SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
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 No.)
26 CENTURY BOULEVARD 37214
NASHVILLE, TENNESSEE (Zip Code)
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 316-5100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing price of such stock, as reported by the
New York Stock Exchange, on September 11, 1998) was $179,619,608.
The number of shares outstanding of the Registrant's Common Stock, as
of September 11, 1998, was 31,545,239 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the MagneTek, Inc. 1998 Annual Report to Shareholders for
the year ended June 28, 1998 are incorporated by reference into Part II of this
Form 10-K. With the exception of those portions which are expressly
incorporated by reference in the Annual Report on Form 10-K, the MagneTek, Inc.
1998 Annual Report to Shareholders is not deemed filed as part of this Report.
Portions of the MagneTek, Inc. definitive Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the close of
the fiscal year ended June 28, 1998 are incorporated by reference into Part III
hereof.
MAGNETEK, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1998 (1)
PAGE
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ITEM 1. BUSINESS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . .11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . .12
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . .13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . .13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . . .13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.. . . . . . . . . . . . . . . . . . . . . . .13
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.. . . . . . . .13
ITEM 11. EXECUTIVE COMPENSATION.. . . . . . . . . . . . . . . . . . . . . .16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. .16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.. . . . . . . . . .16
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K..16
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(1) The Company uses a 52-53 week fiscal year which ends on the Sunday nearest
June 30. For clarity of presentation, all periods are presented as if the
year ended on June 30. Fiscal years 1998, 1997 and 1996 contained 52 weeks.
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PART I
ITEM 1. BUSINESS.
GENERAL
MagneTek, Inc. ("MagneTek" or the "Company") makes electronic and
electrical power products used in data processing and telecommunications,
building and factory automation, power generation, lighting and other global
growth markets. MagneTek's product lines include electronic power supplies,
motor drives, electric motors and generators, and lighting ballasts. They are
sold to equipment builders for incorporation into their products, to resellers
and to end-users. Founded in 1984, the Company operates 16 factories in North
America, seven in Europe and one in Asia, and employs approximately 14,000
associates worldwide.
The Company operates in three business segments: Motors and Controls,
Lighting Products and Power Supplies.
MOTORS AND CONTROLS SEGMENT
GENERAL. Electric motors and generators and electronic variable speed
drives are the principal products in the Company's Motors and Controls segment.
The segment accounted for approximately 49% of fiscal 1998 net sales. Sales are
concentrated in niche markets and specialized applications in which the Company
enjoys a significant market presence. International sales represented
approximately 10% of the segment's total net sales in fiscal 1998.
Manufacturing operations are conducted principally at the Company's Lexington
and McMinnille, Tennessee and New Berlin, Wisconsin facilities in the U.S. and
in Juarez, Mexico. In addition, there are three manufacturing facilities in
Europe, two of which are in Hungary. MagneTek also has a 55% interest in a
joint venture in China which produces generators for consumption in Asia.
MagneTek has close relationships with original equipment manufacturers
("OEMs") who purchase the Company's motors, generators and drives. In many
cases, MagneTek works with its OEM customers at the early stages of product
development to design customized products and solutions for particular needs.
During fiscal 1998, the Company completed a significant restructuring
of its motors production facility in McMinnville, Tennessee. Changes at this
facility include new plant management, the adoption of new manufacturing and
scheduling procedures, reduction of the workforce and increased outsourcing.
MagneTek is in the process of implementing Six Sigma, a well-recognized quality
improvement program designed to reduce defects to statistically insignificant
levels, throughout the Motors and Controls segment. In addition, the Company is
applying Demand Flow Technology ("DFT"), a system for organizing production to
improve responsiveness to changes in demand, increase speed in manufacturing
cycles and reduce inventories, throughout the segment's production facilities.
MagneTek intends to proceed with restructuring efforts at other production
facilities in this segment in future periods.
MOTOR AND GENERATOR PRODUCTS. During fiscal 1998, sales of motor and
generator products represented 83% of the Motors and Controls segment revenues.
MagneTek electric motors, most of which use alternating current power, range in
size from 1/8 to 500 horsepower. Based on frame sizes established by the
National Electric Manufacturers Association motors from 1/8 to 5 horsepower are
designated
1
fractional-horsepower ("FHP") motors. FHP motors are used in applications
such as heating, ventilating and air-conditioning ("HVAC") fans, pool and spa
pumps, sprayers and farm-duty motors. MagneTek integral-horsepower motors
ranging up to 500 horsepower, are used primarily in conveyors, mixers, pumps,
mining, textile and paper processing equipment. MagneTek also manufactures
direct current motors, ranging in size from 1/6 to 3 horsepower, which are
used in variable speed applications such as exercise machines,
battery-powered mobile equipment and material handling equipment.
Approximately 69% of MagneTek's motors are sold to OEMs, primarily
through the Company's direct sales force. The rest are marketed through a
network of approximately 3,500 distributors, mostly for the purpose of
replacement. MagneTek's principal customers for its motors include Trane,
Carrier, York, Pac Fab and Jacuzzi.
Generators manufactured by the Company range in size from 50 kilowatts
("KW") to 2,250 KW. Over 95% of generator sales in fiscal 1998 (18% of the
segment's total net sales) were to Caterpillar, which manufactures and sells
engine generator sets for prime and standby power applications.
DRIVES AND SYSTEMS. Sales of drives and drive systems accounted for
17% of the Motors and Controls segment's total net sales for fiscal 1998. The
Company's electronic variable speed drives and drive systems adjust and control
the speed and torque of electric motors. They are used in applications such as
HVAC, pumping, conveyors, food and beverage, textile machines, machine tools,
material handling and automation control. MagneTek drives and drive systems are
sold primarily to OEMs and end users through a specialized engineering-oriented
sales force as well as through electrical distributors for industrial plant and
replacement purposes. MagneTek's principal customers for its drives and systems
include Otis Elevator, Trane and Joy Mining. Approximately 25% of MagneTek's
drives and drive systems are sold directly to OEMs, with the remainder marketed
through more than 175 distributors.
BACKLOG. The Company's backlog in the Motors and Control segment as
of June 30, 1998 was $76.4 million, compared to $69.6 million at the end of
fiscal 1997. Increased backlog in this segment was primarily a function of
increased demand for commercial fractional horsepower products.
COMPETITION. The Company's principal competitors in motor and
generator products are Emerson Electric Company, GE, Baldor Electric Company,
A.O. Smith and Onan. The principal competitors in drives and systems are
Emerson Electric Company, Allen Bradley, Asea Brown Boveri and GE. Certain of
these competitors have substantially greater resources than the Company.
LIGHTING PRODUCTS SEGMENT
GENERAL. MagneTek is the second largest producer in North America of
lighting ballasts, which are essential to start and operate fluorescent, neon
and similar gas-filled electric lamps. Lighting products accounted for
approximately 37% of net sales in fiscal 1998. International sales accounted
for 23% of the segment's total net sales in fiscal 1998; and Lithonia Lighting,
a domestic lighting fixture OEM, accounted for 13% of segment sales.
During fiscal 1998, MagneTek completed the substantial restructuring
efforts that have been underway in the Lighting Products segment in North
America and Europe for the past two years. In North America the restructuring
included closing the Company's production facilities in Mendenhall, Mississippi
and Huntington, Indiana and relocating those
2
manufacturing operations to existing facilities in Matamoros, Mexico and a
new plant in Reynosa, Mexico. In Europe, the Company relocated production of
certain specialty product lines from Germany to Hungary. Restructuring in
this segment also included the implementation of DFT and Six Sigma at the
Company's lighting products plants, as well as increased outsourcing of
component production.
MAGNETIC AND HID BALLASTS. Sales of magnetic ballasts (including high
intensity discharge ("HID") ballasts) accounted for 52% (43% in the U.S. and 9%
internationally) of the segment's net sales in fiscal 1998. Magnetic
fluorescent ballasts are used primarily in standard fluorescent lighting
fixtures in commercial buildings, hospitals, schools, hotels, factories, homes,
warehouses and airports. Sales of HID ballasts accounted for 17% (13% in the
U.S. and 4% internationally) of the segment's net sales in fiscal 1998. HID
ballasts are used in lighting fixtures in industrial and municipal applications,
such as lighting for retail stores, manufacturing plants, warehouses, parking
facilities, roadways, sports arenas, security areas, tunnels and signs. In the
U.S. approximately 64% of the Company's magnetic fluorescent and HID ballasts
are sold directly to lighting fixture OEMs. The rest are sold through
independent manufacturers' representatives to more than 2,000 independent
distributors nationwide. In Europe, sales are made through a combination of the
Company's direct sales force and sales agents, primarily to OEMs. MagneTek's
principal customers for its magnetic and HID ballasts include Lithonia Lighting,
Cooper, Simkar and Genlyte.
ELECTRONIC BALLASTS. While their initial costs to consumers are
higher than magnetic ballasts, electronic fluorescent ballasts can provide
cost savings through reduced energy consumption. Sales of electronic
ballasts, primarily in the U.S., accounted for 33% of the segment's total net
sales in fiscal 1998. The Company anticipates a continuing shift in demand
toward electronic ballasts from magnetic products as more end-users focus on
long-term operating efficiency and as the cost of electronic ballasts
declines. Certain of the recent repositioning actions taken by the Company
are intended to accommodate this demand change. Electronic ballasts are sold
through the same channels as magnetic ballasts. Approximately 60% of
MagneTek's electronic ballasts were sold directly to OEMs in fiscal 1998 and
the remainder were sold through GE to more than 2,000 independent distributors.
MagneTek's principal customers for its electronic ballasts include Lithonia,
GE, Cooper, United States Industries and Genlyte.
In 1997, the Company announced an agreement with GE wherein GE became
the exclusive distributor in North America of the Company's linear electronic
ballasts. Products distributed by GE are co-branded with the MagneTek and GE
names. The Company continues to sell magnetic, HID and compact ballasts through
its traditional market channels and linear electronic ballasts directly to OEM
customers. The agreement also contemplates possible future joint product
development for electronic lighting products.
BACKLOG. Backlog in the Lighting Products segment as of June 30, l998
was $27 million compared to $29 million at the end of fiscal 1997. The decrease
in backlog in this segment is a reflection both of continued customer demand for
reduced lead times and the Company's increasing customer responsiveness.
COMPETITION. MagneTek's primary competitors in the lighting ballast
business in the U.S. are Advance Transformer (a division of North American
Philips) and Motorola, and in Europe, Schwabe, Helvar and Zumtobel. Some of
these companies have substantially greater resources than MagneTek.
3
POWER SUPPLIES SEGMENT
GENERAL. The Power Supplies segment accounted for 14% of the
Company's net revenues in fiscal 1998. Three customers, IBM, Italtel and
Siemens (25%, 13% and 11%, respectively, of the segment's net sales in fiscal
year 1998), are especially important to the revenue base for the segment. The
Company's Italian subsidiary is the largest independent producer of power
supplies for data processing and telecommunications applications for the
European market. European sales accounted for 66% of the Power Supplies
segment's net sales in fiscal 1998. As a step toward increasing the segment's
North American presence, the Company acquired Omega Power Systems, Inc. in June
1998. In fiscal 1998, the Company completed the closure of its Huntington,
Indiana production facility and the consolidation of existing North American
power supplies production, research and development and sales in a new
headquarters located in Huntsville, Alabama.
This segment manufactures both custom power supplies and special
purpose power supplies, as well as magnetic components. Custom power
supplies are used primarily in computers, telecommunications equipment and
office machines. Special purpose power supplies are used in recreational
vehicles such as campers, mobile homes and boats. MagneTek's magnetic
components are used in a variety of electronic products.
BACKLOG. Backlog in the Power Supplies segment as of June 30, 1998
was $64.7 million compared to $57.5 million as of the end of fiscal 1997. The
increase in backlog in this segment reflects increased penetration of current
accounts and continued growth in the telecommunications markets.
COMPETITIVE STRENGTHS
The Company believes that it benefits from competitive advantages in
each of the following areas.
TECHNOLOGICAL CAPABILITIES. MagneTek emphasizes its ability to
combine electro-magnetic and power electronic technologies into custom solutions
for process and power control. Long a leader in providing innovative, energy
efficient products, MagneTek has used its technological expertise to pioneer
advances in lighting, motor and power supply applications. MagneTek's latest
lines of electronic ballasts and switch mode power supplies, for example, are
among the industry leaders in energy efficiency and power quality. To maintain
and enhance its technological capabilities, MagneTek has established advanced
development centers in each product segment.
ESTABLISHED CUSTOMER RELATIONSHIPS. Due to its reputation as a
reliable, high quality supplier with a well-recognized brand name in the
industry, MagneTek has extensive relationships with major original equipment
manufacturers and distributors such as Caterpillar, IBM, Lithonia Lighting,
United Technologies, GE and Hubbell. Many of these relationships have existed
for decades. Maintenance and development of close relationships with OEMs is an
important strategic priority of the Company.
LOW COST MANUFACTURING. MagneTek competes as a high quality, low cost
supplier of integrated electrical products. The Company has taken important
steps to enhance its position by relocating production to low cost labor areas,
restructuring manufacturing operations through DFT and implementing Six Sigma
throughout its operations.
STRENGTH OF MARKET CHANNELS AND BREADTH OF PRODUCT OFFERINGS.
MagneTek's distribution and OEM market channels have been developed over many
years, would be difficult and expensive to duplicate and constitute a valuable
asset. MagneTek provides a broad diversity of products in each of its product
lines. Since product breadth is an important
4
consideration of customers in their selection of suppliers, MagneTek's
breadth of product has been an advantage in penetrating and maintaining both
OEM and distribution channels.
MANAGEMENT EXPERIENCE. The Company's senior management team benefits
from the diverse experience of individuals with long tenures at the Company and
a number of recent additions from other highly regarded corporations, such as
AlliedSignal, GE, Westinghouse and Northern Telecom.
REPOSITIONING AND CURRENT STRATEGY
Beginning in fiscal 1994, the Company undertook a series of strategic
initiatives to strengthen its financial position, increase management capability
and improve competitiveness. More than 12 non-core business units were divested
between 1994 and 1996, generating proceeds of over $200 million, which were
applied to reduce indebtedness. Significant repositioning reserves were
established and charges recorded, principally in connection with the Lighting
Products segment, in fiscal 1994 and fiscal 1996.
Key elements of MagneTek's repositioning and current business strategy
are the following:
STRENGTHENING OF PERSONNEL AT ALL LEVELS. MagneTek has
restructured its management through internal reorganization, reassignments
and promotions, and through recruitment of individuals with diverse
backgrounds outside the Company, commencing with the hiring of Ronald N. Hoge
from AlliedSignal in June 1996. MagneTek has undertaken to improve the
capabilities and performance of employees at all levels through enhanced
training and performance reviews and revised incentive compensation criteria,
all of which place strong emphasis on economic value added.
REDUCTION OF BALANCE SHEET LEVERAGE. From the end of fiscal 1994 to
the end of fiscal 1998, the Company reduced its debt-to-shareholders' equity
ratio from 4.6:1 to 1.3:1, using proceeds from business divestitures and
internally generated cash flow and through the conversion of outstanding
convertible debt securities. Interest costs were reduced from $32.0 million in
fiscal 1994 to $16.6 million in fiscal 1998.
RESTRUCTURING OPERATIONS. MagneTek has implemented a comprehensive
restructuring of operations, involving facility consolidations and closings,
relocation of production to lower labor cost areas and increased outsourcing.
MagneTek is in the process of implementing DFT and Six Sigma throughout the
Company's operations. In addition, MagneTek has implemented a global
procurement program to consolidate purchasing and maximize volume discounts and
other benefits from suppliers. During fiscal 1998, MagneTek closed three
significant manufacturing sites, opened a major new lighting plant in Reynosa,
Mexico, and expanded its Huntsville, Alabama facility to serve as the North
American center for operations of the Power Supplies segment.
GROWTH AND EXPANSION. Management believes that over the past several
years MagneTek has substantially improved its financial condition, management,
facilities and operational capabilities. In coming periods, MagneTek will seek
to complete its operational restructuring and achieve significant business
growth in North America and abroad. Attractive growth opportunities are
believed to exist through expansion of the power supplies business in North
America, especially in data processing and telecommunications applications where
MagneTek has achieved significant market presence in Europe. Management
believes opportunities also exist for significant expansion of MagneTek's motors
and electronic drives business, especially in markets outside of North America.
MagneTek will seek to leverage existing capabilities and customer relationships
through acquisitions of other companies and product lines where appropriate.
5
INTERNATIONAL OPERATIONS
The Company's international sales accounted for 24% of its net sales
in fiscal 1998. The Company defines international sales to include sales of
products manufactured by its facilities outside the U.S., as well as sales of
products manufactured in the U.S. to purchasers outside of the U.S. The Company
has five production facilities in Mexico and employs more than 5,000 employees
in that country. In Europe, the Company has seven manufacturing facilities and
employs more than 2,000 people. The Company's European operations include
ballast and power supply production in Italy, Germany and Hungary and motor
manufacturing in the United Kingdom and Hungary. In China, the Company has a
55% interest in a joint venture for the production of generators, which has
three production facilities and more than 500 employees. Seeking to expand its
operations in Asia, the Company has established a headquarters for Asian
business development in Hong Kong. Continuing expansion of MagneTek's
international presence is an important element of its competitive strategy.
SUPPLIERS AND RAW MATERIALS
The Company has historically manufactured many of the materials and
components used in its products, including ballast and motor laminations and
capacitors. The Company also draws its own magnet wire primarily for products
in the Lighting Products segment. As described below, based upon an analysis of
the costs and benefits of the Company's historical level of vertical
integration, the Company is increasing its outsourcing of certain component
parts that were previously produced internally.
Virtually all materials and components purchased by the Company are
available from multiple suppliers. During fiscal 1998 approximately 58% of
the Company's cost of sales was for the purchase of raw materials.
Production requirements depend heavily on steel, copper and aluminum, as well
as certain electronic components. The Company generally negotiates prices
with steel vendors on an annual basis. The Company purchases copper for the
Lighting Products segment primarily in rod form for drawing its own magnet
wire and for the Motors and Controls segment in the form of finished magnet
wire. The Company seeks to mitigate its exposure to fluctuations in copper
prices through short-term hedging programs as well as through
forward-contract arrangements with magnet wire suppliers. The Company
purchases its aluminum requirements based upon the spot prices at delivery.
The Company has recently entered into agreements with third party
suppliers to provide certain component parts for its ballast products. The
Company believes that capitalizing on third party expertise in the production of
such components will result in cost savings and quality improvements. The
Company intends to continue to increase outsourcing of non-strategic production
activities in all of its business segments, focusing internal production on
those areas in which the Company has competitive advantages in cost, quality and
delivery.
RESEARCH AND DEVELOPMENT
Research and development activities are conducted by the respective
operating divisions and are directed toward enhancement of the existing
products and development of new products. Advanced technologies are being
developed in the Company's four main research centers in Huntsville, Alabama;
New Berlin, Wisconsin; St. Louis, Missouri; and Valdarno, Italy. Total
research and development expenditures were approximately $22.2 million, $23.6
million and $21.5 million, respectively for the 1998, 1997 and 1996 fiscal
years.
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TRADEMARKS AND PATENTS
The Company holds numerous patents and believes that it holds all the
patent, trademark and other intellectual property rights necessary to conduct
its business.
EMPLOYEES
At the end of fiscal 1998, the Company had approximately 2,200
salaried employees and approximately 12,700 hourly employees, of whom
approximately 5,300 were covered by collective bargaining agreements with
various unions. The Company believes that its relationships with its employees
are favorable.
ENVIRONMENTAL MATTERS
GENERAL. 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 1998 did not entail material expenditures, and its
remediation activities for fiscal 1999 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.
CENTURY ELECTRIC (MCMINNVILLE, TENNESSEE). 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 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.
OFFSITE LOCATIONS. 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.
7
INDEMNIFICATION OBLIGATIONS FROM RESTRUCTURING. 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 1998, and its indemnification obligations for
fiscal 1999 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.
CAUTIONARY STATEMENT
This document contains "forward-looking statements" as defined on 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.
In addition, the Company's results of operations could be adversely
affected by general business and legal risks, as well as the following specific
risks.
SUCCESS OF RESTRUCTURING MEASURES. MagneTek is making significant
changes in its manufacturing facilities and procedures, with the objective of
increasing efficiency and reducing costs. The changes involve the incurrence of
significant costs. Unanticipated costs or delays, disruption of manufacturing
or the failure to realize expected cost reductions could reduce the benefit of
such changes and adversely affect results of operations. Future results of
operations will depend to a significant extent on the success of the
restructuring and business strategy initiatives described herein.
COMPETITION AND PRICING PRESSURES. MagneTek operates in an intensely
competitive environment and certain of its competitors are significantly larger
and have substantially greater resources than the Company. Other companies seek
to compete on the basis of competitive strengths which are similar to those
described herein, or in other areas in which they may have advantages. Certain
of such companies are seeking to employ competitive and management strategies
similar to those of MagneTek. As a result, MagneTek's competitive standing may
be expected to vary from time to time and among different markets. Pricing
pressures in the lighting ballast product line during fiscal 1998, and
continuing to the present, have adversely affected profitability of that
segment.
DEPENDENCE ON SIGNIFICANT CUSTOMERS. MagneTek's sales to its top five
customers represented approximately 23% of its net sales in fiscal 1998. The
loss of any such customers or significant decreases in any such customer's
levels of purchases from MagneTek could have a material adverse effect on the
Company's business.
SENSITIVITY TO GENERAL ECONOMIC AND INDUSTRY CONDITIONS. MagneTek's
markets are cyclical in nature and subject to general trends in the economy.
Profitability and cash flow availability could be adversely affected by any
prolonged economic downturn.
INTERNATIONAL SALES AND OPERATIONS; FOREIGN CURRENCY EXPOSURE.
International sales, including sales from domestic operations, accounted for
approximately 24% of MagneTek's net sales in fiscal 1998. As a result of its
international sales and operations, the Company is subject to the risk of
fluctuation in currency exchange rates. Further, MagneTek's international
operations are subject to risks associated with changes in
8
local economic and political conditions, currency exchange restrictions,
regulatory requirements and taxes.
Approximately 18% of MagneTek's net sales in fiscal 1998 were
denominated in currencies other than the U.S. dollar, principally the Italian
lira and the German mark. Commencing January 1, 1999, 11 countries in the
European Union are scheduled to begin conversion to a common legal currency,
known as the "euro." Conversion to the euro is expected to have broad
implications to companies doing business in Europe, including MagneTek. Such
consequences may include significant changes in exposure to currency
fluctuations; changes in the competitive environment among participating
countries, including the potential of increased business consolidation;
requirements for changes in pricing policies and changes in information
technology requirements. At this time, MagneTek is unable to gauge the effect
on its business of the euro conversion, including whether such effect will be
positive or negative.
YEAR 2000 COMPLIANCE. MagneTek is currently operating certain
computer software and systems which are not year 2000 compliant. MagneTek has
purchased and is in the process of installing an Oracle "Enterprise Resource
Planning" software package which will, among other things, address year 2000
issues. Replacement and conversion of software to the new system is anticipated
to be completed early in calendar year 1999. Prior to the end of calendar year
1998, MagneTek will evaluate the progress of implementation and develop
contingency plans if this evaluation indicates that there will be delays in
implementation. MagneTek is currently contacting critical suppliers to
determine if the products and services they provide to the Company are year 2000
compliant. The failure of products or services supplied to the Company to be
year 2000 compliant could adversely affect the Company's operations. In
addition, MagneTek is subject to the risk that non-compliant software could
escape detection and correction, and thereby cause failures with unpredictable,
and potentially significant, consequences.
ENVIRONMENTAL MATTERS. MagneTek has from time to time discovered
contamination by hazardous substances at certain of its facilities and in
selling certain business operations. The Company has agreed, in some instances,
to provide indemnification against environmental liabilities associated with the
acquired operations.
RAW MATERIALS. MagneTek's raw material costs represented
approximately 47% of its net sales in fiscal 1998. The principal raw materials
used by the Company are copper, steel and aluminum. MagneTek attempts to hedge
against the risk of fluctuation in the prices of copper and aluminum by entering
into futures contracts. However, unanticipated increases in raw material
requirements or price increases not covered by hedging would increase production
costs and could adversely affect profitability.
RISKS ASSOCIATED WITH EXPANSION Strategy. MagneTek is seeking to
expand its business through joint ventures, strategic partnerships and
acquisitions of other business entities. Significant new acquisitions or
investments could reduce the Company's liquidity and result in the incurrence of
additional debt. Inability to successfully integrate future acquisitions or to
manage expanded operations effectively is an inherent risk of MagneTek's growth
strategy.
ITEM 2. PROPERTIES.
MagneTek's headquarters and each of its principal facilities for the
continuing operations of the Company are listed below, each of which is owned by
the Company unless shown as leased.
9
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- ---------------------------------
Altavista, Virginia -- 108,000 Motor manufacturing
Bridgeport, Connecticut 1999 100,000 Capacitor manufacturing
Budapest, Hungary 2002 154,000 Motor manufacturing
Cegled, Hungary -- 152,000 Motor manufacturing
Chatsworth, California 2003 44,000 Power supply manufacturing
Gainsborough -- 44,000 Motor manufacturing
Lincolnshire,
England
Gallman, Mississippi 1999 plus 130,000 Wire mill
options to 2073
Goodland, Indiana -- 75,000 Component transformer
manufacturing
Gordonsville, Tennessee 2004 68,000 Motor manufacturing
Huntsville, Alabama -- 125,000 Electronic ballast manufacturing;
power electronics and ballast
research and development center
Juarez, Mexico Various 282,000 Motor manufacturing
LaVergne, Tennessee 1999 188,000 Distribution center
Lexington, Tennessee -- 449,000 Motor and generator
manufacturing
Mainaschaff, Germany Various 209,000 Ballast, ignition coil
and transformer manufacturing
Matamoros, Mexico Various 320,000 Ballast, RV converter
and transformer manufacturing
McMinnville, Tennessee Options to 2021 275,000 Motor manufacturing
Milan, Italy -- 53,000 Ballast manufacturing
Nashville, Tennessee 2005 67,000 Corporate headquarters
New Berlin, Wisconsin 2008 122,400 Drives and systems
manufacturing
Owosso, Michigan -- 198,000 Motor manufacturing
10
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- ---------------------------------
Pomaz, Hungary 2006, 2007 44,000 Power supply and ballast
manufacturing
Reynosa, Mexico 2008 151,000 Ballast and power supply
manufacturing
Ripley, Tennessee -- 84,000 Motor manufacturing
St. Louis, Missouri 2000 plus option 51,000 Administration, marketing and
to 2005 accounting personnel
Valdarno, Italy -- 149,000 Power supply manufacturing
The Company believes its facilities are in satisfactory condition
and are adequate for its present operations.
ITEM 3. LEGAL PROCEEDINGS.
PRODUCT LIABILITY
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.
PATENT
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 on 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
early 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.
ASBESTOS
In December 1996, the Company and certain of its subsidiaries were
named as defendants in a suit filed by Cooper Industries, Inc. ("Cooper") in
the U.S. District Court for the Southern District of Texas, alleging breach
of the 1986 agreement by which the Company acquired certain businesses from
Cooper. At issue in the litigation is the question of which party has
responsibility in connection with pending lawsuits (the "asbestos lawsuits")
involving numerous plaintiffs who allege injurious exposure to asbestos
contained in products manufactured by current or former subsidiaries and
divisions of Cooper. Cooper claims that the Company is obligated to defend
and indemnify Cooper in connection with the
11
asbestos lawsuits. The Company has denied that it is obligated under the
agreement to defend and indemnify Cooper in connection with the asbestos
lawsuits, and has filed a counterclaim asserting that Cooper is obligated
under the agreement to defend and indemnify the Company in connection with
the asbestos lawsuits and that certain insurance coverage available to Cooper
should be applied to the asbestos lawsuits. The Company and Cooper have
engaged in settlement discussions. In July 1998, the Court granted partial
summary judgment in favor of the Company, ruling that the Company has no
obligation to indemnify Cooper in connection with the asbestos lawsuits.
Management of the Company does not believe that the financial impact of the
foregoing legal proceeding will be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the stockholders of the Company during the
quarter ended June 30, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The following table sets forth the high and low sales prices of the
Company's Common Stock during each quarter of fiscal 1997 and 1998:
QUARTER ENDING HIGH LOW
--------------------------------------------------------
September 30, 1997 23 15-7/8
December 31, 1997 24-5/16 17-7/8
March 31, 1998 20-1/2 16-1/16
June 30, 1998 20-11/16 14-5/16
September 30, 1996 11-5/8 8-1/8
December 31, 1996 14-1/8 10-5/8
March 31, 1997 18-1/8 12-1/4
June 30, 1997 18-3/8 14-7/8
The Company's Common Stock is traded on the New York Stock Exchange
under the ticker symbol "MAG." As of September 11, 1998, there were
approximately 400 record holders of its Common Stock. No cash dividends have
been paid on the Common Stock.
MagneTek has not paid any cash dividends on its Common Stock and
does not anticipate paying cash dividends in the near future. The ability of
the Company to pay dividends on its Common Stock is restricted by provisions
in the Company's 1997 bank loan agreement, which provides that the Company
may not declare or pay any dividend or make any distribution with respect to
its capital stock except for (i) the repurchase of up to $15.0 million of the
Company's Common Stock so long as no event of default exists or would result
from such declaration and payment, and the ratio of the Company and certain
subsidiaries' Funded Debt to Capitalization (as such terms are defined in the
bank loan agreement) is not more than 0.65 to 1.00, or (ii) other
distributions so long as no event of default exists or would result from such
declaration and payment, and (ii) the ratio of the Company and certain
subsidiaries' Funded Debt to Capitalization is not more than 0.55 to 1.00.
12
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Part II, Items 6, 7 and 8 is hereby
incorporated by reference to the Management's Discussion and Analysis, the
Financial Statements and the Report of Ernst & Young LLP, Independent Auditors,
of the Company's 1998 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
current executive officers of the Company.
NAME AGE POSITION
---- --- --------
Andrew G. Galef 65 Chairman of the Board of Directors
Ronald N. Hoge 53 President, Chief Executive Officer and
Director
Antonio Canova 56 Executive Vice President
Brian R. Dundon 52 Executive Vice President
Gerard P. Gorman 46 Executive Vice President
James E. Schuster 45 Executive Vice President
Alexander Levran, Ph.D. 48 Senior Vice President, Technology
David P. Reiland 44 Senior Vice President and Chief Financial
Officer
John P. Colling, Jr. 42 Vice President and Treasurer
Nancy M. Falls 42 Vice President, Investor Relations
Thomas R. Kmak 48 Vice President and Controller
Samuel A. Miley 41 Vice President, General Counsel and
Secretary
Dennis L. Hatfield 50 Assistant Vice President, Facilities and
Environmental Affairs
13
Mr. Galef has been the Chairman of the Board of Directors since
July 1984. He also is the Chairman of the Nominating and Corporate
Governance Committee. Mr. Galef was the Chief Executive Officer of the
Company from September 1993 until June 1996. He has been President of The
Spectrum Group, Inc. ("Spectrum"), a private investment and management firm,
since its incorporation in California in 1978 and its Chairman and Chief
Executive Officer since 1987. Prior to the formation of Spectrum, Mr. Galef
was engaged in providing professional interim management services to
companies with serious operating and financial problems. Mr. Galef is
presently a director of Warnaco, Inc., a diversified apparel manufacturer,
and its parent, The Warnaco Group, Inc., and was formerly Chairman of Aviall,
Inc., a company providing aircraft engine refurbishment and related products
and services, and Exide Corporation, a manufacturer of automotive and
industrial batteries. Mr. Galef also currently serves as a director, and was
formerly the Chairman, of Petco Animal Supplies, Inc. In addition, Mr. Galef
serves as chairman or a director of other privately held Spectrum portfolio
companies.
Mr. Hoge was elected as the President and Chief Executive Officer
of the Company in June 1996. He became a Director of the Company in July
1996. From 1993 until May 1996, Mr. Hoge was President of the Aerospace
Equipment Systems Division of Allied Signal, Inc. From 1986 to 1993, he was
President and Chief Executive Officer of Onan Corporation, the generator
subsidiary of Cummins Engine Company. He also served as President of Cummins
Brasil S.A. for five years. From 1971, when he first joined Cummins, until
1978, he served in progressive staff positions, including Manager of
Corporate Responsibilities, and managed the start-up of Cummins' diesel
engine factory in Daventry, England. Mr. Hoge earned a Bachelor's degree in
Mathematics from Amherst College in 1967. He received his MBA in Marketing
from Stanford University in 1970, completing graduate studies in Public
Administration at the University of California, Berkeley, the same year. Mr.
Hoge has been serving as a director of Merrill Corporation since June 1989.
He was also a director of Graco Corporation from 1990 to 1993.
Mr. Canova has been Executive Vice President, with responsibility
for the Company's Power Supplies business since October 1993. He has served
as managing director of MagneTek S.p.A. in Italy since March 1991. He held
the same position with Plessey S.p.A. from 1988 until March 1991 when Plessey
S.p.A. was acquired by the Company. From 1969 to 1988, Mr. Canova served as
general manager of Plessey S.p.A.
Mr. Dundon has been Executive Vice President, with responsibility
for the Company's Lighting Products business since April 1998. From November
1986, when Century Electric, Inc. was acquired by the Company, until April
1998, Mr. Dundon served as Senior Vice President, Motors and Controls. Prior
to the acquisition Mr. Dundon had been with Gould Inc. and Century Electric
since 1971, serving in various capacities.
Mr. Gorman joined MagneTek in November 1996 as Senior Vice
President of Strategic Planning and since July 1997 has been Executive Vice
President with responsibility for the Company's Drives and Systems business.
From 1994 to 1996, Mr. Gorman was President of General Electric Environmental
Services, Inc., a wholly owned subsidiary of the General Electric Company,
which supplies air pollution control equipment and services to government,
utility and industrial customers worldwide. From 1991 to 1994, Mr. Gorman
was President of Woodward-Clyde International ("WCI"), a unit of
Woodward-Clyde Group, Inc., and prior to his association with WCI, he served
in positions of increasing responsibility with Ebasco Services, Inc. He holds
a BS degree in Industrial & Mechanical Engineering from Pratt Institute, New
York, and an MBA from New York University, and is a graduate of the
International Strategic Planning Program of the Wharton School of Business.
14
Mr. Schuster has been Executive Vice President with responsibility
for the Company's Motors and Controls business since April 1998 and prior to
that was Senior Vice President of Operations since July 1996. From October
1995 to July 1996, Mr. Schuster was Vice President of Operations of the
Aerospace Equipment Systems Division at AlliedSignal Inc. where he was
responsible for 11 sites and approximately 6,000 employees. Before joining
AlliedSignal, Mr. Schuster spent 15 years working for the Naval Systems
Division of Westinghouse Electric Corporation in various positions, including
as Manager of Operations from July 1988 to July 1995. He was also appointed
to Westinghouse Electric's Corporate Engineering and Manufacturing Advisory
Council in 1992.
Dr. Levran has been Senior Vice President, Technology since January
1995. He served as Vice President, Technology from July 1993 until January
1995. From 1991 to June 1993, Dr. Levran was employed by EPE Technologies,
Inc., a subsidiary of Groupe Schneider, as Vice President of Engineering and
Technology with worldwide engineering responsibilities. From 1981 to 1991,
he held various engineering management positions with Teledyne Inet, a
subsidiary of Teledyne, Inc., most recently as Vice President of Engineering.
Dr. Levran received his Ph.D. in electrical engineering from the Polytechnic
Institute of New York in 1981.
Mr. Reiland has been Senior Vice President since July 1996 and
Chief Financial Officer of the Company since July 1988. Mr. Reiland was also
an Executive Vice President of the Company from July 1993 until July 1996 and
Senior Vice President from July 1989 until July 1993. He was Controller of
the Company from August 1986 to October 1993, and was Vice President, Finance
from July 1987 to July 1989. Prior to joining the Company, Mr. Reiland was
an Audit Manager with Arthur Andersen & Co. where he served in various
capacities since 1980.
Mr. Colling has been Vice President of the Company since July 1990,
Treasurer of the Company since June 1989 and was assistant treasurer of the
Company from July 1987 to June 1989. Prior to that, Mr. Colling was the
assistant treasurer of Century Electric, where he served in various
capacities since August 1981.
Ms. Falls has been Vice President, Investor Relations since July
1997. Prior to joining the Company, Ms. Falls spent 13 years with Shawmut
Bank where she served in positions of increasing responsibility, most
recently as Senior Vice President, Loan Syndications, a function which she
helped to establish. From 1981 to 1983, she was Assistant Vice President of
Allied Bank International, New York, following two years as International
Credit Manager of First Tennessee Bank.
Mr. Kmak has been Vice President of the Company since October 1993,
Controller since November 1994 and Operations Controller from October 1993 to
November 1994. Mr. Kmak was the vice president, finance of the Company's
Motors and Controls business from November 1986 when Century Electric was
acquired by the Company until July 1992 and served as vice president,
operational finance of the Company's Motors and Controls business from July
1992 until October 1993. Prior to the acquisition Mr. Kmak had been with
Century Electric since 1976, serving in various capacities.
Mr. Miley joined the Company in February 1990 as Vice President,
General Counsel and Secretary. Prior to that time, he was an attorney with
the law firms of Sheppard, Mullin, Richter & Hampton in Los Angeles,
California from March 1986 until January 1990 and Sidley & Austin in Chicago,
Illinois from May 1982 until March 1986.
Mr. Hatfield joined the Company in August 1992 as Assistant Vice
President, Facilities and Environmental Affairs. Prior to that he was a
principal in the industrial
15
environmental consulting firms of Patterson Schafer, Inc. from February 1989
until December 1990 and Schafer Environmental Associates, Inc. from March
1991 until July 1992. From July 1985 to February 1989, Mr. Hatfield served
as Director of Environmental Affairs of the Specialty Chemicals Group at
Morton Thiokol, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Part III, Items 10, 11, 12 and 13, is
hereby incorporated by reference to the Company's definitive Proxy Statement
to be mailed to Stockholders in September 1998, except for information
regarding the Executive Officers of the Company, which is provided in
response to Item 10, above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Index to Consolidated Financial Statements, Consolidated
Financial Statement Schedules and Exhibits:
Form 10-K Annual Report To
Page Stockholders Page
--------- -----------------
1. Consolidated Financial Statements 25
Consolidated Statements of Income for 31
Years Ended June 30, 1998, 1997, and 1996
Consolidated Balance Sheets at June 30, 32
1998 and 1997
Consolidated Statements of Stockholders' 34
Equity for Years Ended June 30, 1998, 1997
and 1996
Consolidated Statements of Cash Flows for 35
Years Ended June 30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements 36
Report of Ernst & Young LLP, Independent inside back cover
Auditors
2. Consolidated Financial Statement Schedule
16
Form 10-K Annual Report To
Page Stockholders Page
--------- -----------------
Report of Ernst & Young LLP, Independent S-1
Auditors
Schedule II -- Valuation and Qualifying S-2
Accounts
All other schedules have been omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
Consolidated Financial Statements and related notes.
3. Exhibit Index 14
The following exhibits are filed as part of this Annual Report Form
10-K, or are incorporated herein by reference. Where an exhibit is incorporated
by reference, the number which precedes the description of the exhibit indicates
the documents to which the cross-reference is made.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 (1) Restated Certificate of Incorporation of the Company, as filed with the
Delaware Secretary of State on November 21, 1989.
3.2 (2) By-laws of the Company, as amended and restated.
4.1 (3) Specimen Common Stock Certificate.
10.1 (4) 1987 Stock Option Plan of MagneTek, Inc. ("1987 Plan").
10.2 (5) Amendments No. 1 and 2 to 1987 Plan.
10.3 (6) Amendments No. 3 and 4 to 1987 Plan.
10.4 (7) Amendment No. 5 to 1987 Plan.
10.5 (8) Second Amended and Restated 1989 Incentive Stock Compensation Plan of
MagneTek, Inc. ("1989 Plan").
10.6 (7) Amendment No. 1 to 1989 Plan.
10.7 (7) Standard Terms and Conditions Relating to Non-Qualified Stock Options,
revised as of July 24, 1996, pertaining to the 1987 Plan and the 1989 Plan.
10.8 (7) Form of Non-Qualified Stock Option Agreement Pursuant to the Second Amended
and Restated 1989 Incentive Stock Compensation Plan of the Company.
17
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
10.9 (7) Form of Restricted Stock Agreement Pursuant to the Second Amended and
Restated 1989 Incentive Stock Compensation Plan of the Company.
10.10 (9) MagneTek, Inc. 1997 Non-Employee Director Stock Option Plan.
10.11 (4) Senior Executive Medical Expense Reimbursement Plan for the Company.
10.12 (6) 1991 Discretionary Director Incentive Compensation Plan of the Company.
10.13 (10) MagneTek, Inc. Deferral Investment Plan.
10.14 (10) MagneTek, Inc. Performance-Based Pension Restoration Plan.
10.15 (11) Form of Rights Agreement dated as of March 4, 1997 by and between the
Company and The Bank of New York, as Rights Agent.
10.16 (12) MagneTek, Inc. Amended and Restated Director Compensation and Deferral
Investment Plan.
10.17 (10) Employment Agreement dated as of June 1, 1996 between the Company and
Ronald N. Hoge.
10.18 (13) Unsecured Promissory Note and Loan Agreement dated July 29, 1996 of Ronald
N. Hoge.
10.19 (13) Form of Unsecured Promissory Note by Ronald N. Hoge, James E. Schuster and
Gerard P. Gorman, in the aggregate amounts of $1,317,243, $245,000 and
$283,938, respectively.
10.20 (14) Secured Promissory Note and Loan Agreement dated October 7, 1997 and Deed
of Trust dated October 7, 1997 of Ronald N. Hoge.
10.21 (15) Non-Qualified Stock Option Agreement between the Company and Ronald N.
Hoge.
10.22 (15) Non-Qualified Stock Option Agreement between the Company and David P.
Reiland.
10.23 (5) Registration Rights Agreement dated as of April 29, 1991 among the Company,
Andrew G. Galef, Frank Perna, Jr. and the other entities named therein.
10.24 (7) Registration Rights Agreement dated as of June 28, 1996 by and between the
Company and U.S. Trust Company of California, N.A.
10.25 (16) Executive Management Agreement dated as of July 1, 1994, by and between the
Company and The Spectrum Group, Inc.
18
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
10.26 (17) Amendment dated as of January 25, 1995 to the Executive Management
Agreement between the Company and The Spectrum Group, Inc.
10.27 (18) Security Agreement dated March 1, 1993 between the Industrial Development
Board of the City of Huntsville ("the Huntsville IDB") and the Company (the
"Huntsville Security Agreement").
10.28 (19) First Supplemental Security Agreement dated as of August 1, 1993 by and
between the Huntsville IDB and The CIT Group/Equipment Financing, Inc.
("CIT").
10.29 (19) Second Supplemental Security Agreement dated as of October 1, 1993 by and
between the Huntsville IDB and CIT.
10.30 (18) Equipment Lease Agreement of even date with the Huntsville Security
Agreement among the parties thereto.
10.31 (19) Amendment to Equipment Lease Agreement dated as of August 1, 1993 between
the Huntsville IDB and the Company.
10.32 (19) Second Amendment to Equipment Lease Agreement dated as of October 1, 1993
between the Huntsville IDB and the Company.
10.33 (20) Lease Agreement dated as of November 1, 1988 between the Huntsville IDB and
Burnett-Nickelson Investments ("Lease Agreement") as to which the Company
succeeded to the lessee's obligations.
10.34 (21) First, Second and Third Amendments to Lease Agreement.
10.35 (22) Fourth Amendment to Lease Agreement.
10.36 (21) Bond Guaranty Agreement between the Company, as Guarantor and First Alabama
Bank dated as of February 1, 1993 relating to the Lease Agreement.
10.37 (21) Indenture dated as of November 1, 1988 relating to First Mortgage
Industrial Revenue Bonds (Burnett-Nickelson Project Series 1988) between
Huntsville IDB and First Alabama Bank, as Trustee, relating to the
Huntsville facility (the "Indenture").
10.38 (21) First, Second and Third Supplemental Indentures to the Indenture.
10.29 (22) Fourth Supplemental Indenture to the Indenture.
10.40 (23) Environmental Agreement among the Company, Universal Manufacturing
Corporation and Farley Northwest Industries, Inc., as amended.
19
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
10.41 (23) Letter Agreement dated as of January 9, 1986, between the Company and
Farley Northwest Industries, Inc., pursuant to Stock Purchase Agreement.
10.42 (23) Tax Agreement dated as of February 12, 1986, between the Company and Farley
Northwest Industries, Inc.
10.43 (23) Agreement dated as of January 9, 1986, between the Company and
Farley/Northwest Industries, Inc. relating to the Totowa facility.
10.44 (13) Restated Credit Agreement dated as of June 20, 1997 between the Company, as
Borrower, NationsBank of Texas, N.A., as Agent, CIBC Inc., The First
National Bank of Chicago, The Long-Term Credit Bank of Japan, Ltd., Bankers
Trust Company, Credit Lyonnais -- New York Branch, and Union Bank of
California, N.A., as Co-Agents, and Certain Lenders (the "Restated Credit
Agreement").
10.45 (13) Guaranty dated as of December 29, 1996 by MagneTek Financial Services,
Inc., as Guarantor, for the benefit of NationsBank, in its capacity as
Agent for the Lenders now or in the future party to the Credit Agreement
dated as of March 31, 1995 between the Company, certain lenders and
NationsBank (the "1995 Credit Agreement").
10.46 (13) Security Agreement dated as of December 29, 1996 by the Company and
MagneTek Financial Services, Inc. for the benefit of NationsBank, in its
capacity as Agent for the Lenders now or in the future party to the 1995
Credit Agreement.
10.47 (13) Security Agreement dated as of March 31, 1995 by the Company and the other
debtors party thereto for the benefit of NationsBank, in its capacity as
Agent for the Lenders now or in the future party to the 1995 Credit
Agreement (the "1995 Security Agreement").
10.48 (13) Supplement to Security Agreement dated as of March 31, 1995 between the
Company and NationsBank, in its capacity as Agent for the Lenders now or in
the future party to the 1995 Credit Agreement, with reference to the 1995
Security Agreement.
10.49 (14) First Amendment dated as of March 27, 1998 to the Restated Credit
Agreement.
10.50 (24) Lease and Agreement between the City of Blytheville, Arkansas and the
Company, dated as of November 1, 1988.
10.51 (5) First Supplemental Lease and Agreement between City of Blytheville,
Arkansas and the Company dated as of December 1, 1989, for the Blytheville,
Arkansas facility.
10.52 (23) Lease on Bridgeport, Connecticut facility of Universal Manufacturing.
20
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
10.53 (7) Lease Agreement dated March 18, 1996 between Fujian Fufa Company Limited
and MagneTek Fuzhou Generator Company Limited.
10.54 (23) Lease on Gallman, Mississippi facility of Universal Manufacturing.
10.55 (25) Lease of LaVergne, Tennessee facility.
10.56 (22) First Amendment dated August 28, 1991 and Second Amendment dated
February 5, 1993 to Lease on LaVergne, Tennessee facility.
10.57 (26) Lease of Matamoros, Mexico fluorescent ballast manufacturing facility dated
January 1, 1988.
10.58 (27) Lease on McMinnville, Tennessee facility of Century Electric.
10.59 (23) Lease on Mendenhall, Mississippi facility of Universal Manufacturing.
10.60 (2) Lease on Nashville, Tennessee headquarters facility dated as of June 30,
1995.
10.61 (14) Lease on Nashville, Tennessee headquarters facility dated as of March 2,
1998.
10.62 (28) Lease of facility in New Berlin, Wisconsin.
10.63 (5) Third Modification of Lease dated as of December 31, 1990, for the New
Berlin, Wisconsin facility.
10.64 (22) Fourth Modification of Lease dated as of February 12, 1993 for the New
Berlin, Wisconsin facility.
10.65 (27) Lease of St. Louis, Missouri administration, marketing and engineering
personnel facility dated January 1, 1988.
10.66 (29) Stock Purchase Agreement dated as of January 9, 1986, between the Company
and Farley/Northwest Industries, Inc., with list of omitted exhibits and
schedules.
10.67 (29) Stock Purchase Agreement dated as of June 20, 1986, between the Company and
Better Coil and Transformer Corporation, with list of omitted exhibits.
10.68 (30) Purchase Agreement dated as of October 22, 1986, by and among the Company,
Century and certain Securityholders.
10.69 (31) Purchase Agreement dated as of December 15, 1986, between the Company and
all the remaining Securityholders of Century.
10.70 (31) Asset Purchase Agreement dated as of December 30, 1986, between the Company
and Universal Electric.
21
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
10.71 (31) Agreement for the Sale of Stock dated as of December 30, 1986, between the
Company and Cooper.
10.72 (2) Asset Purchase Agreement dated as of May 27, 1994, between the Company and
The Louis Allis Company.
10.73 (2) Asset Purchase Agreement dated as of June 17, 1994, among the Company,
MagneTek Controls, Inc. and Controls Acquisition Corporation.
10.74 (2) Asset Purchase Agreement dated as of October 31, 1994, among the Company,
MagneTek National Electric Coil, Inc. and Rail Products International, Inc.
10.75 (2) Asset Purchase Agreement dated as of November 8, 1994, between the Company
and MAS Acquiring Corp.
10.76 (2) Purchase and Sale Agreement dated November 18, 1994, by and among the
Company, MagneTek Tempe, Inc., MagneTek Deutschland Holding GmbH and PTS,
Inc.
10.77 (2) Asset Purchase Agreement dated as of March 6, 1995, by and between the
Company and GN Acquisition Partners, L.P.
10.78 (2) Asset Purchase Agreement dated as of March 13, 1995, among the Company,
MagneTek National Electric Coil, Inc. and 800 King Avenue Acquisition Corp.
10.79 (2) Asset Purchase Agreement dated as of May 31, 1995, between MagneTek
National Electric Coil, Inc. and The Guardian Resin Corporation.
10.80 (2) Agreement of Sale dated as of June 23, 1995, between General Signal
Corporation and the Company.
10.81 (2) Asset and Stock Purchase Agreement dated as of September 14, 1995, among
the Company, MagneTek National Electric Coil, Inc. and National Electric
Coil Company, L.P.
10.82 (7) Sino-American Equity Joint Venture Contract dated December 17, 1995 between
Fujian Fufa Company Limited and the Company for the Establishment of
MagneTek Fuzhou Generator Company Limited.
10.83 (7) Amended and Restated Asset Purchase Agreement dated as of February 27, 1996
among MagneTek National Electric Coil, Inc., the Company, Eastern Electric
Apparatus Repair Company, Inc. and Grand Eagle Companies Inc.
22
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
10.84 (7) Stock Purchase Agreement dated as of June 28, 1996 among MagneTek National
Electric Coil, Inc., the Company, Grand Eagle Companies North America, Inc.
and Grand Eagle Companies, Inc.
10.85 (7) Amendment No. 1 dated as of June 28, 1996 to Amended and Restated Asset
Purchase Agreement among MagneTek National Electric Coil, Inc., the
Company, Eastern Electric Apparatus Repair Company, Inc. and Grand Eagle
Companies Inc. dated as of February 27, 1996.
10.86 (7) Asset Purchase Agreement dated as of August 30, 1996 between the Company
and Jefferson Electric, Inc.
13 (14) 1998 Annual Report to Stockholders (pp. 25-52 and inside back cover).
22 (13) Subsidiaries of the Company.
23 (14) Consent of Ernst & Young LLP, independent auditors.
27 (14) Financial Data Schedule.
___________________
(1) Previously filed with the Registration Statement on Form S-3 filed on
August 1, 1991, Commission File No. 33-41854, and incorporated herein by
this reference.
(2) Previously filed with Form 10-K for Fiscal Year ended July 2, 1995 and
incorporated herein by this reference.
(3) Previously filed with Amendment No. 1 to Registration Statement filed on
May 10, 1989 and incorporated herein by this reference.
(4) Previously filed with Form 10-K for Fiscal Year ended June 30, 1987 and
incorporated herein by this reference.
(5) Previously filed with Form 10-K for Fiscal Year ended June 30, 1991 and
incorporated herein by this reference.
(6) Previously filed with Form 10-K for Fiscal Year ended June 30, 1992 and
incorporated herein by this reference.
(7) Previously filed with Form 10-K for Fiscal Year ended June 30, 1996 and
incorporated herein by this reference.
(8) Previously filed with Form 10-Q for quarter ended December 31, 1994 and
incorporated herein by this reference.
(9) Previously filed with the Registration Statement on Form S-8 filed on
February 10, 1998, Commission File No. 333-45935, and incorporated
herein by this reference.
(10) Previously filed with Form 10-Q for quarter ended December 31, 1996 and
incorporated herein by this reference.
23
(11) Previously filed with Form 8-K dated March 3, 1997 and incorporated
herein by this reference.
(12) Previously filed with the Registration Statement on Form S-8 filed on
February 10, 1998, Commission File No. 333-45939, and incorporated
herein by this reference.
(13) Previously filed with Form 10-K for Fiscal Year ended June 30, 1997 and
incorporated herein by this reference.
(14) Filed herewith.
(15) Previously filed with Form 10-Q for quarter ended March 31, 1997 and
incorporated herein by this reference.
(16) Previously filed with Form 10-Q for quarter ended March 31, 1994 and
incorporated herein by this reference.
(17) Previously filed with Form 10-Q for quarter ended March 31, 1995 and
incorporated herein by this reference.
(18) Previously filed with Form 10-Q for quarter ended March 31, 1993 and
incorporated herein by this reference.
(19) Previously filed with Form 10-Q for quarter ended September 30, 1993 and
incorporated herein by this reference.
(20) Previously filed with Form 8-K dated January 5, 1990 and incorporated
herein by this reference.
(21) Previously filed with Form 10-K for fiscal year ended June 27, 1993 and
incorporated herein by this reference.
(22) Previously filed with Form 10-K for Fiscal Year ended July 3, 1994 and
incorporated herein by this reference.
(23) Previously filed with Amendment No. 1 to Registration Statement filed on
February 14, 1986 and incorporated herein by this reference.
(24) Previously filed with the Registration Statement filed on April 18, 1989
and incorporated herein by this reference.
(25) Previously filed with Form 10-K for Fiscal Year ended July 2, 1989 and
incorporated herein by this reference.
(26) Previously filed with Form 10-K for Fiscal Year ended July 3, 1988 and
incorporated herein by this reference.
(27) Previously filed with Post-Effective Amendment No. 1 to Registration
Statement, filed on August 3, 1987 and incorporated herein by this
reference.
(28) Previously filed with the Registration Statement filed on May 3, 1985
and incorporated herein by this reference.
(29) Previously filed with Form 10-K for Fiscal Year ended June 30, 1986 and
incorporated herein by this reference.
24
(30) Previously filed with Form 10-Q for quarter ended September 30, 1986 and
incorporated herein by this reference.
(31) Previously filed with Form 8-K dated December 30, 1986 and incorporated
herein by this reference.
(b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K during the last quarter of
the 1996 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of
Nashville, State of Tennessee, on the 28th of September, 1998.
MagneTek, Inc.
(Registrant)
/s/ RONALD N. HOGE
----------------------------------------
Ronald N. Hoge
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- -----
/s/ ANDREW G. GALEF Chairman of the Board of September 28, 1998
- --------------------------------- Directors
Andrew G. Galef
/s/ RONALD N. HOGE President, Chief Executive September 28, 1998
- --------------------------------- Officer and Director
Ronald N. Hoge (Principal Executive Officer)
/s/ THOMAS G. BOREN Director September 28, 1998
- ---------------------------------
Thomas G. Boren
/s/ DEWAIN K. CROSS Director September 28, 1998
- ---------------------------------
Dewain K. Cross
/s/ PAUL J. KOFMEHL Director September 28, 1998
- ---------------------------------
Paul J. Kofmehl
/s/ FREDERICK D. LAWRENCE Director September 28, 1998
- ---------------------------------
Frederick D. Lawrence
/s/ MARGUERITE W. SALLEE Director September 28, 1998
- ---------------------------------
Marguerite W. Sallee
/s/ ROBERT E. WYCOFF Director September 28, 1998
- ---------------------------------
Robert E. Wycoff
/s/ DAVID P. REILAND Senior Vice President and September 28, 1998
- --------------------------------- Chief Financial Officer
David P. Reiland (Principal Financial Officer)
/s/ THOMAS R. KMAK Vice President and Controller September 28, 1998
- --------------------------------- (Principal Accounting Officer)
Thomas R. Kmak
26
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of MagneTek, Inc. as of
June 30, 1998 and 1997, and for each of the three years in the period ended
June 30, 1998, and have issued our report thereon dated August 18, 1998
(incorporated by reference elsewhere in this Annual Report on Form 10-K).
Our audits also included the financial statement schedule listed in Item
14(a) of this Annual Report on Form 10-K. This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
St. Louis, Missouri
August 18, 1998
S-1
SCHEDULE II
MAGNETEK, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(AMOUNTS IN THOUSANDS)
BALANCE AT ADDITIONS DEDUCTIONS BALANCE
BEGINNING CHARGED TO FROM AT END
JUNE 30, 1996 OF YEAR EARNINGS ALLOWANCE OTHER(a) OF YEAR
- ------------- ---------- ---------- ---------- -------- --------
Allowance for
doubtful
receivables $4,421 $5,422 ($4,450) $35 $5,428
JUNE 30, 1997
- -------------
Allowance for
doubtful
receivables $5,428 $1,102 ($1,203) $(159) $5,168
JUNE 30, 1998
- -------------
Allowance for
doubtful
receivables $5,168 $1,738 ($2,102) $19 $4,823
(a) Represents primarily opening allowances for doubtful accounts balances of
acquired companies and Foreign Translation Adjustments.
S-2