seeking judicial declaration that it is not infringing (and has not infringed) the patents asserted by the plaintiff, and that such asserted patents are invalid. The Company intends to defend this matter vigorously. Due to the preliminary state of the litigation, it is difficult to predict the outcome of the foregoing legal proceeding. However, management of the Company does not believe that the financial impact of such litigation will be material. The Company has from time to time discovered contamination by hazardous substances at certain of its facilities. In response to such a discovery, the Company conducts remediation activities to bring the facility into compliance with applicable laws and regulations. The Company's remediation activities for fiscal 1999 did not entail material expenditures, and its remediation activities for fiscal 2000 are not expected to entail material expenditures. Future discoveries of contaminated areas could entail material expenditures, depending upon the extent and nature of the contamination. Prior to its purchase by the Company in 1986, Century Electric, Inc. ("Century Electric") acquired a business from Gould Inc. ("Gould") in May 1983 which included a leasehold interest in a fractional horsepower electric motor manufacturing facility located in McMinnville, Tennessee. In connection with this acquisition, Gould agreed to indemnify Century Electric from and against liabilities and expenses arising out of the handling and cleanup of certain waste materials, including but not limited to cleaning up any PCBs at the McMinnville facility (the "1983 Indemnity"). Investigation has revealed the presence of PCBs and other substances, including solvents, in portions of the soil and in the groundwater underlying the facility and in certain offsite soil, sediment and biota samples. Century Electric has kept the Tennessee Department of Environment and Conservation, Division of Superfund, apprised of test results from the investigation. The McMinnville plant has been listed as a Tennessee Inactive Hazardous Substance Site, a report on that site has been presented to the Tennessee legislature, and community officials and plant employees have been notified of the presence of contaminants as above described. In 1995, Gould completed an interim remedial measure of excavating and disposing onsite soil containing PCBs. Gould also conducted preliminary investigation and cleanup of certain onsite and offsite contamination. The cost of any further investigation and cleanup of onsite and offsite contamination cannot presently be determined. The Company recently sold its leasehold interest in the McMinnville plant and believes that the costs for further onsite and offsite cleanup (including ancillary costs) are covered by the 1983 Indemnity. While the Company believes that Gould will continue to perform substantially under its indemnity obligations, Gould's substantial failure to perform such obligations could have a material adverse effect on the Company. The Company has been identified by the United States Environmental Protection Agency and certain state agencies as a potentially responsible party for cleanup costs associated with alleged past waste disposal practices at several offsite locations. Due, in part, to the existence of indemnification from the former owners of certain acquired businesses for cleanup costs at certain of these sites, the Company's estimated share in liability (if any) at the offsite facilities is not expected to be material. It is possible that the Company will be named as a potentially responsible party in the future with respect to other sites. In selling certain business operations, the Company from time to time has agreed, subject to various conditions and limitations, to indemnify buyers with respect to environmental liabilities associated with the acquired operations. The Company's indemnification obligations pursuant to such agreements did not entail material expenditures for fiscal 1999, and its indemnification obligations for fiscal 2000 are not expected to entail material expenditures. Future expenditures pursuant to such agreements could be material, depending upon the nature of any future asserted claims subject to indemnification. 4. DISCONTINUED OPERATIONS On August 2, 1999, the Company sold its Motor business to A.O. Smith for $253 million. The results of the Motor business have been reflected as discontinued operations in the accompanying consolidated financial statements. A portion of the Company's interest expense has been allocated to discontinued operations based upon the debt attributable to those operations. Taxes have been allocated using the same overall rate incurred by the Company in the first quarter of fiscal year 2000. The Company recorded an after-tax gain of $35 million in the first quarter of fiscal year 2000 upon the sale of its Motor business. 5. ACQUISITIONS On July 23, 1999, the Company purchased the assets of Electric Motor Systems, Inc., Electromotive Systems, Inc., and EMS/Rosa Automation Engineering, Inc., (the EMS Group) for a cash purchase price of approximately $38 million. The EMS Group manufactures and purchases for resale, adjustable speed drives. The acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price has been preliminarily allocated to the net assets acquired based on their estimated fair market values. Operating results of the EMS Group are included in the Company's consolidated results effective as of the acquisition date. 6. COMPREHENSIVE INCOME During the first quarter of fiscal 2000 and 1999, total comprehensive income was $39,481 and $9,361 respectively. 7. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share. (in thousands, except per share amounts) FISCAL YEAR ------------------------------ 1Q 1Q 2000 1999 ----------- ----------- BASIC EARNINGS PER SHARE: Income from continuing operations $ 3,489 $ 3,291 Income (loss) from discontinued operations (528) 5,726 Gain of sale of Motor business (net of taxes) 35,047 -- ----------- ----------- Net income $38,008 $ 9,017 Weighted average shares for basic earnings per share 29,359 31,203 BASIC EARNINGS PER SHARE: Income from continuing operations $ 0.12 $ 0.11 Income (loss) from discontinued operations (0.02) 0.18 Gain on sale of Motor business (net of taxes) 1.19 -- ----------- ----------- BASIC EARNINGS PER SHARE: $ 1.29 $ 0.29 ----------- ----------- ----------- ----------- DILUTED EARNINGS PER SHARE: Income from continuing operations $ 3,489 $ 3,291 Income (loss) from discontinued operations (528) 5,726 Gain on sale of Motor business (net of taxes) 35,047 -- ----------- ----------- Net income $38,008 $ 9,017 Weighted average shares for basic earnings per share 29,359 31,203 Effect of dilutive stock options 203 290 ----------- ----------- Weighted average shares for diluted earnings per share 29,562 31,493 DILUTED EARNINGS PER SHARE: Income from continuing operations $ 0.12 $ 0.11 Income (loss) from discontinued operations (0.02) 0.18 Gain on sale of Motor business (net of taxes) 1.19 -- ----------- ----------- DILUTED EARNINGS PER SHARE: $ 1.29 $ 0.29 ----------- ----------- ----------- ----------- 8. SEGMENT INFORMATION THREE MONTHS THREE MONTHS ENDING SEPTEMBER 30, 1999 ENDING SEPTEMBER 30, 1998 --------------------------------------------- ----------------------------------------------- LIGHTING POWER DRIVES & LIGHTING POWER DRIVES & POWER ELECTRONIC SYSTEMS POWER ELECTRONIC SYSTEMS PRODUCTS PRODUCTS PRODUCTS TOTAL PRODUCTS PRODUCTS PRODUCTS TOTAL ---------- ---------- ---------- ----- --------- ---------- --------- ------ Sales $104,023 $42,920 $35,110 $182,053 $104,628 $39,906 $21,149 $165,683 Operating profit 2,579 1,690 2,202 6,471 4,530 174 1,281 5,985 Lighting Power Products segment sales were comparable to the year earlier period. Power Electronic Products segment sales increased 7.6% due to stronger European sales. Drives & Systems revenues increased 66.1% due to the acquisition of the EMS Group. Excluding the sales from the acquisition, segment sales increased 15.2%. A reconciliation of combined operating profits for Lighting Power Products, Power Electronic Products and Drives & Systems products to consolidated income from continuing operations before taxes is as follows: THREE MONTHS ENDING 9/30/99 9/30/98 ------- ------- Total profit for reportable segments $6,471 $5,985 Interest expense 309 567 Other expense 534 579 ---------- ---------- Income from continuing operations before provision for income taxes $5,628 $4,839 ---------- ---------- ---------- ---------- ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. 1998 NET SALES AND GROSS PROFIT During fiscal 1999, after a period of declining revenues and pressure on operating profits, MagneTek undertook a review of strategic alternatives for improving shareholder value. Based on this review, which was conducted by both internal and outside analysts, the Company concluded that its electronic product lines offer the best opportunity for growth, profitability and value enhancement. Moreover, the Motor and Generator businesses were being impacted by industry consolidation, exposing the Company to unknown costs to remain competitive. Therefore, the Company elected to divest these businesses and use the proceeds to reduce debt, repurchase Company stock and strengthen electronic product lines. The Generator business was sold to Emerson Electric Co. in April 1999 for $115 million. In August, just after fiscal year end, the Motor business was sold to A.O. Smith Corporation for $253 million. These businesses are reported as discontinued operations in the accompanying Consolidated Financial Statements. Proceeds from the divestitures were used to repay all borrowings under the Company's domestic bank lines of credit, to continue the stock repurchase program previously authorized by the Board, and to acquire substantially all of the assets of EMS group (see Note 5). This acquisition significantly increases MagneTek's share of the North American A/C (alternating current) electronic drives market. MagneTek now operates in three business segments: Lighting Power Products (LP), Power Electronic Products (PE), and Drives & Systems (DS). LP makes power devices called "ballasts" that energize and operate fluorescent and other types of lamps, as well as certain ballast components. PE produces electronic converters, rectifiers and battery chargers, generally known as "power supplies," primarily for data processing and communications equipment, as well as component transformers. Previously part of the Motors & Controls segment, DS supplies electronic "drives" for regulating motor speed, as well as related hardware and software. MagneTek's net sales for the first quarter of fiscal 2000 were $182.1 million, a 9.9% increase from the first quarter of fiscal 1999 at $165.7 million. As a result of the Company's 52/53 week fiscal year, the fiscal 2000 quarter contained 14 weeks compared to 13 weeks in the fiscal 1999 quarter. Sales in the Drives and Systems segment increased 66.1% from the prior year due primarily to the acquisition of the EMS Group in July 1999. Excluding the effect of the acquisition, sales increased 15.2% due to stronger sales of standard drives products. Sales in the Power Electronic Products segment increased 7.6% due to increased sales of custom power supplies primarily in the segment's European operations. Sales of power supply products increased 15% and were offset by lower sales of small transformer products. Sales in the Lighting Power Products segment were flat with the year earlier quarter. The Company's gross profit increased to $34.6 million (19.0% of net sales) in the first quarter of fiscal 2000 from $33.2 million (20% of net sales) in the first quarter of fiscal 1999. The gross profit increase was due to the increase in sales discussed above. Gross profit levels for the Company were negatively impacted by final transitional costs associated with consolidating domestic power electronics to a single domestic manufacturing site. Lighting Power Products gross profits continue to be adversely effected by competitive pricing actions in selected markets. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative (SG&A) expense was $28.1 million (15.5% of net sales) in the first quarter of fiscal 2000 compared to $27.2 million (16.4% of net sales) in the first quarter of fiscal 1999. The increase in SG&A spending reflects the SG&A expense of the recently acquired EMS Group offset by lower spending for corporate costs, primarily reduced manning levels. INTEREST AND OTHER EXPENSE Interest expense of $.3 million in the first quarter of fiscal 2000 compared to $.6 million in the first quarter of fiscal 1999. The first quarter of fiscal 2000 results reflected the elimination of domestic bank debt with proceeds from the Motor sale. NET INCOME The Company recorded an after-tax profit from continuing operations of $3.5 million in the first quarter of fiscal 2000 compared to an after-tax profit of $3.3 million in the first quarter of fiscal 1999. Results for discontinued operations in the first quarter of fiscal 2000 were an after-tax loss of $.5 million compared to an after-tax profit of $5.7 million in the first quarter of fiscal 1999. The Company sold its Motor business in the first quarter of fiscal 2000 and recognized an after-tax gain of $35.0 million. The tax provision for continuing operations in the first quarter of fiscal 2000 was $2.1 million (38% effective tax rate) versus $1.5 million in the first quarter of fiscal 1999 (32% effective tax rate). The tax rates applied to discontinued operations and the gain on sale of the Motors business are consistent with the tax rates used for continuing operations. The Company expects rates used in the first quarter of fiscal 2000 to continue throughout the year. LIQUIDITY AND CAPITAL RESOURCES Effective September 27, 1999, the Company amended its Bank Loan Agreement to adjust covenants for the reclassification of the motor and generator businesses as discontinued operations and the impact of certain charges recorded in the fourth quarter of fiscal 1999. Currently, borrowings under Bank Loan Agreement bear interest at the bank's prime lending rate or, at the Company's option, the London Interbank Offered Rate plus one and a half percent. These rates may be reduced or increased based on the level of certain debt-to-cash flow ratios. The Bank Loan Agreement provides funds for both short-term working capital requirements and long term financing needs for the Company. As of October 1, 1999, the Company had no borrowing outstanding under the facility. Under terms of the amendment, the Bank Loan Agreement also limits the amount of certain distributions the Company can make including share repurchases to no more than $60 million through December 31, 1999, and $90 million throughout the term of the Agreement. During the first quarter of fiscal year 2000, the Company repurchased 1.86 million shares for approximately $17 million in open market transactions. Through October 18, 1999, the Company had repurchased approximately $55 million of stock subject to the $60 million limitation noted above. During the first quarter, the Company purchased the EMS/ESI group for approximately $38 million and sold its Motor business for $253 million (see Notes 4 and 5). QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET LIST The Company is exposed to market risks in the areas of commodity prices, foreign exchange and interest rates. To mitigate the effect of such risks, the Company selectively utilizes specific financial instruments. Company policy clearly prohibits the use of such financial instruments for trading or speculative purposes. There have been no material changes in the reported market risks since that reported in the Company's Annual Report and 10-K dated June 30, 1999. IMPACT OF YEAR 2000 As previously reported in the 1999 Annual Report, the Company initiated in fiscal 1997 a comprehensive systems review, which resulted in the purchase of an Oracle "Enterprise Resource Planning" software package. While the primary purpose of the software was to improve business processed, it also enables the Company to resolve Year 2000 issues. The Company has essentially completed its system conversion. The Company expects to complete final conversion of all software to eliminate Year 2000 problems prior to December 31, 1999. Management estimates that the total cost of the project attributable to continuing operations approximates $8.5 million with funding occurring from the operating cash flows of the Company. The Company estimates that as of the end of the first quarter of fiscal 2000 approximately $1.0 million of spending associated with continuing operations remains. Management believes that the likelihood of a material adverse impact due to problems with internal systems is remote. The Company has also initiated an evaluation of other potential areas which could be impacted by the Year 2000 issue. The Company has, and continues to contact critical suppliers to determine that the products and services they provide are Year 2000 compliant. These external vendor products and systems are expected to function properly in the Year 2000. Notwithstanding those efforts, there can be no assurance that another company's failure to ensure Year 2000 capability would not have an adverse effect on the Company. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Part I, Item 1, Note 3. ITEM 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders of the Company was held on October 19, 1999. (b) The following named person were elected as directors at such meeting: Andrew G. Galef Thomas G. Boren Dewain K. Cross Paul J. Kofmehl Frederick D. Lawrence Robert E. Wycoff (a) The votes cast for and withheld with respect to each nominee for director are as follows: NOMINEE FOR WITHHELD ------- --- -------- Andrew G. Galef 23,573,017 812,379 Thomas G. Boren 23,575,144 810,252 Dewain K. Cross 23,575,744 809,652 Paul J. Kofmehl 23,575,044 810,352 Frederick D. Lawrence 23,575,344 810,052 Robert E. Wycoff 23,575,309 810,087 The votes cast for, against and abstaining with respect to the adoption of the 1999 Stock Incentive Plan of MagneTek, Inc. are as follows: FOR AGAINST ABSTAIN BROKER NO VOTES --- ------- ------- --------------- 21,352,427 1,072,089 17,175 1,943,705 ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Fourth Amendment dated as of September 27, 1999, to the Restated Credit Agreement dated as of June 20, 1997. 10.2 1999 Stock Incentive Plan of MagneTek, Inc. (the "1999 Plan"). 10.3 2000 Employee Stock Plan of MagneTek, Inc. (the "2000 Plan"). 10.4 Standard Terms and Conditions Relating to Non-Qualified Stock Options, effective as of October 19, 1999, pertaining to the 1999 Plan and the 2000 Plan. (b) Reports on Form 8-K The Company filed a Form 8-K dated August 2, 1999, reporting the sale of its Motors business to A.O. Smith Corporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAGNETEK, INC. (Registrant) Date: November 10, 1999 --------------------------------- David P. Reiland Executive Vice President and Chief Financial Officer (Duly authorized officer of the registrant and principal financial officer)