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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 July 2, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10233
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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.)
10900 WILSHIRE BOULEVARD, SUITE 850
LOS ANGELES, CALIFORNIA 90024
(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
------------------- ---------------------
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. |X|
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 1, 2000) was $237,756,062.
The number of shares outstanding of the Registrant's Common
Stock, as of September 22, 2000, was 23,081,634 shares, including 100,000
treasury shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the MagneTek, Inc. 2000 Annual Report for the year
ended July 2, 2000 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. 2000 Annual
Report 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 July 2, 2000 are incorporated by reference into
Part III hereof.
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MAGNETEK, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2000(1)
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PAGE
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ITEM 1. BUSINESS.......................................................................1
ITEM 2. PROPERTIES.....................................................................6
ITEM 3. LEGAL PROCEEDINGS..............................................................7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................7
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..........8
ITEM 6. SELECTED FINANCIAL DATA........................................................8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.....................................................................8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.....................................................................8
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................9
ITEM 11. EXECUTIVE COMPENSATION........................................................10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................10
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................10
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K..............10
</TABLE>
(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 year 2000 contained 53 weeks and fiscal years
1999 and 1998 each contained 52 weeks.
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PART I
ITEM 1. BUSINESS.
GENERAL
MagneTek, Inc. ("MagneTek" or the "Company") supplies digital
power products used in information technology and industrial/instrumentation
markets. These products usually take the form of sub-systems. They are sold
directly or through agents to original equipment manufacturers (OEMs) for
incorporation into their products, to system integrators and value-added
resellers (VARs) for assembly and installation in telecommunications and other
end-user systems, and to distributors for resale to OEMs, contractors and end
users for repair and replacement purposes. Founded in 1984 and listed on the New
York Stock Exchange in 1989 (NYSE: MAG), MagneTek operates four factories in
North America and two in Europe and employs approximately 1,700 people
worldwide. The Company operates in a single segment called Digital Power
Products, which includes two broad product lines, Power Controls and Motion
Controls.
DIGITAL POWER PRODUCTS
GENERAL. MagneTek ranks among the world's 15 largest
independent makers of OEM power supplies. It is an acknowledged innovator in
mixed-signal (analog-to-digital) power electronic sub-system design, heat
reduction technology and the application of microprocessors and
micro-controllers in digital power products. International sales accounted for
28% of net sales in fiscal 2000. IBM, a computer and information services
company, accounted for 16% of the Company's sales in fiscal 2000.
POWER CONTROLS. Power control products accounted for 54% of
the Company's net sales in fiscal 2000. They include: AC-to-DC switching power
supplies; AC-to-DC rectifiers/battery chargers; DC-to-DC power converters;
DC-to-AC power inverters; peripheral component interconnects (PCIs); and voltage
regulator modules (VRMs). These power controls are used primarily in
telecommunications, data-processing, data-communications, data-storage,
networking, imaging, laser processing, and power generation equipment, as well
as medical instrumentation and home appliances. Principal customers include IBM,
Siemens, ItalTel, AT&T Wireless, Alcatel, Nokia, United Technologies, Kodak,
Xerox, Ericsson and Wincor.
MOTION CONTROLS. Motion control products accounted for 46% of
the Company's net sales in fiscal 2000. MagneTek's motion control products
consist primarily of programmable power supplies that control motor speed. They
include alternating (AC) and direct current (DC) variable-frequency motor drives
(VFDs), reduced-voltage motor starters, and related software products. VFDs are
utilized in a wide range of applications, including industrial automation and
materials handling, commercial heating, ventilating and air conditioning. In
addition, the Company supplies VFDs and related software and accessories for
controlling overhead cranes and hoists. Principal customers include American
Standard, Joy Manufacturing and Morris Material Handling, as well as the world's
leading elevator builders and most of the industrial crane and hoist companies
in North America.
BACKLOG. Backlog as of June 30, 2000 was $94.1 million versus
$68.5 million at the end of fiscal 1999. The increased backlog reflects
increased orders from telecommunications, data communications and other
communications infrastructure customers, as well as the acquisition of the EMS
group of companies and Mondel Engineering ULC during fiscal 2000.
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COMPETITION. MagneTek's primary competitors include Delta
Electronics, Emerson/Astec/APS, Artesyn Technologies, Invensys/Lambda,
Power-One, Celestica, Vicor, Rockwell/Allen Bradley, Asea Brown Boveri and
Toshiba. Some of these companies have substantially greater resources than
MagneTek.
COMPETITIVE STRENGTHS
Management believes that MagneTek benefits most from
competitive advantages in the following areas:
TECHNOLOGICAL CAPABILITIES. MagneTek emphasizes and leverages
its ability to provide custom-designed and customized solutions for power and
motion control applications through power-electronic (digital) technology. The
Company recruits top talent from universities that stress power electronics in
their curricula, and its technical personnel possess substantial expertise in
disciplines central to digital power systems. These include: mixed-signal
(analog-to-digital) design; heat reduction technology; and the application of
microprocessors and micro-controllers to power products.
CUSTOMER RELATIONSHIPS. MagneTek has established durable
relationships with major manufacturers of data-processing and telecommunications
equipment and systems, business machines, medical electronics, power generators
and fuel cells, cranes and hoist, mining equipment and elevators, among others.
The Company believes that these long-term relationships have resulted from: its
responsiveness, which is superior to that of its larger competitors; its
readiness to meet special customer needs, based on innovative technology; the
quality and cost-effectiveness of its products; its commitment to stand behind
its products; and its after-sale service. Maintenance and development of close
relationships with OEMs, VARs and distributors are important strategic
priorities of the Company.
STATE-OF-THE-ART MANUFACTURING. MagneTek competes as a
high-quality, cost-effective supplier of digital power subsystems that are
incorporated into customers' products and systems. The Company has taken steps
to enhance its competitive position by locating new production facilities in
low-cost labor areas, implementing demand-flow and cellular manufacturing
techniques, and investing in state-of-the-art manufacturing capabilities, such
as surface-mount machinery and advanced electronic test equipment, to enhance
its product quality and reliability.
MARKET CHANNELS AND PRODUCT BREADTH. MagneTek's North American
and European networks of agents, distributors and VARs 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 scope is an important consideration of customers in
their selection of suppliers, the Company's breadth of product has been an
advantage in penetrating and maintaining both OEM relationships and channel
partnerships.
RESTRUCTURING AND CURRENT STRATEGY
Since the mid-1990s, MagneTek has undertaken a series of
strategic initiatives to strengthen its financial position and improve its
competitiveness. A number of businesses have been divested (most importantly
Motors and Generators in 1999), resulting in total proceeds over the last five
years of more than $500 million, which were applied to reduce indebtedness,
repurchase Company stock, and make select product-line acquisitions. In fiscal
2001, MagneTek plans to divest all of its remaining electrical equipment
operations and focus exclusively on markets for digital power products. Proceeds
from these divestitures will be used to repay debt, increase the Company's
investment in research and
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development, and make selective acquisitions consistent with the Company's
new digital power focus.
Major goals of MagneTek's restructuring and current business
strategy are as follows:
REDUCTION OF BALANCE SHEET LEVERAGE. From the end of fiscal
1994 to the end of fiscal 2000, MagneTek reduced its Debt-to-Shareholders'
Equity ratio from 4.6:1 to 0.3:1 by using proceeds from business divestitures
and internally generated cash flow and calling outstanding convertible debt
securities. The Company anticipates that proceeds received from the planned sale
of its Lighting Products and Transformer businesses will eliminate all currently
outstanding debt and provide financing for internal growth and selective
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the Company's 2000 Annual Report.
INCREASED EMPHASIS ON DIGITAL POWER PRODUCTS. In coming
periods MagneTek seeks to: improve the profitability and cash flow generating
capability of its continuing operations under delevered conditions; strengthen
its product offerings through internal development and selected product line
additions; and concurrently, grow and diversify in the digital power products
business. Attractive growth opportunities are believed to exist in the digital
power products business in North America, especially in applications where
MagneTek has achieved substantial market positions in Europe.
INTERNATIONAL OPERATIONS
International sales accounted for 28% of MagneTek's net
revenues in fiscal 2000. The Company defines international sales as sales of
products manufactured by its facilities outside the U.S. that are sold outside
of the U.S., as well as sales of products manufactured in the U.S. to purchasers
outside of the U.S. In Europe the Company operates two manufacturing facilities,
one in Italy and one in Hungary, and employs approximately 1,000 people.
SUPPLIERS AND RAW MATERIALS
Virtually all materials and components purchased by the
Company are available from multiple suppliers. During fiscal 2000, raw materials
purchases accounted for approximately 70% of the Company's cost of sales.
Production of digital power products depends heavily on various electronic
components. The Company seeks to obtain competitive pricing on these raw
materials, as well as MRO supplies, by utilizing multiple suppliers available to
its North American and European operations, leveraging its combined purchasing
requirements, and utilizing internet sources when possible.
Based on analyses of the costs and benefits of its level of
vertical integration, MagneTek is continuing to increase its outsourcing of
certain materials and component parts that were previously produced internally.
RESEARCH AND DEVELOPMENT
MagneTek's Research and Development activities, which are
conducted primarily at advanced development centers in Valdarno, Italy,
Chatsworth, California and New Berlin, Wisconsin, are directed toward developing
new products, improving existing products, and customizing or modifying products
to meet customers' specific needs. Total research and development expenditures
were approximately $8.1 million, $11.0 million and $13.0 million, respectively
for the 2000, 1999 and 1998 fiscal years.
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TRADEMARKS AND PATENTS
The Company holds numerous patents and believes that it holds
all of the patent, trademark and other intellectual property rights necessary to
conduct its business.
EMPLOYEES
As of September 1, 2000, the Company had approximately 600
salaried employees and approximately 1,100 hourly employees, of whom
approximately 600 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 2000 did not entail material expenditures, and
its remediation activities for fiscal 2001 are not expected to entail material
expenditures. Future remediation of contaminated areas could entail material
expenditures, depending upon the extent and nature of the contamination, the
cleanup measures employed and the concurrence of governmental authorities.
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 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.
EFFECT OF FRUIT OF THE LOOM BANKRUPTCY. A company obligated to
indemnify MagneTek against certain environmental liabilities, Fruit of the Loom,
Inc. ("FOL"), has filed a petition for Reorganization under Chapter 11 of the
Bankruptcy Code. MagneTek acquired the stock of Universal Manufacturing Company
("Universal") from a predecessor of FOL. In connection with that acquisition,
the predecessor of FOL indemnified MagneTek against certain environmental
liabilities arising from Universal's pre-acquisition activities. Environmental
liabilities covered by the FOL indemnity include completion of additional
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cleanup activities (if any) at MagneTek's Bridgeport, Connecticut facility, and
defense and indemnity of MagneTek concerning offsite disposal locations where
MagneTek may have a share of potential response costs. MagneTek has filed a
proof of claim in FOL's bankruptcy proceeding for matters governed by the FOL
environmental indemnity.
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. Based on the nature of
its alleged connections to those sites, the volume and nature of the alleged
contaminants, the anticipated cleanup costs, the number of parties
participating, any available identification rights and the ability of other
liable parties to pay their shares, 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's actual expenditures at those sites maybe less or
greater than currently anticipated, and that the Company will be named as a
potentially responsible party in the future with respect to other sites.
INDEMNIFICATION OBLIGATIONS FROM DIVESTITURES. 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 divested operations. The Company's
indemnification obligations pursuant to such agreements did not entail material
expenditures for fiscal 2000, and its indemnification obligations for fiscal
2001 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 telecommunications 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.
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.
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.
DEPENDENCE ON SIGNIFICANT CUSTOMERS. MagneTek's sales to its
top five customers represented approximately 25% of its net sales in fiscal
2000. 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.
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INTERNATIONAL SALES AND OPERATIONS; FOREIGN CURRENCY EXPOSURE.
International sales, including sales from domestic operations, accounted for
approximately 28% of MagneTek's net sales in fiscal 2000. 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 local economic and
political conditions, currency exchange restrictions, regulatory requirements
and taxes.
YEAR 2000 COMPLIANCE. In fiscal years 1998 and 1999 the
Company conveyed its plans and progress in insuring that all systems were Year
2000 compliant. As scheduled, the Company completed remediation and testing for
all systems in the last half of fiscal year 1999. Due to efforts expended, the
Company has experienced no significant disruptions in either critical
information or non-information technology systems. The Company is not aware of
any material problems resulting from Year 2000 issues with products, internal
systems or third party products or services. For the remainder of Year 2000, the
Company will continue to monitor both internal computer applications and those
of third party suppliers and vendors. While the Company does not expect any
problems to occur, should any latent Year 2000 issues arise, they will be
addressed promptly.
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 divested operations.
RAW MATERIALS. MagneTek's raw material costs represented
approximately 55% of its net sales in fiscal 2000. The principal materials used
by the Company are electronic components. Unanticipated increases in raw
material requirements or price increases would increase production costs and
adversely affect profitability.
ACQUISITIONS. MagneTek's business strategy calls for growth
and diversification in the digital power products business. Pursuing acquisition
opportunities and attempting to integrate and manage acquired businesses
requires significant resources, including management time and skill, and these
efforts may detract from the management or operation of other businesses.
Additionally, acquired businesses may not perform as expected, thereby causing
MagneTek's actual growth or operating results to suffer.
ITEM 2. PROPERTIES.
MagneTek's headquarters and each of its manufacturing
facilities for the continuing operations of the Company are listed below, each
of which is owned by the Company unless shown as leased.
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APPROXIMATE
LOCATION LEASE TERM SIZE (SQ. FT.) PRINCIPAL USE
-------------------------- ---------- -------------- --------------------------------
<S> <C> <C> <C>
Chatsworth, California 2003 48,000 Power supply manufacturing
Los Angeles, California 2005 5,000 Corporate headquarters
Menomonee Falls, Wisconsin 2004 74,000 Drives and systems manufacturing
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APPROXIMATE
LOCATION LEASE TERM SIZE (SQ. FT.) PRINCIPAL USE
-------------------------- ---------- -------------- --------------------------------
<S> <C> <C> <C>
New Berlin, Wisconsin 2008 122,400 Drives and systems manufacturing
Pomaz, Hungary 2006, 2007 44,000 Power supply and ballast
manufacturing
Valdarno, Italy -- 149,000 Power supply manufacturing
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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 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. At this stage 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.
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, 2000.
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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 1999 and 2000:
<TABLE>
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QUARTER ENDING HIGH LOW
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September 30, 1999 11-5/8 8-13/16
December 31, 1999 9-3/8 6-1/8
March 31, 2000 9-7/8 7-1/4
June 30, 2000 9-1/8 7-3/16
September 30, 1998 16-5/8 9-13/16
December 31, 1998 13-7/8 8-15/16
March 31, 1999 12-13/16 8-1/4
June 30, 1999 11-13/16 8-5/16
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The Company's Common Stock is traded on the New York Stock
Exchange under the ticker symbol "MAG." As of September 22, 2000, there were 259
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 the repurchase of up to $72.0 million (of which $62.0 million
has been applied) of the Company's Common Stock so long as no event of default
exists.
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 Selected Financial Data, Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Financial Statements and the Report of Ernst & Young LLP, Independent
Auditors, of the Company's 2000 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
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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.
<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------- --- -------------------------------------------------
<S> <C> <C>
Andrew G. Galef 67 Chairman of the Board of Directors,
President and Chief Executive Officer
Antonio Canova 58 Executive Vice President
Alexander Levran, Ph.D. 50 Senior Vice President, Technology
David P. Reiland 46 Senior Vice President and Chief Financial Officer
John P. Colling, Jr. 44 Vice President and Treasurer
Thomas R. Kmak 50 Vice President and Controller
</TABLE>
Mr. Galef has been the Chairman of the Board of Directors
since July 1984 and the President and Chief Executive Officer of the Company
since May 4, 1999. 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. 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.
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.
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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.
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.
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 October 2000, 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:
<TABLE>
<CAPTION>
EDGARIZED ANNUAL REPORT TO
FORM 10-K PAGE STOCKHOLDERS PAGE
-------------- -----------------
<S> <C> <C>
1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income for Years Ended -- 11
June 30, 2000, 1999 and 1998
Consolidated Balance Sheets at June 30, 2000 and 1999 -- 12
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
EDGARIZED ANNUAL REPORT TO
FORM 10-K PAGE STOCKHOLDERS PAGE
-------------- -----------------
<S> <C> <C>
Consolidated Statements of Stockholders' Equity for -- 14
Years Ended June 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for Years Ended -- 15
June 30, 2000, 1999 and 1998
Notes to Consolidated Financial Statements -- 16
Report of Ernst & Young LLP, Independent Auditors -- 33
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Report of Ernst & Young LLP, Independent Auditors S-1 51
Schedule II -- Valuation and Qualifying Accounts S-2 52
</TABLE>
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.
<TABLE>
<CAPTION>
EDGARIZED ANNUAL REPORT TO
FORM 10-K PAGE STOCKHOLDERS PAGE
-------------- -----------------
<S> <C> <C>
3. EXHIBIT INDEX 11 44
</TABLE>
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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
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.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
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.
10.9 (9) MagneTek, Inc. 1997 Non-Employee Director Stock Option Plan.
10.10 (4) Senior Executive Medical Expense Reimbursement Plan for the Company.
10.11 (6) 1991 Discretionary Director Incentive Compensation Plan of the Company.
10.12 (10) 1999 Stock Incentive Plan of the Company (the "1999 Plan").
10.13 (10) 2000 Employee Stock Plan of the Company (the "2000 Plan").
10.14 (7) Form of Restricted Stock Agreement Pursuant to the Second Amended and Restated 1989
Incentive Stock Compensation Plan of the Company.
10.15 (10) 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.
10.16 (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, as amended and restated as of February 2, 2000.
10.17 (12) MagneTek, Inc. Amended and Restated Director Compensation and Deferral Investment
Plan.
10.18 (13) Non-Qualified Stock Option Agreement between the Company and David P. Reiland.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.19 (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.
10.20 (7) Registration Rights Agreement dated as of June 28, 1996 by and between the Company
and U.S. Trust Company of California, N.A.
10.21 (14) Executive Management Agreement dated as of July 1, 1994, by and between the Company
and The Spectrum Group, Inc.
10.22 (15) Amendment dated as of January 25, 1995 to the Executive Management Agreement between
the Company and The Spectrum Group, Inc.
10.23 (16) Amendment No. 1 to the Executive Management Agreement dated as of June 30, 2000
between the Company and The Spectrum Group, Inc.
10.24 (17) Change of Control Agreement dated October 20, 1998 between Antonio Canova and
MagneTek, Inc.
10.25 (17) Change of Control Agreement dated October 20, 1998 between Brian R. Dundon and
MagneTek, Inc.
10.26 (17) Change of Control Agreement dated October 20, 1998 between Alexander Levran and
MagneTek, Inc.
10.27 (17) Change of Control Agreement dated October 20, 1998 between David P. Reiland and
MagneTek, Inc.
10.28 (17) Change of Control Agreement dated October 20, 1998 between John P. Colling, Jr. and
MagneTek, Inc.
10.29 (17) Change of Control Agreement dated October 20, 1998 between Thomas R. Kmak and
MagneTek, Inc.
10.30 (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").
10.31 (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").
10.32 (19) Second Supplemental Security Agreement dated as of October 1, 1993 by and between the
Huntsville IDB and CIT.
10.33 (18) Equipment Lease Agreement of even date with the Huntsville Security Agreement among
the parties thereto.
10.34 (19) Amendment to Equipment Lease Agreement dated as of August 1, 1993 between the
Huntsville IDB and the Company.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.35 (19) Second Amendment to Equipment Lease Agreement dated as of October 1, 1993 between the
Huntsville IDB and the Company.
10.36 (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.
10.37 (21) First, Second and Third Amendments to Lease Agreement.
10.38 (22) Fourth Amendment to Lease Agreement.
10.39 (21) Bond Guaranty Agreement between the Company, as Guarantor and First Alabama Bank
dated as of February 1, 1993 relating to the Lease Agreement.
10.40 (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").
10.41 (21) First, Second and Third Supplemental Indentures to the Indenture.
10.42 (22) Fourth Supplemental Indenture to the Indenture.
10.43 (23) Environmental Agreement among the Company, Universal Manufacturing Corporation and
Farley Northwest Industries, Inc., as amended.
10.44 (23) Letter Agreement dated as of January 9, 1986, between the Company and Farley
Northwest Industries, Inc., pursuant to Stock Purchase Agreement.
10.45 (23) Tax Agreement dated as of February 12, 1986, between the Company and Farley Northwest
Industries, Inc.
10.46 (23) Agreement dated as of January 9, 1986, between the Company and Farley/Northwest
Industries, Inc. relating to the Totowa facility.
10.47 (24) 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").
10.48 (24) 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").
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.49 (24) 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.
10.50 (24) 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").
10.51 (24) 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.
10.52 (25) First Amendment dated as of March 27, 1998 to the Restated Credit Agreement.
10.53 (16) Second Amendment dated as of March 26, 1999 to the Restated Credit Agreement.
10.54 (16) Third Amendment dated as of July 30, 1999, to the Restated Credit Agreement.
10.55 (10) Fourth Amendment dated as of September 28, 1999 to the Restated Credit Agreement.
10.56 (16) Lease on Chatsworth, California facility dated May 22, 1997.
10.57 (16) Lease on Los Angeles, California facility dated June 5, 2000.
10.58 (26) Lease on New Berlin, Wisconsin facility.
10.59 (5) Third Modification of Lease dated as of December 31, 1990 on New Berlin, Wisconsin
facility.
10.60 (22) Fourth Modification of Lease dated as of February 12, 1993 on New Berlin, Wisconsin
facility.
10.61 (16) Lease on Pomaz, Hungary facility.
10.62 (27) Lease on Menomonee Falls, Wisconsin facility dated as of July 23, 1999.
10.63 (28) Asset Purchase Agreement dated as of April 26, 1999 between the Company and Emerson
Electric Co.
10.64 (29) Asset Purchase Agreement dated as of June 28, 1999 by and among the Company, MagneTek
Service (U.K.), Limited and A.O. Smith Corporation.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.65 (27) Asset Purchase Agreement dated July 23, 1999 among the Company, Electric Motor
Systems, Inc., Electromotive Systems, Inc., EMS/Rosa Automation Engineering, Inc.,
Robert G. Friedrich and Steven J. Badinghaus.
13 (16) 2000 Annual Report (pp. 3-33).
23 (16) Consent of Ernst & Young LLP, independent auditors.
27 (16) Financial Data Schedule.
</TABLE>
-------------------
(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/A for quarter ended September 30, 1999
and incorporated herein by this reference.
(11) Previously filed with Form 8A/A dated March 7, 2000 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-Q for quarter ended March 31, 1997 and
incorporated herein by this reference.
16
<PAGE>
(14) Previously filed with Form 10-Q for quarter ended March 31, 1994 and
incorporated herein by this reference.
(15) Previously filed with Form 10-Q for quarter ended March 31, 1995 and
incorporated herein by this reference.
(16) Filed herewith.
(17) Previously filed with Form 10-Q for quarter ended December 31, 1998 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 Form 10-K for Fiscal Year ended June 30, 1997 and
incorporated herein by this reference.
(25) Previously filed with Form 10-K for Fiscal Year ended June 30, 1998 and
incorporated herein by this reference.
(26) Previously filed with the Registration Statement filed on May 3, 1985 and
incorporated herein by this reference.
(27) Previously filed with Form 10-K for Fiscal year ended June 27, 1999 and
incorporated herein by this reference.
(28) Previously filed with Form 8-K dated April 26, 1999 and incorporated herein
by this reference.
(29) Previously filed with Form 8-K dated August 2, 1999 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
2000 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
17
<PAGE>
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 2nd day of October, 2000.
MagneTek, Inc.
(Registrant)
/s/ ANDREW G. GALEF
------------------------------------
Andrew G. Galef
Chairman of the Board of Directors,
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ANDREW G. GALEF Chairman of the Board of Directors, October 2, 2000
--------------------------------------------- President and Chief Executive
Andrew G. Galef Officer (Principal Executive
Officer)
/s/ THOMAS G. BOREN Director October 2, 2000
---------------------------------------------
Thomas G. Boren
/s/ DEWAIN K. CROSS Director October 2, 2000
---------------------------------------------
Dewain K. Cross
/s/ PAUL J. KOFMEHL Director October 2, 2000
---------------------------------------------
Paul J. Kofmehl
/s/ FREDERICK D. LAWRENCE Director October 2, 2000
---------------------------------------------
Frederick D. Lawrence
/s/ MITCHELL I. QUAIN Director October 2, 2000
---------------------------------------------
Mitchell I. Quain
/s/ ROBERT E. WYCOFF Director October 2, 2000
---------------------------------------------
Robert E. Wycoff
/s/ DAVID P. REILAND Senior Vice President and October 2, 2000
--------------------------------------------- Chief Financial Officer
David P. Reiland (Principal Financial Officer)
/s/ THOMAS R. KMAK Vice President and Controller October 2, 2000
--------------------------------------------- (Principal Accounting Officer)
Thomas R. Kmak
</TABLE>
18
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of MagneTek, Inc. as of
June 30, 2000 and 1999, and for each of the three years in the period ended June
30, 2000, and have issued our report thereon dated August 18, 2000 (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
Nashville, Tennessee
August 18, 2000
S-1
<PAGE>
SCHEDULE II
MAGNETEK, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1998, 1999 AND 2000
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
beginning charged to from at end
June 30, 1998 of year earnings Allowance Other(a) of year
------------------- ----------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful
receivables $1,031 $1,743 ($1,753) $36 $1,057
June 30, 1999
-------------------
Allowance for
doubtful
receivables $1,057 $3,062 ($2,549) ($6) $1,564
June 30, 2000
-------------------
Allowance for
doubtful
receivables $1,564 $8,452 ($7,132) $415 $3,299
</TABLE>
(a) Represents primarily opening allowances for doubtful accounts balances
of acquired companies and Foreign Translation Adjustments.
S-2
