Table of Contents

 

 

 

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D. C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 
| **x** | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|--------------------------------------------------------------------------------------------------------|

 

**For thequarterly period ended:  December 28,2008**

 

**OR**

 
| **o** | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|----------------------------------------------------------------------------------------------------------|

 

**For the transition period from                   **

 

**Commission file number 1-10233**

 

**MAGNETEK,INC.**

(Exact name ofRegistrant as specified in its charter)

 

| **DELAWARE**                     | ** ** | **95-3917584**          |
|----------------------------------|------------|-------------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer        |
| incorporation or  organization)  |       | Identification  Number) |

** **

**N49 W13650 Campbell Drive**

**MenomoneeFalls, Wisconsin  53051**

(Address ofprincipal executive offices)

 

**(262)783-3500**

(Registrant’stelephone number, including area code)

 

 

(Former name,former address and former fiscal year,

if changed sincelast report)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes  x   Noo

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer,” “largeaccelerated filer,” and “smaller reporting company” in Rule 12b-2 of theExchange Act.  (Check one):

 
| Large accelerated filer  o |   |   |   | Accelerated filer x |   | Non-accelerated filer o |   |   |   | Smaller Reporting  Company o |
|----------------------------|--------|--------|--------|---------------------|--------|-------------------------|--------|--------|--------|------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o   Nox

 

The number of sharesoutstanding of Registrant’s Common Stock, as of January 30, 2009, was31,061,499 shares.

 

 

 

----

Table of Contents

 

2009 MAGNETEK FORM 10-Q

 

TABLE OF CONTENTSFOR THE QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCALQUARTER ENDED DECEMBER 28, 2008

 

MAGNETEK, INC.

 
| **Part I.**  | **Financial  Information**                                                                  | **3**      |
|-------------------|---------------------------------------------------------------------------------------------|------------|
| ** **        | ** **                                                                                  | ** ** |
| Item 1.           | Financial Statements                                                                        | 3          |
| Item 2.           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 13         |
| Item 3.           | Quantitative  and Qualitative Disclosures about Market Risk                                 | 19         |
| Item 4.           | Controls and  Procedures                                                                    | 19         |
|              |                                                                                        |       |
| **Part II.** | **Other Information**                                                                       | **20**     |
| ** **        | ** **                                                                                  | ** ** |
| Item  1.          | Legal Proceedings                                                                           | 20         |
| Item  1A.         | Risk Factors                                                                                | 20         |
| Item 2.           | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 20         |
| Item 3.           | Defaults upon  Senior Securities                                                            | 20         |
| Item 4.           | Submission of  Matters to a Vote of Security Holders                                        | 20         |
| Item  5.          | Other Information                                                                           | 21         |
| Item 6.           | Exhibits                                                                                    | 21         |
|              |                                                                                        |       |
| Signatures        | 22                                                                                          |

 

2

----

Table of Contents

 

**PART I.  FINANCIAL INFORMATION**

 

**Item 1 –Financial Statements**

 

MAGNETEK, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts inthousands, except per share data, unaudited)

 
| ** **                                                           | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                           | ** ** | **(13 Weeks)**              | ** ** | **(13 Weeks)** | ** ** |
| ** **                                                           | ** ** | **December 28,**            | ** ** | **December 30,** | ** ** |
| ** **                                                           | ** ** | **2008**                         | ** ** | **2007** | ** ** |
|                                                                 |       |                             |       |   |   |
| Net sales                                                            |       | $                                | 26,761     |   | $ | 25,389 |   |
| Cost of sales                                                        |       | 17,359                           |       | 18,400 |   |
| Gross profit                                                         |       | 9,402                            |       | 6,989 |   |
|                                                                 |       |                             |       |   |   |
| Operating  expenses:                                                 |       |                             |       |   |   |
| Research and  development                                            |       | 900                              |       | 858 |   |
| Selling, general  and administrative                                 |       | 6,554                            |       | 4,308 |   |
| Income from  operations                                              |       | 1,948                            |       | 1,823 |   |
|                                                                 |       |                             |       |   |   |
| Non operating  expense (income):                                     |       |                             |       |   |   |
| Interest expense                                                     |       | —                           |       | 116 |   |
| Interest income                                                      |       | (43                              | )          | (316 | ) |
| Income from  continuing operations before provision for income taxes |       | 1,991                            |       | 2,023 |   |
|                                                                 |       |                             |       |   |   |
| Provision for  income taxes                                          |       | 732                              |       | 219 |   |
| Income from  continuing operations                                   |       | 1,259                            |       | 1,804 |   |
|                                                                 |       |                             |       |   |   |
| Income from  discontinued operations, net of tax                     |       | 680                              |       | 776 |   |
|                                                                 |       |                             |       |   |   |
| Net income                                                           |       | $                                | 1,939      |   | $ | 2,580 |   |
|                                                                 |       |                             |       |   |   |
| Earnings per  common share                                           |       |                             |       |   |   |
| Basic:                                                               |       |                             |       |   |   |
| Earnings from  continuing operations                                 |       | $                                | 0.04       |   | $ | 0.06 |   |
|                                                                 |       |                             |       |   |   |
| Income from  discontinued operations                                 |       | $                                | 0.02       |   | $ | 0.03 |   |
|                                                                 |       |                             |       |   |   |
| Net income                                                           |       | $                                | 0.06       |   | $ | 0.09 |   |
|                                                                 |       |                             |       |   |   |
| Diluted:                                                             |       |                             |       |   |   |
| Earnings from  continuing operations                                 |       | $                                | 0.04       |   | $ | 0.06 |   |
|                                                                 |       |                             |       |   |   |
| Income from  discontinued operations                                 |       | $                                | 0.02       |   | $ | 0.03 |   |
|                                                                 |       |                             |       |   |   |
| Net income                                                           |       | $                                | 0.06       |   | $ | 0.08 |   |
|                                                                 |       |                             |       |   |   |
| Weighted average  shares outstanding:                                |       |                             |       |   |   |
| Basic                                                                |       | 30,671                           |       | 30,270 |   |
|                                                                 |       |                             |       |   |   |
| Diluted                                                              |       | 30,845                           |       | 30,474 |   |

 

See accompanyingnotes

 

3

----

Table of Contents

 

MAGNETEK, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

 (Amounts in thousands, except per share data,unaudited)

 
| ** **                                                           | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                           | ** ** | **(26 Weeks)**            | ** ** | **(26 Weeks)** | ** ** |
| ** **                                                           | ** ** | **December 28,**          | ** ** | **December 30,** | ** ** |
| ** **                                                           | ** ** | **2008**                       | ** ** | **2007** | ** ** |
|                                                                 |       |                           |       |   |   |
| Net sales                                                            |       | $                              | 53,112     |   | $ | 48,188 |   |
| Cost of sales                                                        |       | 34,265                         |       | 34,346 |   |
| Gross profit                                                         |       | 18,847                         |       | 13,842 |   |
|                                                                 |       |                           |       |   |   |
| Operating  expenses:                                                 |       |                           |       |   |   |
| Research and  development                                            |       | 1,770                          |       | 1,638 |   |
| Selling, general  and administrative                                 |       | 13,098                         |       | 9,245 |   |
| Income from  operations                                              |       | 3,979                          |       | 2,959 |   |
|                                                                 |       |                           |       |   |   |
| Non operating  expense (income):                                     |       |                           |       |   |   |
| Interest expense                                                     |       | —                         |       | 260 |   |
| Interest income                                                      |       | (110                           | )          | (672 | ) |
| Income from  continuing operations before provision for income taxes |       | 4,089                          |       | 3,371 |   |
|                                                                 |       |                           |       |   |   |
| Provision for  income taxes                                          |       | 1,094                          |       | 523 |   |
| Income from  continuing operations                                   |       | 2,995                          |       | 2,848 |   |
|                                                                 |       |                           |       |   |   |
| Income (loss)  from discontinued operations, net of tax              |       | (175                           | )          | 231 |   |
|                                                                 |       |                           |       |   |   |
| Net income                                                           |       | $                              | 2,820      |   | $ | 3,079 |   |
|                                                                 |       |                           |       |   |   |
| Earnings (loss)  per common share                                    |       |                           |       |   |   |
|                                                                 |       |                           |       |   |   |
| Basic and  diluted:                                                  |       |                           |       |   |   |
| Earnings from  continuing operations                                 |       | $                              | 0.10       |   | $ | 0.09 |   |
|                                                                 |       |                           |       |   |   |
| Income (loss)  from discontinued operations                          |       | $                              | (0.01      | ) | $ | 0.01 |   |
|                                                                 |       |                           |       |   |   |
| Net income                                                           |       | $                              | 0.09       |   | $ | 0.10 |   |
|                                                                 |       |                           |       |   |   |
| Weighted average  shares outstanding:                                |       |                           |       |   |   |
| Basic                                                                |       | 30,654                         |       | 30,302 |   |
|                                                                 |       |                           |       |   |   |
| Diluted                                                              |       | 30,905                         |       | 30,521 |   |

 

See accompanyingnotes

 

4

----

Table of Contents

 

MAGNETEK, INC.

CONDENSEDCONSOLIDATED BALANCE SHEETS

(Amounts inthousands)

 
| ** **                                       | ** ** | **December 28,** | ** ** | **June 29,** | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                       | ** ** | **2008**              | ** ** | **2008**          | ** ** |
| ** **                                       | ** ** | **(Unaudited)**       | ** ** | ** **        | ** ** |
| ASSETS                                           |       |                  |       |              |       |
|                                             |       |                  |       |              |       |
| Current assets:                                  |       |                  |       |              |       |
| Cash and cash  equivalents                       |       | $                     | 16,908     |              | $          | 15,210 |   |
| Restricted cash                                  |       | 261                   |       | 256               |       |
| Accounts  receivable, net                        |       | 15,443                |       | 18,600            |       |
| Inventories                                      |       | 16,642                |       | 12,525            |       |
| Prepaid expenses  and other current assets       |       | 2,402                 |       | 2,133             |       |
| Assets held for  sale                            |       | —                |       | 1,288             |       |
| Total current  assets                            |       | 51,656                |       | 50,012            |       |
|                                             |       |                  |       |              |       |
| Property, plant  and equipment                   |       | 20,046                |       | 20,147            |       |
| Less:  accumulated depreciation                  |       | 16,276                |       | 16,054            |       |
| Net property,  plant and equipment               |       | 3,770                 |       | 4,093             |       |
|                                             |       |                  |       |              |       |
| Goodwill                                         |       | 30,318                |       | 30,464            |       |
| Other assets                                     |       | 6,587                 |       | 6,978             |       |
| Total Assets                                     |       | $                     | 92,331     |              | $          | 91,547 |   |
|                                             |       |                  |       |              |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY       |       |                  |       |              |       |
|                                             |       |                  |       |              |       |
| Current  liabilities:                            |       |                  |       |              |       |
| Accounts payable                                 |       | $                     | 9,259      |              | $          | 10,407 |   |
| Accrued  liabilities                             |       | 8,831                 |       | 7,740             |       |
| Current portion  of long-term debt               |       | 7                     |       | 9                 |       |
| Total current  liabilities                       |       | 18,097                |       | 18,156            |       |
|                                             |       |                  |       |              |       |
| Long-term debt,  net of current portion          |       | 16                    |       | 12                |       |
|                                             |       |                  |       |              |       |
| Pension benefit  obligations, net                |       | 32,779                |       | 37,638            |       |
| Other long term  obligations                     |       | 1,951                 |       | 1,947             |       |
| Deferred income  taxes                           |       | 4,443                 |       | 3,993             |       |
|                                             |       |                  |       |              |       |
| Commitments and  contingencies                   |       |                  |       |              |       |
|                                             |       |                  |       |              |       |
| Stockholders’  equity                       |       |                  |       |              |       |
| Common stock                                     |       | 307                   |       | 306               |       |
| Paid in capital  in excess of par value          |       | 137,769               |       | 136,864           |       |
| Accumulated  deficit                             |       | (1,984                | )          | (4,804            | )          |
| Accumulated  other comprehensive loss            |       | (101,047              | )          | (102,565          | )          |
| Total  stockholders’ equity                 |       | 35,045                |       | 29,801            |       |
|                                             |       |                  |       |              |       |
| Total  Liabilities and Stockholders’ Equity |       | $                     | 92,331     |              | $          | 91,547 |   |

 

See accompanyingnotes

 

5

----

Table of Contents

 

MAGNETEK, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOW

(Amounts inthousands, unaudited)

 
| ** **                                                                                                 | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                 | ** ** | **(26 Weeks)**            | ** ** | **(26 Weeks)** | ** ** |
| ** **                                                                                                 | ** ** | **December 28,**          | ** ** | **December 30,** | ** ** |
| ** **                                                                                                 | ** ** | **2008**                       | ** ** | **2007** | ** ** |
| Cash flows from  continuing operating activities:                                                          |       |                           |       |   |   |
| Income from continuing  operations                                                                         |       | $                              | 2,995      |   | $ | 2,848 |   |
| Adjustments to  reconcile income from continuing operations to net cash provided by operating  activities: |       |                           |       |   |   |
| Depreciation and  amortization                                                                             |       | 513                            |       | 870 |   |
| Stock based  compensation expense                                                                          |       | 742                            |       | 245 |   |
| Pension expense                                                                                            |       | 1,693                          |       | 94 |   |
| Changes in  operating assets and liabilities                                                               |       | (551                           | )          | (3,193 | ) |
| Cash  contribution to pension fund                                                                         |       | (4,392                         | )          | — |   |
|                                                                                                       |       |                           |       |   |   |
| Total  adjustments                                                                                         |       | (1,995                         | )          | (1,984 | ) |
| Net cash  provided by continuing operating activities                                                      |       | 1,000                          |       | 864 |   |
|                                                                                                       |       |                           |       |   |   |
| Cash flows from  investing activities:                                                                     |       |                           |       |   |   |
| Proceeds from  sale of business, net of transaction costs                                                  |       | 1,250                          |       | — |   |
| Proceeds from  (deposits into) escrow account                                                              |       | (5                             | )          | 593 |   |
| Capital  expenditures                                                                                      |       | (396                           | )          | (733 | ) |
| Net cash  provided by (used in) investing activities                                                       |       | 849                            |       | (140 | ) |
|                                                                                                       |       |                           |       |   |   |
| Cash flow from  financing activities:                                                                      |       |                           |       |   |   |
| Proceeds from  issuance of common stock                                                                    |       | 164                            |       | 917 |   |
| Borrowings under  capital lease obligations                                                                |       | 8                              |       | — |   |
| Principal  payments under capital lease obligations                                                        |       | (7                             | )          | (6 | ) |
| Net cash provided  by financing activities                                                                 |       | 165                            |       | 911 |   |
|                                                                                                       |       |                           |       |   |   |
| Cash flows from  discontinued operations:                                                                  |       |                           |       |   |   |
| Used in  operating activities                                                                              |       | (316                           | )          | (1,769 | ) |
| Cash used in  discontinued operations                                                                      |       | (316                           | )          | (1,769 | ) |
|                                                                                                       |       |                           |       |   |   |
| Net increase  (decrease) in cash                                                                           |       | 1,698                          |       | (134 | ) |
| Cash at the  beginning of the period                                                                       |       | 15,210                         |       | 5,404 |   |
| Cash at the end  of the period                                                                             |       | $                              | 16,908     |   | $ | 5,270 |   |

 

See accompanyingnotes

 

6

----

Tableof Contents

 

MAGNETEK, INC.

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 28, 2008

(Amounts inthousands unless otherwise noted, except per share data, unaudited)

 

**1.****                                      Summaryof Significant Accounting Policies**

 

Profile

 

Magnetek, Inc.(the “Company” or “Magnetek”) is a global provider of digital power controlsystems that are used to control motion and power primarily in materialhandling, elevator and energy delivery applications.  The Company’s products consist primarily ofprogrammable motion control and power conditioning systems used on thefollowing applications: overhead cranes and hoists; elevators; coal miningequipment; and alternative energy.

 

Basis of Presentation

 

The accompanyingunaudited condensed consolidated financial statements include the accounts ofMagnetek, Inc. and its subsidiaries. All significant intercompany accounts and transactions have beeneliminated.

 

The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the United States for interimfinancial reporting and with the instructions to Form 10-Q and Article 10of Regulation S-X.  Accordingly, they donot include all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements.  For further information, refer to thefinancial statements and footnotes thereto included in the Company’s AnnualReport on Form 10-K for the year ended June 29, 2008 filed with theSecurities and Exchange Commission (the “SEC”). In the Company’s opinion, these unaudited statements contain alladjustments, consisting of normal recurring adjustments, necessary to presentfairly the financial position of the Company as of December 28, 2008, andthe results of its operations and cash flows for the three- and six-monthperiods ended December 28, 2008 and December 30, 2007. Results forthe three- and six-months ended December 28, 2008 are not necessarilyindicative of results that may be experienced for the full fiscal year.

 

The Company uses afifty-two, fifty-three week fiscal year ending on the Sunday nearest to June 30.  Fiscal quarters are the 13 or 14 week periodsending on the Sunday nearest September 30, December 31, March 31and June 30.  The three- andsix-month periods ended December 28, 2008 and December 30, 2007 eachcontained 13 and 26 weeks respectively.

 

Useof Estimates - The preparation offinancial statements in accordance with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the amounts reported in the financial statements andaccompanying notes. Actual results could differ from those estimates.

 

Recent AccountingPronouncements – In September 2006,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, *Fair Value Measurements*(“SFAS 157”). SFAS 157 defines fairvalue, establishes a framework for measuring fair value in accordance withgenerally accepted accounting principles, and expands disclosures about fairvalue measurements.  SFAS 157 establishes a three-levelhierarchy for fair value measurements to prioritize the inputs used in thevaluation techniques to derive fair values. The basis for fair valuemeasurements for each level within the hierarchy is described below with Level1 having the highest priority and Level 3 having the lowest.

 

Level 1: Quoted prices inactive markets for identical assets or liabilities.

 

Level 2: Quoted pricesfor similar assets or liabilities in active markets; quoted prices foridentical or similar instruments in markets that are not active; andmodel-derived valuations in which all significant inputs are observable in activemarkets.

 

Level 3: Valuationsderived from valuation techniques in which one or more significant inputs areunobservable.

 

The Companyadopted SFAS 157 effective June 30, 2008. The Company’s assets and liabilities measured at fair value on arecurring basis subject to the presentation requirements of SFAS 157 at December 28,2008 consisted of cash and cash equivalents. Cash and cash equivalents are comprised of bank deposits and short-terminvestments, such as money market funds, the fair value of which is based onquoted market prices, a Level 1 fair value measure.  The adoption of SFAS 157 did not have amaterial effect on the Company’s financial position, results of operations orcash flows.

 

7

----

Table of Contents

 

In February 2007,the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities — including an amendment of FASBStatement No. 115* (“SFAS 159”). SFAS 159 provides companieswith an option to report selected financial assets and financial liabilities atfair value. Unrealized gains and losses on items for which the fair valueoption has been elected are reported in earnings at each subsequent reportingdate. The Company adopted SFAS 159 effective June 28, 2008.  The Company has not elected to measure anyfinancial assets and financial liabilities at fair value that were notpreviously required to be measured at fair value. Therefore, the adoption ofthis standard had no impact on the Company’s consolidated financial position,results of operations or cash flows.

 

In August 2008, theSEC announced that it will issue for comment a proposed roadmap regarding thepotential use of International Financial Reporting Standards (“IFRS”) for thepreparation of financial statements by U.S. registrants. IFRS are standards andinterpretations adopted by the International Accounting Standards Board. Underthe proposed roadmap, the Company would be required to prepare financialstatements in accordance with IFRS in fiscal 2014, including comparativeinformation also prepared under IFRS for fiscal 2013 and fiscal 2012. TheCompany is currently assessing the potential impact of IFRS on its financial statementsand will continue to follow the proposed roadmap for future developments.

 

Reclassifications– Certain prior year balances were reclassified to conform to the current yearpresentation, mainly the reclassification of the Company’s telecom power systems(“TPS”) business results of operations from continuing operations todiscontinued operations.

 

**2.**                                      **Discontinued Operations**

 

In April 2008, theCompany committed to a plan to divest its TPS business, which manufacturedbackup power systems for wireless applications. As a result, the Company reclassified the assets to be disposed of,primarily inventory, as held for sale at June 29, 2008, and classified theoperating results of the business as discontinued operations.  In September 2008, the Company completedthe sale of the assets of the TPS business to Myers Power Products, Inc. (“Myers”).  The purchase price of $1.25 million was paidby Myers to the Company during the three months ended December 28,2008.  The Company recorded a loss of$0.4 million related to the divestiture, included in results of discontinuedoperations for the six months ended December 28, 2008, comprised mainly offuture lease costs and the write-off of certain TPS fixed assets.

 

Income from discontinuedoperations for the three-and six-month periods ended December 28, 2008includes a settlement gain of $0.5 million, and income (loss) from discontinuedoperations for the three-and six-month periods ended December 30, 2007includes a settlement gain of $1.4 million, both from a May 2007settlement agreement between the Company and Federal-Mogul Corporation (“FederalMogul”, see Note 4 of Notes to Condensed Consolidated Financial Statements).

 

In addition,certain expenses incurred related to businesses the Company no longer owns areclassified as discontinued operations. The results of discontinued operations are as follows:

 
| ** **                                        | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|---------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                        | ** ** | **December 28,**            | ** ** | **December 30,**          | ** ** | **December 28,** | ** ** | **December 30,** | ** ** |
| ** **                                        | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net sales - TPS business      |       | $                                | —     |                           | $          | 3,580 |   | $ | 1,503 |   | $ | 6,891 |   |
|                                              |       |                             |       |                           |       |   |   |   |   |
| Loss from  discontinued operations - TPS business |       | $                                | (5         | )                              | $          | (382 | ) | $ | (94 | ) | $ | (593 | ) |
| Income from  Federal Mogul settlement             |       | 480                              |       | 1,420                          |       | 480 |   | 1,420 |   |
| Income (loss) on  disposal of TPS business        |       | 153                              |       | —                         |       | (368 | ) | — |   |
| Income (expense)  related to divested businesses  |       | 52                               |       | (262                           | )          | (193 | ) | (596 | ) |
| Income (loss)  from discontinued operations       |       | $                                | 680        |                           | $          | 776 |   | $ | (175 | ) | $ | 231 |   |

 

The condensedconsolidated balance sheet as of December 28, 2008 includes certainaccrued liabilities which represent the Company’s best estimate of remainingcontingent liabilities related to indemnification provisions included in saleagreements of divested businesses.  Whilemanagement has used its best judgment in assessing the potential liability forthese items, given the uncertainty regarding future events, it is difficult toestimate the possible timing or magnitude of any payments that may be requiredfor liabilities subject to indemnification. Any future adjustment to currently recorded contingencies related toindemnification claims or payments based upon changes in circumstances would berecorded as a gain or loss in discontinued operations.

 

8

----

Table of Contents

 

**3.****                                      Inventories**

 

Inventories consist ofthe following:

 
| ** **                     | ** ** | **December 28,** | ** ** | **June 29,** | ** ** |
|--------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                     | ** ** | **2008**              | ** ** | **2008**          | ** ** |
| Raw materials  and stock parts |       | $                     | 10,108     |              | $          | 7,676 |   |
| Work-in-process                |       | 1,535                 |       | 1,071             |       |
| Finished goods                 |       | 4,999                 |       | 3,778             |       |
|                           |       | $                     | 16,642     |              | $          | 12,525 |   |

 

**4.****                                      Commitmentsand Contingencies**

 

**Litigation—ProductLiability**

 

The Company isinvolved in a product liability lawsuit related to the Telemotive IndustrialControls business acquired in December 2002 through the purchase of the stockof MXT Holdings, Inc. (“MXT”).  Thelawsuit was initially filed by Robert Redman in Cook County, Illinois in 1998against MXT and other defendants, but now is pending only against MXT andElectromotive Systems, Inc, a non-affiliated third party.  The claim pre-dated the acquisition and wastendered to the insurance companies that provided coverage for MXT Holdings, Inc.,against such claims, and the defense and indemnification has been accepted bythe carriers, subject to a reservation of rights.  The lawsuit seeksdamages for personal injuries allegedly incurred by Mr. Redman due to anallegedly defective radio control product manufactured by MXT.  Management believes that the insurers willbear all liability, if any, with respect to the case and that theproceeding will not have a material adverse effect on the Company’s results ofoperations or financial position.

 

In August 2006,Pamela L. Carney, Administrator of the Estate of Michael J. Carney, filed alawsuit in the Court of Common Pleas of Westmoreland County, Pennsylvania,against the Company and other defendants, alleging that a product manufacturedby the Telemotive Industrial Controls business acquired by the Company in December 2002contributed to an accident that resulted in the death of Michael J. Carney in August 2004.  The claim has been tendered to the Company’sinsurance carrier and legal counsel has been retained to represent theCompany.  Plaintiff’s claim for damagesis unknown at this time, but management believes that its insurers will bearall liability in excess of deductible amounts for the claim, if any.

 

The Company hasbeen named, along with multiple other defendants, in asbestos-related lawsuitsassociated with business operations previously acquired by the Company, butwhich are no longer owned. During the Company’s ownership, none of thebusinesses produced or sold asbestos-containing products. With respect to theseclaims, the Company is either contractually indemnified against liability forasbestos-related claims or believes that it has no liability for such claims.The Company aggressively seeks dismissal from these proceedings, and has alsotendered the defense of these cases to the insurers for the companies fromwhich Magnetek acquired the businesses. The Company also filed claims in the Federal-Mogul bankruptcyproceedings to recover attorney’s fees for defense of these claims.  In May 2007,the Company and Federal-Mogul entered into a settlement agreement under whichthe Company is entitled to receive amounts from a settlement trust establishedunder Federal-Mogul’s reorganization plan and funded by insuranceproceeds.  The Company was entitled to receive 15% of the first $20million and 10% of the next $25 million of insurance proceeds, up to a maximumof $5.5 million, in exchange for withdrawing its bankruptcy claims andobjections to the reorganization plan and execution of certain releases. In January 2009, the Company received a payment of $1.0 million under thesettlement agreement, which brought the total proceeds received to date underthe settlement agreement to $5.5 million, the maximum amount to which theCompany is entitled.  The condensedconsolidated statements of operations for the three- and six-months periodsended December 28, 2008 include $0.5 million of income from the settlementtrust in income (loss) from discontinued operations.  The condensed consolidated statements ofoperations for the three- and six-months periods ended December 30, 2007include $1.4 million of income from the settlement trust in income fromdiscontinued operations.  Severalinsurance carriers filed a declaratory judgment action relating to insurancecoverage for such previously acquired businesses, seeking a determination thatno coverage is available under the policies.  Federal-Mogul, the Companyand other defendants filed responsive pleadings and motions relating to thecase, and the court granted the motions to stay the declaratory judgmentaction.  Some of these insurers appealed such ruling and in November 2008,the ruling was upheld on appeal.  Management does not believe the asbestosproceedings, individually or in the aggregate, will have a material adverseeffect on its financial position or results of operations.

 

9

----

Table of Contents

 

**Litigation—Other**

 

In November 2007,a lawsuit was filed by Antonio Canova in Italy, in the Court of Arezzo, LabourLaw Section, against the Company and Power-One Italy, S.p.A.  Mr. Canova is a former Executive VicePresident of the Company and was Deputy Chairman and Managing Director of theCompany’s former Italian subsidiary, Magnetek S.p.A.  Mr. Canova asserted claims for damagesin the amount of 3.5 million Euros (approximately $4.5 million USD) allegedlyincurred in connection with the termination of his employment at the time ofthe sale of the Company’s power electronics business to Power-One, Inc. inOctober 2006.  The Company’s replybrief was filed in March 2008.  TheCompany believes the claim is without merit and intends to vigorously defendagainst it.

 

**EnvironmentalMatters - General**

 

From time to time,Magnetek has taken action to bring certain facilities associated withpreviously owned businesses into compliance with applicable environmentallaws and regulations. Upon the subsequent sale of certain businesses, theCompany agreed to indemnify the buyers against environmental claims associatedwith the divested operations, subject to certain conditions and limitations.Remediation activities, including those related to the Company’sindemnification obligations, did not involve material expenditures during thefirst six months of fiscal years 2009 or 2008.

 

The Company hasalso been identified by the United States Environmental Protection Agency andcertain state agencies as a potentially responsible party for cleanup costsassociated with alleged past waste disposal practices at several previouslyowned or leased facilities and offsite locations. Its remediation activities asa potentially responsible party were not material in the first six months offiscal years 2009 or 2008.  Although themateriality of future expenditures for environmental activities may be affectedby the level and type of contamination, the extent and nature of cleanupactivities required by governmental authorities, the nature of the Company’salleged connection to the contaminated sites, the number and financialresources of other potentially responsible parties, the availability of indemnificationrights against third parties and the identification of additional contaminatedsites, the Company’s estimated share of liability, if any, for environmentalremediation, including its indemnification obligations, is not expected to bematerial.

 

*Environmental- Effect of Fruit of the Loom Bankruptcy (Bridgeport, Connecticut)*

 

In 1986, theCompany acquired the stock of Universal Manufacturing Company (“Universal”)from a predecessor of Fruit of the Loom (“FOL”), and the predecessor agreed toindemnify the Company against certain environmental liabilities arising frompre-acquisition activities at a facility in Bridgeport, Connecticut.Environmental liabilities covered by the indemnification agreement includecompletion of additional cleanup activities, if any, at the Bridgeport facilityand defense and indemnification against liability for potential response costsrelated to offsite disposal locations. The Company’s leasehold interest in theBridgeport facility was assigned to the buyer in connection with the sale ofthe Company’s transformer business in June 2001.  FOL, the successor to the indemnificationobligation, filed a petition for Reorganization under Chapter 11 of theBankruptcy Code in 1999 and the Company filed a proof of claim in the proceedingfor obligations related to the environmental indemnification agreement. TheCompany believes that FOL had substantially completed the clean-up obligationsrequired by the indemnification agreement prior to the bankruptcy filing. In November 2001,the Company and FOL entered into an agreement involving the allocation ofcertain potential tax benefits and Magnetek withdrew its claims in thebankruptcy proceeding. FOL’s obligation to the State of Connecticut was notdischarged in the reorganization proceeding.

 

In October 2006,the owner of the Bridgeport facility filed a lawsuit in Superior Court, J.D. ofFairfield, Connecticut alleging that the Company is obligated to remediateenvironmental contamination at the facility. The case was transferred to the Complex Litigation Docket, J.D. ofWaterbury at Waterbury, Connecticut, which subsequently denied motions forsummary judgment filed by the plaintiff, The Sergy Company, LLC (“Sergy”), aswell as the counter motion for summary judgment filed by the Company.  Sergy’s amended complaint alleges a breach oflease obligations and violation of Connecticut environmental statutoryrequirements, which allegations were denied in the Company’s amended answer,affirmative defenses and counterclaims. The case is in the discovery and motions phase, and Sergy recently fileda motion to amend the complaint to include additional claims against theCompany under the Connecticut Transfer Act. The Company’s request to add additional potentially responsible partiesas defendants was granted by the Court, and the Company filed declaratoryjudgment complaints against two other potentially responsible parties.  In January 2007, the ConnecticutDepartment of Environmental Protection (“DEP”) requested parties, including theCompany, to submit reports summarizing the investigations and remediationperformed to 

 

10

----

Table of Contents

 

date at the siteand the proposed additional investigations and remediation necessary tocomplete those actions at the site.  TheDEP requested additional information from the Company relating to siteinvestigations and remediation. The Company has retained an environmentalconsultant to review and prepare a report on historical operations andenvironmental activities at the Bridgeport facility.  An action was filed by the ConnecticutCommissioner of Environmental Protection (CTCEP) against the Company and Sergy inApril 2008.  Although a stipulation wasentered into by the Company and Sergy relating to the issue involving the groundwaterpump and treat system located at the Bridgeport facility, the CTCEP filed arequest to amend the complaint to assert additional claims and to seek furtherremedies for alleged failure to investigate and remediate pollution under theConnecticut Transfer Act. In September 2008 the court ordered the casetransferred to the Waterbury court, where the declaratory judgment action filedby Sergy against the Company is currently pending.  The Company has recorded a liability of $0.3million related to the Bridgeport facility, representing the Company’s bestestimate of future legal fees and site investigation costs, the majority ofwhich is expected to be incurred during fiscal 2009.  The liability, included in accruedliabilities in the condensed consolidated balance sheet as of December 28,2008, does not include any estimated remediation costs.  FOL’s inability to satisfy its remainingobligations related to the Bridgeport facility and any offsite disposallocations, or any unfavorable rulings in the lawsuits with the owner of theBridgeport facility or the CTCEP, or the discovery of additional environmentalcontamination at the Bridgeport facility could have a material adverse effecton the Company’s financial position, cash flows or results of operations.

 

**5.****                                      ComprehensiveIncome**

 

For the three- andsix-month periods ended December 28, 2008, and December 30, 2007,comprehensive income consisted of the following:

 
| ** **                                 | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                 | ** ** | **December 28,**            | ** ** | **December 30,**          | ** ** | **December 28,** | ** ** | **December 30,** | ** ** |
| ** **                                 | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net income                                 |       | $                                | 1,939      |                           | $          | 2,580 |   | $ | 2,820 |   | $ | 3,079 |   |
| Change in  unrecognized pension liability  |       | 1,080                            |       | 846                            |       | 2,160 |   | 1,687 |   |
| Change in  currency translation adjustment |       | (597                             | )          | 48                             |       | (642 | ) | 236 |   |
| Comprehensive  income                      |       | $                                | 2,422      |                           | $          | 3,474 |   | $ | 4,338 |   | $ | 5,002 |   |

 

**6.****                                      Earnings(Loss) Per Share**

 

The following table sets forth thecomputation of basic and diluted earnings (loss) per share for the three- andsix-months ended December 28, 2008, and December 30, 2007:

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                            | ** ** | **December 28,**            | ** ** | **December 30,**          | ** ** | **December 28,** | ** ** | **December 30,** | ** ** |
| ** **                                            | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Numerator:                                            |       |                             |       |                           |       |   |   |   |   |
| Income from  continuing operations                    |       | $                                | 1,259      |                           | $          | 1,804 |   | $ | 2,995 |   | $ | 2,848 |   |
| Income (loss)  from discontinued operations           |       | 680                              |       | 776                            |       | (175 | ) | 231 |   |
| Net income                                            |       | $                                | 1,939      |                           | $          | 2,580 |   | $ | 2,820 |   | $ | 3,079 |   |
|                                                  |       |                             |       |                           |       |   |   |   |   |
| Denominator:                                          |       |                             |       |                           |       |   |   |   |   |
| Weighted average  shares - basic earnings per share   |       | 30,671                           |       | 30,270                         |       | 30,654 |   | 30,302 |   |
| Add dilutive  effective of stock based compensation   |       | 174                              |       | 204                            |       | 251 |   | 219 |   |
| Weighted average  shares - diluted earnings per share |       | 30,845                           |       | 30,474                         |       | 30,905 |   | 30,521 |   |
|                                                  |       |                             |       |                           |       |   |   |   |   |
| Basic:                                                |       |                             |       |                           |       |   |   |   |   |
| Income per share  from continuing operations          |       | $                                | 0.04       |                           | $          | 0.06 |   | $ | 0.10 |   | $ | 0.09 |   |
| Income (loss)  per share from discontinued operations |       | $                                | 0.02       |                           | $          | 0.03 |   | $ | (0.01 | ) | $ | 0.01 |   |
| Net income per  share                                 |       | $                                | 0.06       |                           | $          | 0.09 |   | $ | 0.09 |   | $ | 0.10 |   |
|                                                  |       |                             |       |                           |       |   |   |   |   |
| Diluted:                                              |       |                             |       |                           |       |   |   |   |   |
| Income per share  from continuing operations          |       | $                                | 0.04       |                           | $          | 0.06 |   | $ | 0.10 |   | $ | 0.09 |   |
| Income (loss)  per share from discontinued operations |       | $                                | 0.02       |                           | $          | 0.03 |   | $ | (0.01 | ) | $ | 0.01 |   |
| Net income per  share                                 |       | $                                | 0.06       |                           | $          | 0.08 |   | $ | 0.09 |   | $ | 0.10 |   |

 

11

----

Table of Contents

 

Outstanding options topurchase 2.4 million and 2.8 million shares of common stock for the threemonths ended December 28, 2008, and December 30, 2007, respectively,have not been included in the Company’s computation of weighted average sharesfor diluted earnings per share because the effect would have beenanti-dilutive. Outstanding options to purchase 2.3 million and 2.8 millionshares of common stock for the six months ended December 28, 2008, and December 30,2007, respectively, have not been included in the Company’s computation ofweighted average shares for diluted earnings per share because the effect wouldhave been anti-dilutive.

 

**7.****                                      Warranties**

 

TheCompany offers warranties for certain products that it manufactures, with thewarranty term generally ranging from one to two years.  Warranty reserves are established for costsexpected to be incurred after the sale and delivery of products under warranty,based mainly on known product failures and historical experience.  Actual repair costs incurred for productsunder warranty are charged against the established reserve balance asincurred.  Changes in the warrantyreserve for the six-month periods ended December 28, 2008, and December 30,2007, are as follows:

 
| ** **                                         | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------|------------|--------------------------------|------------|
| ** **                                         | ** ** | **December 28,**          | ** ** | **December 30,** | ** ** |
| ** **                                         | ** ** | **2008**                       | ** ** | **2007** | ** ** |
| Balance,  beginning of fiscal year                 |       | $                              | 493        |   | $ | 305 |   |
| Changes in  product warranties charged to earnings |       | (48                            | )          | 314 |   |
| Use of reserve  for warranty obligations           |       | (97                            | )          | (237 | ) |
| Balance, end of  period                            |       | $                              | 348        |   | $ | 382 |   |

 

Warrantyreserves are included in accrued liabilities in the accompanying condensedconsolidated balance sheets.

 

**8.**                                      **Pension Expense**

 

Pension expense relatedto the Company’s defined benefit pension plan for the three- and six-monthperiods ended December 28, 2008, and December 30, 2007, follows:

 
| ** **                       | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                       | ** ** | **December 28,**            | ** ** | **December 30,**          | ** ** | **December 28,** | ** ** | **December 30,** | ** ** |
| ** **                       | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Interest Cost                    |       | $                                | 2,799      |                           | $          | 2,607 |   | $ | 5,598 |   | $ | 5,215 |   |
| Expected return  on plan assets  |       | (3,032                           | )          | (3,406                         | )          | (6,065 | ) | (6,808 | ) |
| Recognized net  actuarial losses |       | 1,080                            |       | 846                            |       | 2,160 |   | 1,687 |   |
|                             |       |                             |       |                           |       |   |   |   |   |
| Total net pension  expense       |       | $                                | 847        |                           | $          | 47 |   | $ | 1,693 |   | $ | 94 |   |

 

Pensionexpense is included in selling, general and administrative expense in theaccompanying condensed consolidated statements of operations.  Under current funding regulations, actuarialprojections indicate that the Company will be required to make contributions tothe defined benefit pension plan of approximately $2.8 million during theremainder of fiscal year 2009.

 

Asrequired by the measurement provisions of SFAS No. 158, *Accounting for Defined Benefit Pension and Other Postretirement Plans*,the Company’s defined benefit plan assets and obligations will be measured asof the Company’s fiscal year-end in June 2009. If financial markets do notrecover significantly by June 2009, the decline in fair value of thepension plan assets experienced during fiscal 2009 may result in increasedtotal pension costs in the future and may also result in additional future cashcontributions in accordance with the U.S. Pension Protection Act of 2006.  The Company is currently evaluating theimpact of the continuing decline in the financial markets on its consolidatedfinancial statements.  Based on currentlyavailable information, the Company expects an increase in pension expense forfiscal 2010 from the current year projected pension expense of $3.4 million.

 

12

----

Table ofContents

 

**9.****                                     ****Income Taxes**

 

Dueto historical taxable losses, the Company provides valuation reserves againstits U.S. deferred tax assets.  A portionof the Company’s deferred tax liability relates to tax-deductible amortizationof goodwill that is no longer amortized for financial reporting purposes. Thesedeferred tax liabilities are considered to have an indefinite life and aretherefore ineligible to be considered as a source of future taxable income inassessing the realization of deferred tax assets.

 

TheCompany’s provision for income taxes for each of the three- and six-monthperiods ended December 28, 2008 and December 30, 2007 includes $225and $450, respectively, of deferred income tax expense related to the increasein the Company’s deferred tax liability related to tax-deductible amortizationof goodwill.   The remaining taxprovision is comprised of income taxes of the Company’s foreign subsidiary inCanada.

 

The Company hascompleted its evaluation as to whether ordinary transfers of the Company’scommon stock between shareholders resulted in an ownership change as defined inSection 382 of the Internal Revenue Code. Based on currently available information, the Company has determinedthat no such ownership change has occurred. If such ownership change had occurred, utilization of the Company’s netoperating loss carryforwards (“NOLs”) would be subject to annual limitationprovisions per the Internal Revenue Code and similar state laws. Such annuallimitations could defer the utilization of loss carryforwards, acceleratepayment of federal income taxes, and could result in the expiration of aportion of the net operating loss carryforwards before utilization. Anownership change under Section 382 of the Internal Revenue Code would not havehad a material adverse effect on the Company’s results of operations orfinancial position, as the Company has provided a full valuation allowanceagainst all of its deferred tax assets. Ordinary transfers of the Company’s common stock between shareholders infuture periods could result in an ownership change in such periods and accordingly,at that time, limit the Company’s utilization of its NOLs as described above.

 

**10.****                              ****Bank Borrowing Arrangements**

 

In November 2007,the Company entered into an agreement with Associated Bank, N.A. (“AssociatedBank”) providing for a $10 million revolving credit facility (the “Associatedfacility”).  Borrowings under the Associated facility bear interest at theLondon Interbank Offering Rate (“LIBOR”) plus 1.5%, with borrowing levelsdetermined by a borrowing base formula as defined in the agreement, whichincludes the level of eligible accounts receivable.  The Associatedfacility also supports the issuance of letters of credit, places certainrestrictions on the Company’s ability to pay dividends or make acquisitions,and includes covenants that require minimum operating profit levels and limitannual capital expenditures.  Borrowings under the Associated facility arecollateralized by the Company’s accounts receivable and inventory.  In December 2008,the Company and Associated Bank entered into a first amendment to theAssociated facility, the primary purpose of which was to extend the maturitydate of the Associated facility to November 2010.  The Company is currently in compliance withall covenants and there were no amounts outstanding under the Associatedfacility as of December 28, 2008.

 

**Item 2 – Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

**Overview**

 

Magnetek, Inc.(“Magnetek,” “the Company,” “we,” or “us” ) is a global provider of digitalpower control systems that are used to control motion and power primarily inmaterial handling, elevator, and energy delivery applications.  Our systems consist primarily of programmablemotion control and power conditioning systems used in the followingapplications:  overhead cranes andhoists; elevators; coal mining equipment; and alternative energy applications,including wind turbines and photovoltaic systems.   Our products are sold directly or throughmanufacturers’ representatives to original equipment manufacturers (“OEMs”) forincorporation into their products, to system integrators and value-addedresellers for assembly and incorporation into end-user systems, to distributorsfor resale to OEMs and contractors, and to end-users for repair and replacementpurposes.  We believe that with ourtechnical and productive resources we are well positioned to respond toincreasing demand in our served markets. We operate in a single segment, Digital Power Control Systems.  Magnetek was founded in July 1984 and islisted on the New York Stock Exchange (NYSE: MAG).  Our operations are located in North America,predominantly in Menomonee Falls, Wisconsin, our Company headquarters.

 

Product offerings formaterial handling applications include drive systems, radio remote controls,and braking, collision-avoidance, and electrification subsystems, soldprimarily to OEMs of overhead cranes and hoists.  We have a significant market share in NorthAmerica in alternating current (“AC”) control systems and believe we havegrowth opportunities in direct current (“DC”) control systems for retrofitapplications, wireless remote controls and in automating existing manualmaterial handling processes.

 

Our product offerings forelevator applications are comprised of highly integrated subsystems and drivesused to control motion primarily in high-rise, high speed elevatorapplications.  Our products are soldmainly to elevator OEMs and we have a significant share of the available marketfor DC drives and subsystems used in high-rise elevators for both new andretrofit projects.  We believe we haveopportunities for growth in available elevator markets by introducing newenergy-saving product offerings for DC applications, expanding the breadth ofour product offering to include competitive low-end products for lowerperformance AC applications, and using our new product offerings to expandgeographically.

 

Our product offerings forenergy delivery applications include power inverters for alternative energyapplications, including wind turbines and photovoltaic installations, whichdeliver AC power to the utility grid from generators inside wind turbines orfrom solar panels, or deliver power for consumption at the source.  Both the wind and solar markets have grownrapidly in North America over the past several years as wind and solar powerare becoming increasingly competitive from a cost standpoint with moretraditional methods of power generation. We believe our product offerings have us well positioned to takeadvantage of growth in alternative energy markets and expect sales of powerinverters for alternative energy applications to be our fastest revenue growthproduct over the next several years.

 

13

----

Table of Contents

 

**ContinuingOperations**

 

We focus on a variety ofkey indicators to monitor our business performance.  These indicatorsinclude order rates, sales growth, gross profit margin, operating profitmargin, net income, earnings per share, and working capital and cash flowmeasures.   These indicators are comparedto our operating plans as well as to our prior year actual results, and areused to measure our success relative to our company objectives.  Ourcompany objectives are to grow sales at least 10% on a year-over year basis, toachieve 30% gross margins and 10% operating profit margins, and to generatesufficient cash flow to fund our operations and meet our obligations.

 

During the second quarterof fiscal 2009, we achieved 5% year-over-year sales growth from the secondquarter of fiscal 2008 due to continued strong demand for our products as wellas successful introduction and acceptance of new products in our servedmarkets.  Second quarter fiscal 2009sales were $26.8 million compared to second quarter fiscal 2008 sales of $25.4million, as we experienced year-over-year sales growth in our material handlingand elevator product lines.  Sales ofenergy delivery products were lower in the second quarter of fiscal 2009, asincreased sales of mining products were not enough to offset larger declines inalternative energy products.  While wecompleted production of the remaining units under our initial order for E-Forcewind inverters during the first quarter of fiscal 2009, at our customer’srequest, we have not yet shipped those units. We expect to ship those units during the third quarter of fiscal2009.  Fiscal 2009 second quarter grossmargin was 35.1% compared to fiscal 2008 second quarter gross margin of 27.6%,and operating profit margin was 7.3% in the second quarter of fiscal 2009compared to 7.2% in the second quarter of fiscal 2008.  The improvement in gross margin, mainly dueto higher volume and favorable sales mix, was largely offset by a managementrestructuring charge of $0.9 million and an increase in our non-cash pensionexpense of $0.8 million, and as a result, our operating profit improved onlymodestly in the second quarter of fiscal 2009 compared to the second quarter offiscal 2008.  In addition, our cashbalances increased by $1.0 million during the second quarter of fiscal 2009,even after making a $1.6 million contribution to our defined benefit pensionplan, and we have no debt outstanding as of December 28, 2008.

 

In the fourth quarter offiscal 2008, we classified the assets and liabilities of our telecom powersystems (“TPS”) business as held for sale, and the results of operations of thebusiness as discontinued operations.  OurTPS product offerings were focused on providing back-up power for wirelessapplications.  We believe we can betterachieve our sales growth objectives by redirecting certain resources deployedin the TPS business to our product offerings in the material handling, elevatorand energy delivery markets.  Wecompleted the divestiture of the TPS business during the first quarter offiscal 2009 (see Note 2 of Notes to Condensed Consolidated FinancialStatements).

 

We believe that futureincreased profitability is dependent upon increased sales revenue and continuedimprovement in gross margins.  Our pastsales growth has been, and we believe our fiscal 2009 sales growth willcontinue to be, dependent on continuing strong demand for material handlingproducts, our customers’ ability to obtain financing and willingness to investin the current economic environment, and successful introduction and increasingacceptance of new products, mainly in the elevator and alternative energymarkets.  Recently introduced productofferings are gaining acceptance with customers in the marketplace, however,the rate of sales growth of new product offerings is slower than weexpected.  While we believe we cancontinue to achieve year-over-year sales growth with existing product offeringsand new product introductions, we may pursue selective external growthopportunities to enhance or expand our product offerings, market channels ortechnical resources.  In addition, ourmaterial handling business is influenced by cyclical forces in the industrialmarketplace, and we have recently seen signs of a softening in demand incertain of our served markets, mainly in the automotive and primary metalsindustries.  A cyclical slowdown couldnegatively impact our sales growth rate, as sales of material handling productofferings comprised nearly 70% of our sales in fiscal 2008.

 

Gross margins in ourcontinuing operations have historically been near or above 30% and we aretargeting this level of gross margin going forward.  Improvement in gross margins is mainlydependent upon favorable economic conditions, continued acceptance of recentlyintroduced product offerings by the marketplace, and successful cost reductionactions related to recently introduced elevator and alternative energy productofferings.

 

We intend to focus ourdevelopment and marketing efforts on internal sales growth opportunities acrossall product lines, with an emphasis on energy efficient power products.  While we have continued to focus oncontrolling our operating expenses, these expenses increased in the secondquarter of fiscal 2009 over the second quarter of fiscal 2008, mainly due to amanagement restructuring charge and higher non-cash pension expense.  The higher pension expense will recurthroughout fiscal 2009 and is mainly due to negative returns on plan assetsexperienced during fiscal 2008 and continuing through the second quarter offiscal 2009 (see Note 8 of Notes to Condensed Consolidated FinancialStatements).

 

We expect that fiscal2009 operating margin as a percent of sales will likely be comparable to fiscal2008 operating margins of 6.8%, due mainly to higher gross profit offset byhigher pension expense.  Throughutilization of our net operating loss carryforwards for U.S. tax purposes, webelieve the majority of our reported operating profit can be realized as net income.

 

14

----

Table of Contents

 

**DiscontinuedOperations**

 

As discussed above, theoperating results of the TPS business as well as certain expenses related topreviously divested businesses have been classified as discontinued operationsin the accompanying condensed consolidated financial statements and footnotesfor all periods presented (see Note 2 of Notes to Condensed Consolidated FinancialStatements).  Expenses related topreviously divested businesses have historically included charges for anarbitration award in a patent infringement claim and related legal fees, aswell as certain expenses for environmental matters, asbestos claims and productliability claims (see Note 4 of Notes to Condensed Consolidated FinancialStatements).   All of these issues relate to businesses we no longerown and most relate to indemnification agreements we provided when we divestedthose businesses.

 

Going forward, ourresults of discontinued operations may include additional costs incurredrelated to businesses no longer owned, and may include additional costs abovethose currently estimated and accrued related to the divestiture of our TPSbusiness and our power electronics business, divested in October 2006.

 

**CriticalAccounting Policies and Estimates**

 

There have been nomaterial changes to our critical accounting policies and estimates from theinformation provided in Item 7, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations”, included in our Annual Reporton Form 10-K for the fiscal year ended June 29, 2008.

 

**Results of Operations - Three Months Ended December 28,2008 and December 30, 2007**

 

NetSales and Gross Profit

 

Netsales for the three months ended December 28, 2008, were $26.8 million, anincrease of 5.4% from the three months ended December 30, 2007, sales of$25.4 million.  The increase in sales wasdue to higher sales volumes in our material handling and elevator productlines, offset by lower sales in our energy delivery product line.  Net sales by product line were as follows, inmillions:

 
| ** **               | ** ** | **Three Months Ended** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **December 28, 2008**  | ** ** | **December 30, 2007** | ** ** |
| Material  handling       |       | $                                | 19.7       |   | 74 | % | $ | 18.1 |   | 71 | % |
| Elevator motion  control |       | 4.9                              |       | 18 | % | 4.3 |   | 17 | % |
| Energy delivery          |       | 2.2                              |       | 8 | % | 3.0 |   | 12 | % |
|                     |       |                             |       |   |   |   |   |   |   |
| Total net sales          |       | $                                | 26.8       |   | 100 | % | $ | 25.4 |   | 100 | % |

 

Grossprofit for the three months ended December 28, 2008, was $9.4 million, or35.1% of sales, versus $7.0 million, or 27.5% of sales, for the three monthsended December 30, 2007.  Theincrease in gross profit as a percentage of sales for the three months ended December 28,2008, as compared to the three months ended December 30, 2007, was due tohigher sales volume of material handling and elevator products, increased salesof higher margin mining products, and favorable sales mix within our materialhandling and elevator products.

 

Researchand Development, Selling, General and Administrative

 

Researchand development (“R&D”) expense was $0.9 million, or 3.4% of sales, for thethree months ended December 28, 2008, comparable to R&D expense of$0.9 million, also 3.4% of sales, for the three months ended December 30,2007.

 

Selling, general andadministrative (“SG&A”) expense was $6.6 million (24.5% of sales) for thethree months ended December 28, 2008, versus $4.3 million (17.0% of sales)for the three months ended December 30, 2007.  Selling expenses in the three months ended December 28,2008, were $2.6 million, comparable to $2.6 million in the three months ended December 30,2007.  General and administrative (“G&A”)expense was $4.0 million for the three months ended December 28, 2008,compared to $1.7 million for the three months ended December 30, 2007, mainlydue to a restructuring charge related to management reorganization of $0.9million, an increase in pension expense of $0.8 million, and higher incentivecompensation provisions.

 

15

----

Table of Contents

 

Incomefrom Operations

 

Incomefrom operations for the three months ended December 28, 2008, was $1.9million compared to income from operations of $1.8 million for the three monthsended December 30, 2007.  Theimprovement in income from operations for the three months ended December 28,2008, as compared to the three months ended December 30, 2007, was due tohigher gross profit on increased sales volume, partially offset by increasedSG&A expense.

 

InterestIncome and Expense

 

Interestincome was $0.1 million for the three months ended December 28, 2008.  Interest income was $0.3 million and interestexpense was $0.1 million for the three months ended December 30,2007.  The decrease in interest income inthe three months ended December 28, 2008, as compared to the three monthsended December 30, 2007, was due to lower cash balances held in short-terminvestments and reduced interest rates earned on cash balances.  Interest expense for the three months ended December 30,2007, was comprised mainly of deferred financing amortization.

 

Provisionfor Income Taxes

 

Werecorded an income tax provision of $0.7 million for the three months ended December 28,2008, and $0.2 million for the three months ended December 30, 2007.  The tax provision for the three months ended December 28,2008, includes $0.5 million for income taxes on our pretax income in Canada(see Note 9 of Notes to Condensed Consolidated Financial Statements).  The tax provision in both periods includesnon-cash deferred tax provisions of $0.2 million related to changes in deferredtax liabilities from goodwill amortization.

 

Incomefrom Continuing Operations

 

Werecorded income from continuing operations of $1.3 million for the three monthsended December 28, 2008, or $0.04 earnings per share on both a basic anddiluted basis, compared to income from continuing operations of $1.8 millionfor the three months ended December 30, 2007, or $0.06 earnings per shareon both a basic and diluted basis.

 

Incomefrom Discontinued Operations

 

Income from discontinuedoperations for the three months ended December 28, 2008, was $0.7 million,or $0.02 earnings per share on both a basic and diluted basis, compared to incomefrom discontinued operations of $0.8 million, or $0.03 earnings per share onboth a basic and diluted basis, for the three months ended December 30,2007.  Income from discontinuedoperations in the three months ended December 28, 2008, includes a settlementgain of $0.5 million from a previous agreement with Federal-Mogul, as well asincome of $0.5 million related to previously divested businesses, partiallyoffset by expenses related to previously divested businesses of $0.3 million.  Income from discontinued operations for thethree months ended December 30, 2007, includes a settlement gain of $1.4million from a previous agreement with Federal-Mogul, partially offset bylosses of $0.4 million in our TPS business and $0.2 million of expenses relatedto previously divested businesses.

 

NetIncome

 

Ournet income was $1.9 million in the three months ended December 28, 2008,or $0.06 earnings per share, basic and diluted, compared to net income of $2.6million in the three months ended December 30, 2007, or $0.08 earnings pershare on a diluted basis.

 

16

----

Table of Contents

 

**Results of Operations - Six Months Ended December 28,2008 and December 30, 2007**

 

NetSales and Gross Profit

 

Netsales for the six months ended December 28, 2008, were $53.1 million, anincrease of 10.2% from the six months ended December 30, 2007, sales of$48.2 million.  The increase was due tohigher sales volume in each of our main product lines, and includes $1.6million in sales of products from the business we acquired from Enrange LLC (“Enrange”)in February 2008.  Net sales byproduct line were as follows, in millions:

 
| ** **               | ** ** | **Six Months Ended**  | ** ** |
|--------------------------|------------|---------------------------------|------------|
| ** **               | ** ** | **December 28, 2008** | ** ** | **December 30, 2007** | ** ** |
| Material  handling       |       | $                               | 38.0       |   | 72 | % | $ | 35.3 |   | 73 | % |
| Elevator motion  control |       | 10.3                            |       | 19 | % | 8.8 |   | 18 | % |
| Energy systems           |       | 4.8                             |       | 9 | % | 4.1 |   | 9 | % |
|                     |       |                            |       |   |   |   |   |   |   |
| Total net sales          |       | $                               | 53.1       |   | 100 | % | $ | 48.2 |   | 100 | % |

 

Grossprofit for the six months ended December 28, 2008, was $18.8 million, or35.5% of sales, versus $13.8 million, or 28.7% of sales, for the six monthsended December 30, 2007.  Theincrease in gross profit as a percentage of sales for the six months ended December 28,2008, as compared to the six months ended December 30, 2007, was due tohigher sales volume in our material handling, elevator and mining productlines, favorable sales mix within each of our main product lines, and lowersales of lower margin wind inverters.  Inaddition, gross profit for the six months ended December 30, 2007, wasnegatively impacted by start-up costs and manufacturing variances related toramp up of production of our wind inverter products.

 

Researchand Development, Selling, General and Administrative

 

R&Dexpense was $1.8 million, or 3.3% of sales, for the six months ended December 28,2008, comparable to R&D expense of $1.6 million, or 3.4% of sales, for thesix months ended December 30, 2007. R&D expense for the six months ended December 28, 2008,reflects higher payroll costs due to headcount additions.

 

SG&A expense was$13.1 million (24.7% of sales) for the six months ended December 28, 2008,compared to $9.2 million (19.2% of sales) for the six months ended December 30,2007.  Selling expenses for the sixmonths ended December 28, 2008, were $5.2 million, an increase of $0.3million compared to $4.9 million for the six months ended December 30,2007, due to higher volume related commissions and trade show expenses.  G&A expense was $7.9 million for the sixmonths ended December 28, 2008, compared to $4.3 million for the sixmonths ended December 30, 2007, due to higher pension expense of $1.6million, restructuring costs related to management reorganization of $1.0million, higher incentive compensation provisions of $1.0 million, and theinclusion of Enrange operating expenses of $0.4 million

 

Income from Operations

 

Ourincome from operations for the six months ended December 28, 2008, was$4.0 million compared to income from operations of $3.0 million for the sixmonths ended December 30, 2007.  Theincrease in income from operations for the six months ended December 28,2008, as compared to the six months ended December 30, 2007, was mainlydue to higher gross profit on increased sales volume, partially offset byincreased SG&A expense.

 

InterestIncome and Expense and Other Expense

 

Interestincome was $0.1 million for the six months ended December 28, 2008.  Interest income was $0.7 million and interestexpense was $0.3 million for the six months ended December 30, 2007.  The decrease in interest income for the sixmonths ended December 28, 2008, as compared to the six months ended December 30,2007, was due to lower cash balances and reduced interest rates earned on cashbalances.  Interest expense for the sixmonths ended December 30, 2007, was comprised mainly of deferred financingamortization.

 

Provisionfor Income Taxes

 

Werecorded an income tax provision of $1.1 million for the six months ended December 28,2008, and $0.5 million for the six months ended December 30, 2007.  The tax provision for the six months ended December 28,2008, includes $0.6 million for income taxes on our pretax income in Canada(see Note 9 of Notes to Condensed Consolidated Financial Statements).  The tax provision in both periods includesnon-cash deferred tax provisions of $0.5 million related to changes in deferredtax liabilities from goodwill amortization.

 

17

----

Table of Contents

 

Incomefrom Continuing Operations

 

Werecorded income from continuing operations of $3.0 million for the six monthsended December 28, 2008, or $0.10 earnings per share on both a basic anddiluted basis, compared to income from continuing operations of $2.8 millionfor the six months ended December 30, 2007, or $0.09 earnings per share onboth a basic and diluted basis.

 

Income(Loss) from Discontinued Operations

 

Our loss fromdiscontinued operations for the six months ended December 28, 2008, was$0.2 million, or a $0.01 loss per share on both a basic and diluted basis,compared income from discontinued operations of $0.2 million, or $0.01 earningsper share on both a basic and diluted basis, for the six months ended December 30,2007.  Our loss from discontinuedoperations for the six months ended December 28, 2008, includes a loss onthe September 2008 disposal of our TPS business of $0.4 million, expensesrelated to previously divested businesses of $0.2 million, and losses in ourTPS business of $0.1 million, partially offset by a settlement gain of $0.5million from a previous agreement with Federal-Mogul.  Income from discontinued operations for thesix months ended December 30, 2007, was comprised of a settlement gain of$1.4 million from the Federal-Mogul agreement, offset by losses in our TPSbusiness of $0.6 million and expenses related to previously divested businessesof $0.6 million.

 

NetIncome

 

Ournet income was $2.8 million for the six months ended December 28, 2008, or$0.10 earnings per share, basic and diluted, compared to net income of $3.1million for the six months ended December 30, 2007, or a $0.10 earningsper share on both a basic and diluted basis.

 

**Liquidity and Capital Resources**

 

Our cash and cashequivalent balance, including restricted cash, increased $1.7 million duringthe six months ended December 28, 2008, from $15.5 million at June 29,2008, to $17.2 million at December 28, 2008.  Our primary sources of cash during the sixmonths ended December 28, 2008, were income from operations of $4.0million, $1.25 million from the sale of our TPS business, and a participationpayment related to an annuity contract of $0.5 million, and our primary use ofcash was for contributions of $4.4 million to our defined benefit pensionplan.  During the six months ended December 28,2008, our net inventories increased by $4.1 million, mainly related to anincrease in wind inverter inventory; however, accounts receivable decreased by$3.2 million from June 29, 2008. Our capital expenditures in the six months ended December 28, 2008,were $0.4 million.  While we may makefurther investments to increase capacity for and improve efficiency in theproduction of wind inverters, we do not anticipate capital expenditures infiscal 2009 will exceed $2.0 million. The expected amount of capital expenditures could change depending uponchanges in revenue levels, our financial condition and the general economy.

 

InNovember 2007 we entered into an agreement with Associated Bank, N.A. (“AssociatedBank”) providing for a $10 million revolving credit facility (the “Associatedfacility”).  Borrowings under theAssociated facility bear interest at the London Interbank Offering Rate (“LIBOR”)plus 1.5%, with borrowing levels determined by a borrowing base formula asdefined in the agreement, based on the level of eligible accountsreceivable.  The Associated facility alsosupports the issuance of letters of credit, places certain restrictions on ourability to pay dividends or make acquisitions, and includes covenants whichrequire minimum operating profit levels and limit annual capitalexpenditures.  Borrowings under theAssociated facility are collateralized by our accounts receivable andinventory.  In December 2008, we enteredinto an amendment to the Associated facility with Associated Bank, the primarypurpose of which was to extend the maturity date of the Associated facility to November 1,2010.  There were no amounts outstandingunder the Associated facility and the Company is in compliance with allcovenants as of December 28, 2008.

 

Primarily as a result ofthe decline in interest rates over the past several years and more recentdeclines in values in equity markets, the accumulated benefit obligation of ourdefined benefit pension plan currently exceeds plan assets.  We have made contributions to the planaggregating $9.5 million from April 2008 through January 2009, fundedby existing cash on hand.  Under fundingregulations, current actuarial projections indicate that we will be required tomake additional contributions to the plan aggregating approximately $2.8million during the remainder of fiscal 2009 and approximately $14.2 million infiscal 2010.  Required contributions beyondfiscal 2010 could still be significant, and will depend on future interest ratelevels, values in equity and fixed income markets, and the level and timing ofadditional interim contributions we may make to the plan.

 

Based upon current plansand business conditions, we believe that current cash balances, borrowingcapacity under the Associated facility and internally generated cash flows willbe sufficient to fund anticipated operational needs, capital expenditures andother commitments over the next 12 months.

 

18

----

Table of Contents

 

**Caution Regarding Forward-Looking Statements andRisk Factors**

 

This document, includingdocuments incorporated herein by reference, contains “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995.  The words “believe,” “expect,” “estimate,” “anticipate,” “intend,”“may,” “might,” “will,” “would,” “could,” “project,” and “predict,” or similar wordsand phrases generally identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertaintieswhich in many cases are beyond our control and which cannot be predicted orquantified.  As a result, future events and actual results could differmaterially from those set forth in, contemplated by, or underlyingforward-looking statements.  Forward-looking statements contained in thisdocument speak only as of the date of this document or, in the case of anydocument incorporated by reference from another document, the date of thatdocument.  We do not have any obligation to publicly update or revise anyforward-looking statement contained or incorporated by reference in thesedocuments to reflect changed assumptions, the occurrence of unanticipatedevents or changes to future operating results over time.

 

Our future results ofoperations and the other forward-looking statements contained in this filing,including this section titled “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations,” involve a number of risks anduncertainties.  In particular, the statements regarding future economicconditions, our goals and strategies, new product introductions, penetration ofnew markets, projections of sales revenues and sales growth, manufacturingcosts and operating costs, pricing of our products and raw materials requiredto manufacture our products, gross margin expectations, relocation andoutsourcing of production capacity, capital spending, research and developmentexpenses, the outcome of pending legal proceedings and environmental matters,payment of certain claims by insurance carriers, tax rates, sufficiency offunds to meet our needs including contributions to our defined benefit pensionplan, and our plans for future operations, as well as our assumptions relatingto the foregoing, are all subject to risks and uncertainties.

 

Anumber of factors could cause our actual results to differ materially from ourexpectations.  We are subject to all of the business risks facing publiccompanies, including business cycles and trends in the general economy,financial market conditions, changes in interest rates, demand variations andvolatility, potential loss of key personnel, supply chain disruptions,government legislation and regulation, and natural causes.  Additionalrisks and uncertainties include but are not limited to industry conditions,competitive factors such as technology and pricing pressures, businessconditions in our served markets, dependence on significant customers,increased material costs, risks and costs associated with acquisitions anddivestitures, environmental matters and the risk that our ultimate costs ofdoing business exceed present estimates. This list of risk factors is not all-inclusive, as other factors andunanticipated events could adversely affect our financial position or resultsof operations.  Further information onfactors that could affect our financial results can be found in our AnnualReport on Form 10-K filed with the Securities and Exchange Commission forthe fiscal year ended June 29, 2008, under the heading “Risk Factors” aswell as below in Part II, Item 1A under the heading “Risk Factors”.

 

**Item 3 –Quantitative and Qualitative Disclosures about Market Risk**

 

Therehave been no material changes to the quantitative and qualitative disclosuresabout our market risk disclosed in our Annual Report on Form 10-K for thefiscal year ended June 29, 2008.  Wedid not have any outstanding hedge instruments or foreign currency contractsoutstanding at December 28, 2008 or December 30, 2007.

 

**Item 4 – Controls and Procedures**

 

In connection with thisQuarterly Report on Form 10-Q, under the direction of our Chief ExecutiveOfficer and Chief Financial Officer, we evaluated our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) of theSecurities Exchange Act of 1934, and internal control over financial reportingand concluded that (i) our disclosure controls and procedures were effectiveas of December 28, 2008; and (ii) no change in internal controlover financial reporting occurred during the quarter ended December 28,2008, that has materially affected, or is reasonably likely to materiallyaffect, such internal control over financial reporting.

 

Attached as exhibits tothis Form 10-Q are certifications of the Company’s Chief Executive Officerand Chief Financial Officer, which are required in accordance with Rule 13a-14of the Securities Exchange Act of 1934. This “Controls and Procedures” section includes information concerningthe controls and evaluation thereof referred to in the attached certifications,and it should be read in conjunction with the attached certifications for amore complete understanding of the topics presented.

 

19

----

Table of Contents

 

**PART II - OTHER INFORMATION**

 

**Item 1 – Legal Proceedings**

 

Information about ourlegal proceedings is contained in Part I, Item 3, Legal Proceedings, andNote 11 in the Notes to Consolidated Financial Statements in our Annual Reporton Form 10-K for the fiscal year ended June 29, 2008, which isincorporated herein by reference, and in Note 4 of the Notes to CondensedConsolidated Financial Statements contained in our Quarterly Reports on Form 10-Q.  We believe that there have been no materialdevelopments with respect to these matters during the fiscal quarter ended December 28,2008.

 

**Item 1A – Risk Factors**

 

Except as notedbelow in the following paragraphs, there have been no material changes to therisk factors disclosed in our Annual Report on Form 10-K for the fiscal yearended June 29, 2008.

 

Risk of De-listingof our Common Stock by the NYSE

 

The continued listingstandards of the New York Stock Exchange (the “NYSE”) require us to maintain,among other things, a market capitalization of at least $75 million at the sametime our stockholders’ equity is at least $75 million during any 30-trading-dayperiod.  On November 26, 2008, we werenotified by the NYSE that we had fallen below this continued listing standard,as set forth in Section 802.01B of the NYSE Listed Company Manual, because overa 30-trading-day period, our average total market capitalization was less than$75 million and, during the same period, our stockholders’ equity was less than$75 million.  In accordance withapplicable NYSE rules, on January 12, 2009, we submitted to the NYSE a businessplan that demonstrates how we intend to regain compliance with the continuedlisting standards within 18 months.  Ourplan is currently being reviewed by the NYSE. If the NYSE rejects our plan, or if the NYSE accepts our plan but we areultimately unable to regain compliance with the continued listing standardswithin 18 months, our common stock could become delisted from the NYSE.  A delisting of our common stock from the NYSEcould potentially materially and adversely affect us by, among other things,reducing the liquidity and market price of our common stock, reducing thenumber of investors willing to hold or acquire our common stock, and limitingour ability to issue additional securities or obtain additional financing inthe future.  If our common stock isdelisted from the NYSE, or if it becomes apparent to us that we will be unableto regain compliance with the continued listing standards within 18 months, wewould likely seek to move trading of our common stock to another nationalsecurities exchange or quotation system. 

 

Financial Effectof Unfunded Pension Obligations

 

Our definedbenefit pension plan was underfunded by approximately $38 million as of June29, 2008.  During the first six months offiscal 2009, based mainly on adverse conditions in the financial markets, ourpension plan assets decreased to approximately $100 million as of December 28,2008, resulting in an increase in our underfunded status.  The decline in fair value of the pension planassets experienced to date during fiscal 2009 may result in increased totalpension costs in the future and may also result in future cash contributions greaterthan the amounts previously reported in our Annual Report on Form 10-K for theperiod ended June 29, 2008.  The impacton our fiscal 2010 expense will be determined based on the funded status as ofJune 28, 2009.  These increased pension costsand future cash contributions could have a material adverse effect on ourresults of operations, financial position and cash flows.

 

**Item 2 – Unregistered Sales of EquitySecurities and Use of Proceeds**

 

There were no unregistered sales of equity securities andthere were no repurchases of equity securities during our second fiscal quarterended December 28, 2008.

 

**Item3 – Defaults upon Senior Securities**

 

None.

 

**Item 4 – Submission of Matters toa Vote of Security Holders**

 

(a)                                     TheAnnual Meeting of Stockholders of the Company (“Annual Meeting”) was held on October 24,2008.

 

(b)                                    Thefollowing named persons were elected as directors at the Annual Meeting:

 

David A. Bloss, Sr.

Dewain K. Cross

Yon Y. Jorden

Mitchell I. Quain

David P. Reiland

 

(c)                                     Thevotes cast for and withheld with respect to each nominee for director at theAnnual Meeting were as follows:

 
| **Nominee**               | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|---------------------------|------------|------------|------------|--------------|------------|
|                      |       |       |       |         |       |
| David A.  Bloss, Sr. |       | 28,641,855 |       | 90,472       |       |
| Dewain K. Cross           |       | 28,583,135 |       | 149,192      |       |
| Yon Y. Jorden             |       | 28,606,952 |       | 125,375      |       |
| Mitchell I.  Quain        |       | 28,608,651 |       | 123,676      |       |
| David P. Reiland          |       | 28,582,662 |       | 149,665      |       |

 

20

----

Table ofContents

 

(d)                                    Theappointment of Ernst & Young LLP as the Company’s independentregistered public accounting firm for fiscal 2009 was ratified at the AnnualMeeting.  The votes cast for and againstthe appointment, and the votes that abstained were as follows:

 
| **For**    | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|------------|------------|-------------|------------|-------------|------------|
| 28,705,918 |       | 19,426      |       | 6,982       |       |

 

**Item5 – Other Information**

 

None.

 

**Item6 - Exhibits**

 

(a)                                  Indexto Exhibits

 
| 10.1   | Advisory Services  Agreement by and between the Company and David A. Bloss, Sr. dated as of  December 15, 2008. *                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                   |
| 10.2   | Transition, Separation  and Complete Release Agreement by and between the Company and David P.  Reiland dated as of January 5, 2009. *            |
|   |                                                                                                                                                   |
| 10.3   | Amended Form of  Restricted Stock Award Agreement Pursuant to 2004 Stock Incentive Plan of  Magnetek, Inc. (Form adopted October 23, 2008) * |
|   |                                                                                                                                                   |
| 10.4   | First Amendment to  Credit Agreement dated as of December 15, 2008, between the Company and  Associated Bank, N.A. **                             |
|   |                                                                                                                                                   |
| 31.1   | Certification of the  Chief Executive Officer pursuant to Rule 13a-14(a) of the  Securities Exchange Act of 1934. *                          |
|   |                                                                                                                                                   |
| 31.2   | Certification of the  Chief Financial Officer pursuant to Rule 13a-14(a) of the  Securities Exchange Act of 1934. *                          |
|   |                                                                                                                                                   |
| 32.1   | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002. *                  |

 

----

*                                         Filedwith this Report on Form 10-Q.

 

**                                  Previouslyfiled under Form 8-K of the Company on December 15, 2008 andincorporated herein by this reference.

 

21

----

Table ofContents

 

SIGNATURES

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|                         | MAGNETEK, INC.                                                               |
|------------------------------|------------------------------------------------------------------------------|
|                         | (Registrant)                                                                 |
|                         |                                                                         |
|                         |                                                                         |
| Date:  February 6, 2009 | /s/ Peter M.  McCormick                                                      |
|                         | Peter M.  McCormick                                                          |
|                         | President and  Chief Executive Officer                                       |
|                         | (Duly  authorized officer of the Registrant and principal executive officer) |
|                         |                                                                         |
|                         |                                                                         |
| Date:  February 6, 2009 | /s/ Marty J.  Schwenner                                                      |
|                         | Marty J.  Schwenner                                                          |
|                         | Vice-President  and Chief Financial Officer                                  |
|                         | (Duly  authorized officer of the Registrant and principal financial officer) |

 

22

----