Tableof 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: March 29, 2009**

 

**OR**

 

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

 

**For thetransition period from                          **

 

**Commissionfile number 1-10233**

 

**MAGNETEK,INC.**

(Exact name of Registrantas specified in its charter)

 

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

 

**N49W13650 Campbell Drive**

**Menomonee Falls, Wisconsin  53051**

(Address of principalexecutive offices)

 

**(262) 783-3500**

(Registrant’s telephonenumber, including area code)

 

 

(Former name, formeraddress and former fiscal year,

if changed since lastreport)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes  x  No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes oNo o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company.  Seedefinition of “accelerated filer,” “large accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
| Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller Reporting Company o |
|---------------------------|---------------------|-------------------------|-----------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yeso  No x

 

Thenumber of shares outstanding of Registrant’s Common Stock, as of April 30,2009, was 30,884,811 shares.

 

 

 

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2009 MAGNETEK FORM 10-Q

 

TABLE OF CONTENTS FOR THE QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCAL QUARTERENDED MARCH 29, 2009

 

MAGNETEK, INC.

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

 

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**PART I.  FINANCIAL INFORMATION**

 

**Item 1 — Financial Statements**

 

MAGNETEK, INC.

CONDENSED CONSOLIDATEDSTATEMENTS OF INCOME

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

 
| ** **                                             | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                             | ** ** | **(13 Weeks)**              | ** ** | **(13 Weeks)** | ** ** |
| ** **                                             | ** ** | **March 29,**               | ** ** | **March 30,** | ** ** |
| ** **                                             | ** ** | **2009**                         | ** ** | **2008** | ** ** |
|                                                   |       |                             |       |   |   |
| Net sales                                              |       | $                                | 25,111     |   | $ | 24,606 |   |
| Cost of sales                                          |       | 17,353                           |       | 17,823 |   |
| Gross profit                                           |       | 7,758                            |       | 6,783 |   |
|                                                   |       |                             |       |   |   |
| Operating  expenses:                                   |       |                             |       |   |   |
| Research and  development                              |       | 928                              |       | 823 |   |
| Pension expense                                        |       | 846                              |       | 46 |   |
| Selling, general  and administrative                   |       | 4,778                            |       | 4,516 |   |
| Income from  operations                                |       | 1,206                            |       | 1,398 |   |
|                                                   |       |                             |       |   |   |
| Non operating  income:                                 |       |                             |       |   |   |
| Interest income                                        |       | (14                              | )          | (226 | ) |
| Income from  continuing operations before income taxes |       | 1,220                            |       | 1,624 |   |
|                                                   |       |                             |       |   |   |
| Provision  (benefit) for income taxes                  |       | (25                              | )          | 224 |   |
| Income from  continuing operations                     |       | 1,245                            |       | 1,400 |   |
|                                                   |       |                             |       |   |   |
| Loss from  discontinued operations, net of tax         |       | (1,067                           | )          | (892 | ) |
|                                                   |       |                             |       |   |   |
| Net income                                             |       | $                                | 178        |   | $ | 508 |   |
|                                                   |       |                             |       |   |   |
| Earnings per  common share                             |       |                             |       |   |   |
| Basic and  diluted:                                    |       |                             |       |   |   |
| Earnings from  continuing operations                   |       | $                                | 0.04       |   | $ | 0.05 |   |
|                                                   |       |                             |       |   |   |
| Loss from  discontinued operations                     |       | $                                | (0.03      | ) | $ | (0.03 | ) |
|                                                   |       |                             |       |   |   |
| Net income                                             |       | $                                | 0.01       |   | $ | 0.02 |   |
|                                                   |       |                             |       |   |   |
| Weighted average  shares outstanding:                  |       |                             |       |   |   |
| Basic                                                  |       | 30,866                           |       | 30,377 |   |
| Diluted                                                |       | 30,892                           |       | 30,507 |   |

 

See accompanying notes

 

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MAGNETEK, INC.

CONDENSED CONSOLIDATEDSTATEMENTS OF INCOME

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

 
| ** **                                             | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                             | ** ** | **(39 Weeks)**             | ** ** | **(39 Weeks)** | ** ** |
| ** **                                             | ** ** | **March 29,**              | ** ** | **March 30,** | ** ** |
| ** **                                             | ** ** | **2009**                        | ** ** | **2008** | ** ** |
|                                                   |       |                            |       |   |   |
| Net sales                                              |       | $                               | 78,223     |   | $ | 72,794 |   |
| Cost of sales                                          |       | 51,618                          |       | 52,169 |   |
| Gross profit                                           |       | 26,605                          |       | 20,625 |   |
|                                                   |       |                            |       |   |   |
| Operating  expenses:                                   |       |                            |       |   |   |
| Research and  development                              |       | 2,698                           |       | 2,461 |   |
| Pension expense                                        |       | 2,539                           |       | 140 |   |
| Selling, general  and administrative                   |       | 16,183                          |       | 13,667 |   |
| Income from  operations                                |       | 5,185                           |       | 4,357 |   |
|                                                   |       |                            |       |   |   |
| Non operating  expense (income):                       |       |                            |       |   |   |
| Interest expense                                       |       | —                          |       | 260 |   |
| Interest income                                        |       | (124                            | )          | (898 | ) |
| Income from  continuing operations before income taxes |       | 5,309                           |       | 4,995 |   |
|                                                   |       |                            |       |   |   |
| Provision for  income taxes                            |       | 1,069                           |       | 747 |   |
| Income from  continuing operations                     |       | 4,240                           |       | 4,248 |   |
|                                                   |       |                            |       |   |   |
| Loss from  discontinued operations, net of tax         |       | (1,242                          | )          | (661 | ) |
|                                                   |       |                            |       |   |   |
| Net income                                             |       | $                               | 2,998      |   | $ | 3,587 |   |
|                                                   |       |                            |       |   |   |
| Earnings (loss)  per common share                      |       |                            |       |   |   |
|                                                   |       |                            |       |   |   |
| Basic and  diluted:                                    |       |                            |       |   |   |
| Earnings from  continuing operations                   |       | $                               | 0.14       |   | $ | 0.14 |   |
|                                                   |       |                            |       |   |   |
| Loss from  discontinued operations                     |       | $                               | (0.04      | ) | $ | (0.02 | ) |
|                                                   |       |                            |       |   |   |
| Net income                                             |       | $                               | 0.10       |   | $ | 0.12 |   |
|                                                   |       |                            |       |   |   |
| Weighted average  shares outstanding:                  |       |                            |       |   |   |
| Basic                                                  |       | 30,774                          |       | 30,339 |   |
| Diluted                                                |       | 30,855                          |       | 30,513 |   |

 

See accompanying notes

 

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MAGNETEK, INC.

CONDENSED CONSOLIDATEDBALANCE SHEETS

 (Amounts in thousands)

 
| ** **                                       | ** ** | **March 29,** | ** ** | **June 29,** | ** ** |
|--------------------------------------------------|------------|--------------------|------------|-------------------|------------|
| ** **                                       | ** ** | **2009**           | ** ** | **2008**          | ** ** |
| ** **                                       | ** ** | **(Unaudited)**    | ** ** | ** **        | ** ** |
| ASSETS                                           |       |               |       |              |       |
|                                             |       |               |       |              |       |
| Current assets:                                  |       |               |       |              |       |
| Cash and cash  equivalents                       |       | $                  | 16,619     |              | $          | 15,210 |   |
| Restricted cash                                  |       | 261                |       | 256               |       |
| Accounts  receivable, net                        |       | 13,454             |       | 18,600            |       |
| Inventories                                      |       | 14,910             |       | 12,525            |       |
| Prepaid expenses  and other current assets       |       | 1,375              |       | 2,133             |       |
| Assets held for  sale                            |       | —             |       | 1,288             |       |
| Total current  assets                            |       | 46,619             |       | 50,012            |       |
|                                             |       |               |       |              |       |
| Property, plant  and equipment                   |       | 20,277             |       | 20,147            |       |
| Less:  accumulated depreciation                  |       | 16,528             |       | 16,054            |       |
| Net property,  plant and equipment               |       | 3,749              |       | 4,093             |       |
|                                             |       |               |       |              |       |
| Goodwill                                         |       | 30,310             |       | 30,464            |       |
| Other assets                                     |       | 6,491              |       | 6,978             |       |
| Total Assets                                     |       | $                  | 87,169     |              | $          | 91,547 |   |
|                                             |       |               |       |              |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY       |       |               |       |              |       |
|                                             |       |               |       |              |       |
| Current  liabilities:                            |       |               |       |              |       |
| Accounts payable                                 |       | $                  | 6,944      |              | $          | 10,407 |   |
| Accrued  liabilities                             |       | 7,112              |       | 7,740             |       |
| Current portion  of long-term debt               |       | 7                  |       | 9                 |       |
| Total current  liabilities                       |       | 14,063             |       | 18,156            |       |
|                                             |       |               |       |              |       |
| Long-term debt,  net of current portion          |       | 10                 |       | 12                |       |
|                                             |       |               |       |              |       |
| Pension benefit  obligations, net                |       | 30,163             |       | 37,638            |       |
| Other long term  obligations                     |       | 1,761              |       | 1,947             |       |
| Deferred income  taxes                           |       | 4,736              |       | 3,993             |       |
|                                             |       |               |       |              |       |
| Commitments and  contingencies                   |       |               |       |              |       |
|                                             |       |               |       |              |       |
| Stockholders’  equity                       |       |               |       |              |       |
| Common stock                                     |       | 309                |       | 306               |       |
| Paid in capital  in excess of par value          |       | 137,835            |       | 136,864           |       |
| Accumulated  deficit                             |       | (1,806             | )          | (4,804            | )          |
| Accumulated  other comprehensive loss            |       | (99,902            | )          | (102,565          | )          |
| Total  stockholders’ equity                 |       | 36,436             |       | 29,801            |       |
|                                             |       |               |       |              |       |
| Total  Liabilities and Stockholders’ Equity |       | $                  | 87,169     |              | $          | 91,547 |   |

 

See accompanying notes

 

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MAGNETEK, INC.

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(Amounts in thousands,unaudited)

 
| ** **                                                                                                 | ** ** | **(39 Weeks)** | ** ** | **(39 Weeks)** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|---------------------|------------|---------------------|------------|
| ** **                                                                                                 | ** ** | **March 29,**  | ** ** | **March 30,**  | ** ** |
| ** **                                                                                                 | ** ** | **2009**            | ** ** | **2008**            | ** ** |
| Cash flows from  continuing operating activities:                                                          |       |                |       |                |       |
| Income from  continuing operations                                                                         |       | $                   | 4,240      |                | $          | 4,248 |   |
| Adjustments to  reconcile income from continuing operations to net cash provided by operating  activities: |       |                |       |                |       |
| Depreciation and  amortization                                                                             |       | 779                 |       | 1,197               |       |
| Stock based  compensation expense                                                                          |       | 923                 |       | 433                 |       |
| Pension expense                                                                                            |       | 2,539               |       | 140                 |       |
| Changes in  operating assets and liabilities                                                               |       | 316                 |       | (1,023              | )          |
| Cash  contribution to pension fund                                                                         |       | (6,773              | )          | —              |       |
|                                                                                                       |       |                |       |                |       |
| Total  adjustments                                                                                         |       | (2,216              | )          | 747                 |       |
| Net cash  provided by continuing operating activities                                                      |       | 2,024               |       | 4,995               |       |
|                                                                                                       |       |                |       |                |       |
| Cash flows from  investing activities:                                                                     |       |                |       |                |       |
| Proceeds from  sale of business, net of transaction costs                                                  |       | 1,250               |       | —              |       |
| Purchase of  business                                                                                      |       | (885                | )          | (1,750              | )          |
| Proceeds from  (deposit into) escrow account                                                               |       | (5                  | )          | 600                 |       |
| Capital  expenditures                                                                                      |       | (665                | )          | (950                | )          |
| Net cash used in  investing activities                                                                     |       | (305                | )          | (2,100              | )          |
|                                                                                                       |       |                |       |                |       |
| Cash flows from  financing activities:                                                                     |       |                |       |                |       |
| Proceeds from  issuance of common stock                                                                    |       | 230                 |       | 958                 |       |
| Purchase and  retirement of treasury stock                                                                 |       | (182                | )          | —              |       |
| Borrowings under  capital lease obligations                                                                |       | 8                   |       | 13                  |       |
| Principal  payments under capital lease obligations                                                        |       | (12                 | )          | (9                  | )          |
| Net cash  provided by financing activities                                                                 |       | 44                  |       | 962                 |       |
|                                                                                                       |       |                |       |                |       |
| Cash flows from  discontinued operations:                                                                  |       |                |       |                |       |
| Provided by  (used in) operating activities                                                                |       | (354                | )          | 2,699               |       |
| Cash provided by  (used in) discontinued operations                                                        |       | (354                | )          | 2,699               |       |
|                                                                                                       |       |                |       |                |       |
| Net increase in  cash                                                                                      |       | 1,409               |       | 6,556               |       |
| Cash at the  beginning of the period                                                                       |       | 15,210              |       | 5,404               |       |
| Cash at the end  of the period                                                                             |       | $                   | 16,619     |                | $          | 11,960 |   |

 

See accompanying notes

 

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MAGNETEK, INC.

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

MARCH 29, 2009

(Amounts in thousandsunless 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 productsconsist primarily of programmable motion control and power conditioning systemsused on the following applications: overhead cranes and hoists; elevators; coalmining equipment; and alternative energy.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidatedfinancial statements include the accounts of Magnetek, Inc. and itssubsidiaries. All significant intercompany accounts and transactions have beeneliminated.

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States for interim financial reporting and with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all ofthe information and footnotes required by generally accepted accountingprinciples for complete financial statements. For further information, refer tothe financial 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, theseunaudited statements contain all adjustments, consisting of normal recurringadjustments, necessary to present fairly the financial position of the Companyas of March 29, 2009, and the results of its operations and cash flows forthe three- and nine-month periods ended March 29, 2009 and March 30,2008. Results for the three- and nine-months ended March 29, 2009 are notnecessarily indicative of results that may be experienced for the full fiscalyear.

 

The Company uses a fifty-two, fifty-three week fiscalyear ending on the Sunday nearest to June 30. Fiscal quarters are the 13or 14 week periods ending on the Sunday nearest September 30, December 31,March 31 and June 30. The three- and nine-month periods ended March 29,2009 and March 30, 2008 each contained 13 and 39 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-level hierarchy for fair valuemeasurements to prioritize the inputs used in the valuation techniques toderive fair values. The basis for fair value measurements for each level withinthe hierarchy is described below with Level 1 having the highest priority and Level3 having the lowest.

 

Level 1: Quoted prices in active markets for identicalassets or liabilities.

 

Level 2: Quoted prices for similar assets orliabilities in active markets; quoted prices for identical or similarinstruments in markets that are not active; and model-derived valuations inwhich all significant inputs are observable in active markets.

 

Level 3: Valuations derived from valuation techniquesin which one or more significant inputs are unobservable.

 

The Company adopted SFAS157 effective June 30, 2008. The Company’s assets and liabilities measuredat fair value on a recurring basis subject to the presentation requirements ofSFAS 157 at March 29, 2009 consisted of cash and cash equivalents. Cashand cash equivalents are comprised of bank deposits and short-term investments,such as money market funds, the fair value of which is based on quoted marketprices, 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.

 

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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 30, 2008. The Companyhas not elected to measure any financial assets and financial liabilities atfair value that were not previously required to be measured at fair value.Therefore, the adoption of this standard had no impact on the Company’sconsolidated financial position, results of operations or cash flows.

 

In August 2008, the SEC announced that it willissue for comment a proposed roadmap regarding the potential use ofInternational Financial Reporting Standards (“IFRS”) for the preparation offinancial 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. The Companyis currently assessing the potential impact of IFRS on its financial statementsand will continue to follow the proposed roadmap for future developments.

 

In December 2007, the FASB issued SFAS No. 141(revised 2007), *Business Combinations*, (“SFAS 141R”)which replaces SFAS No. 141, *Business Combinations*.SFAS 141R is effective for business combinations closed in fiscal yearsbeginning after December 15, 2008. This standard significantly changes theaccounting for business acquisitions both during the period of the acquisitionand in subsequent periods. Among the more significant changes in the accountingfor acquisitions are the following:

 

·                  Acquiredin-process research and development (“IPR&D”) is accounted for as an asset,with the cost recognized as the research and development is realized orabandoned. IPR&D was previously expensed at the time of the acquisition.

 

·                  Contingentconsideration is recorded at fair value as an element of purchase price withsubsequent adjustments recognized in operations. Contingent consideration waspreviously accounted for as a subsequent adjustment of purchase price.

 

·                  Transactioncosts are expensed. These costs were previously treated as costs of theacquisition.

 

In December 2007, the FASB issued SFAS No. 160,*Noncontrolling Interests in Consolidated FinancialStatements — an**amendment of AccountingResearch Bulletin No. 51*, (“SFAS 160”). SFAS 160 establishesaccounting and reporting standards for the noncontrolling interest (minorityinterest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160is effective for financial statements issued for fiscal years beginning after December 15,2008. The Company currently has no minority interests and accordingly expectsthat the adoption of SFAS 160 will not have a material impact on its condensedconsolidated financial statements.

 

In March 2008, the FASB issued SFAS No. 161,*Disclosures about Derivative Instruments andHedging Activities, an amendment of FASB Statement No. 133*, (“SFAS161”). SFAS 161 requires enhanced disclosures about a company’s derivative andhedging activities. SFAS 161 is effective for any reporting period (annual orquarterly interim) beginning after November 15, 2008. The adoption of SFAS161 did not have a material impact on the Company’s condensed consolidatedfinancial statements.

 

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

 

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

 

In April 2008, the Company committed to a plan todivest its TPS business, which manufactured backup power systems for wirelessapplications. As a result, the Company reclassified the assets to be disposedof, primarily inventory, as held for sale at June 29, 2008, and classifiedthe operating results of the business as discontinued operations. In September 2008,the Company completed the sale of the assets of the TPS business to Myers PowerProducts, Inc. (“Myers”). The purchase price of $1.25 million was paid byMyers to the Company in October, 2008. The Company recorded a loss of $0.4million related to the divestiture, included in results of discontinuedoperations for the nine months ended March 29, 2009, comprised mainly offuture lease costs and the write-off of certain TPS fixed assets.

 

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Loss from discontinued operations for the three- andnine-months ended March 29, 2009, includes a loss of $1.0 million relatedto the termination of a lease agreement for office space in Nashville,Tennessee, effective August 2010. The Company has been subleasing thespace to a Nashville-area law firm since the inception of the lease in August 2000pursuant to a sublease agreement that expires in August 2010. The Companyhas received notice from the law firm of its intention not to renew thesublease. By terminating the lease prior to the scheduled expiration date of August 2015,the Company will avoid potential future lease payments of $9.9 million afterthe sublease agreement expires. The lease termination costs, paid in March 2009,represent the unamortized portion of tenant improvements previously provided bythe landlord to Magnetek.

 

Loss from discontinued operations for the nine-monthperiod ended March 29, 2009, includes a settlement gain of $0.5 million,and loss from discontinued operations for the nine-month period ended March 30,2008, includes 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, certainexpenses incurred related to businesses the Company no longer owns areclassified as discontinued operations. The results of discontinued operationsare as follows:

 
| ** **                                | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                | ** ** | **March 29,**               | ** ** | **March 30,**              | ** ** | **March 29,** | ** ** | **March 30,** | ** ** |
| ** **                                | ** ** | **2009**                         | ** ** | **2008**                        | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net sales - TPS  business                 |       | $                                | —     |                            | $          | 1,723 |   | $ | 1,503 |   | $ | 8,614 |   |
|                                      |       |                             |       |                            |       |   |   |   |   |
| Lease  termination expense                |       | $                                | (959       | )                               | $          | — |   | $ | (959 | ) | $ | — |   |
| Expense related  to divested businesses   |       | (108                             | )          | (642                            | )          | (301 | ) | (1,238 | ) |
| Loss on disposal  of TPS business         |       | —                           |       | —                          |       | (368 | ) | — |   |
| Loss from TPS  business prior to disposal |       | —                           |       | (250                            | )          | (94 | ) | (843 | ) |
| Income from  Federal Mogul settlement     |       | —                           |       | —                          |       | 480 |   | 1,420 |   |
| Loss from  discontinued operations        |       | $                                | (1,067     | )                               | $          | (892 | ) | $ | (1,242 | ) | $ | (661 | ) |

 

The condensedconsolidated balance sheet as of March 29, 2009 includes certain accruedliabilities which represent the Company’s best estimate of remaining contingentliabilities related to indemnification provisions included in sale agreementsof divested businesses. While management has used its best judgment inassessing the potential liability for these items, given the uncertaintyregarding future events, it is difficult to estimate the possible timing ormagnitude of any payments that may be required for liabilities subject toindemnification. Any future adjustment to currently recorded contingenciesrelated to indemnification claims or payments based upon changes incircumstances would be recorded as a gain or loss in discontinued operations.

 

**3.****                                      Inventories**

 

Inventories consist of the following:

 
| ** **                     | ** ** | **March 29,** | ** ** | **June 29,** | ** ** |
|--------------------------------|------------|--------------------|------------|-------------------|------------|
| ** **                     | ** ** | **2009**           | ** ** | **2008**          | ** ** |
| Raw materials  and stock parts |       | $                  | 10,402     |              | $          | 7,676 |   |
| Work-in-process                |       | 1,299              |       | 1,071             |       |
| Finished goods                 |       | 3,209              |       | 3,778             |       |
|                           |       | $                  | 14,910     |              | $          | 12,525 |   |

 

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

 

**Litigation—ProductLiability**

 

The Company is involvedin a product liability lawsuit related to the Telemotive Industrial Controlsbusiness acquired in December 2002 through the purchase of the stock ofMXT Holdings, Inc. (“MXT”). The lawsuit was initially filed by RobertRedman in Cook County, Illinois in 1998 against MXT and other defendants, butnow is pending only against MXT and Electromotive Systems, Inc, anon-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 seeks damages forpersonal injuries allegedly incurred by Mr. Redman due to an allegedlydefective radio control product manufactured by MXT. Management believes thatthe insurers will bear all liability, if any, with respect to the case andthat the proceeding will not have a material adverse effect on the Company’sresults of operations 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’s insurance carrier and legalcounsel has been retained to represent the Company. Plaintiff’s claim fordamages is unknown at this time, but management believes that its insurers willbear all liability in excess of deductible amounts for the claim, if any.

 

The Company has beennamed, 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 theFederal-Mogul bankruptcy proceedings to recover attorney’s fees for defense ofthese claims. In May 2007, the Company and Federal-Mogul entered into asettlement agreement under which the Company was entitled to receive amountsfrom a settlement trust established under Federal-Mogul’s reorganization planand funded by insurance proceeds. The Company was entitled to receive 15% ofthe first $20 million and 10% of the next $25 million of insurance proceeds, upto a maximum of $5.5 million, in exchange for withdrawing its bankruptcy claimsand objections to the reorganization plan and execution of certain releases. InJanuary 2009, the Company received a payment of $1.0 million under thesettlement agreement, which brought the total proceeds received to date under thesettlement agreement to $5.5 million, the maximum amount to which the Companyis entitled. The condensed consolidated statements of operations for thenine-month period ended March 29, 2009 include $0.5 million of income fromthe settlement trust in income (loss) from discontinued operations. Thecondensed consolidated statements of operations for the nine-month period endedMarch 30, 2008 include $1.4 million of income from the settlement trust inincome from discontinued operations. Several insurance carriers filed adeclaratory judgment action relating to insurance coverage for such previouslyacquired businesses, seeking a determination that no coverage is availableunder the policies. Federal-Mogul, the Company and other defendants filedresponsive pleadings and motions relating to the case, and the court grantedthe motions to stay the declaratory judgment action. Some of these insurersappealed such ruling and in November 2008, the ruling was upheld onappeal. Management does not believe the asbestos proceedings, individually orin the aggregate, will have a material adverse effect on its financial positionor results of operations.

 

**Litigation—Other**

 

In November 2007, alawsuit 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 isa former Executive Vice President of the Company and was Deputy Chairman andManaging Director of the Company’s former Italian subsidiary, Magnetek S.p.A. Mr. Canovaasserted claims for damages in the amount of 3.5 million Euros (approximately$4.5 million USD) allegedly incurred in connection with the termination of hisemployment at the time of the sale of the Company’s power electronics businessto Power-One, Inc. in October 2006. The Company’s reply brief wasfiled in March 2008. The Company believes the claim is without merit andintends to vigorously defend against 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 nine months of fiscal years 2009 or 2008.

 

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The Company has also beenidentified by the United States Environmental Protection Agency and certainstate agencies as a potentially responsible party for cleanup costs associatedwith alleged past waste disposal practices at several previously owned orleased facilities and offsite locations. Its remediation activities as apotentially responsible party were not material in the first nine 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 ofindemnification rights against third parties and the identification ofadditional contaminated sites, the Company’s estimated share of liability, ifany, for environmental remediation, including its indemnification obligations,is not expected to be material.

 

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

 

In 1986, the Company acquiredthe stock of Universal Manufacturing Company (“Universal”) from a predecessorof Fruit of the Loom (“FOL”), and the predecessor agreed to indemnify theCompany against certain environmental liabilities arising from pre-acquisitionactivities at a facility in Bridgeport, Connecticut. Environmental liabilitiescovered by the indemnification agreement include completion of additionalcleanup activities, if any, at the Bridgeport facility and defense andindemnification against liability for potential response costs related tooffsite disposal locations. The Company’s leasehold interest in the Bridgeportfacility was assigned to the buyer in connection with the sale of the Company’stransformer business in June 2001. FOL, the successor to the indemnification obligation, filed a petitionfor Reorganization under Chapter 11 of the Bankruptcy Code in 1999 and theCompany filed a proof of claim in the proceeding for obligations related to theenvironmental indemnification agreement. The Company believes that FOL hadsubstantially completed the clean-up obligations required by theindemnification 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, theowner of the Bridgeport facility filed a lawsuit in Superior Court, J.D. of Fairfield,Connecticut alleging that the Company is obligated to remediate environmentalcontamination at the facility.  The casewas transferred to the Complex Litigation Docket, J.D. of Waterbury atWaterbury, Connecticut, which subsequently denied motions for summary judgmentfiled by the plaintiff, The Sergy Company, LLC (“Sergy”), as well as thecounter 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 filed a motionto amend the complaint to include additional claims against the Company underthe Connecticut Transfer Act.  TheCompany’s request to add additional potentially responsible parties asdefendants was granted by the Court, and the Company filed declaratory judgmentcomplaints 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 date at the site and the proposed additional investigations andremediation necessary to complete those actions at the site.  The DEP requested additional information fromthe Company relating to site investigations and remediation. The Company retainedan environmental consultant to review and prepare a report on historicaloperations and environmental activities at the Bridgeport facility and thereport was submitted to the DEP.  Anaction was filed by the Connecticut Commissioner of Environmental Protection (“CTCEP”)against the Company and Sergy in April 2008.  Although a stipulation was entered into bythe Company and Sergy relating to the issue involving the groundwater pump andtreat system located at the Bridgeport facility, the CTCEP filed a request toamend the complaint to assert additional claims and to seek further remediesfor 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 above referenced action filed bySergy against the Company is currently pending.  The Company has incurredcosts of $0.3 million related to the Bridgeport facility during fiscal2009.  The condensed consolidated balance sheet as of March 29, 2009,does not include any estimated remediation costs.  FOL’s inability tosatisfy its remaining obligations related to the Bridgeport facility and anyoffsite disposal locations, or any unfavorable rulings in the lawsuits with theowner of the Bridgeport facility or the CTCEP, or the discovery of additionalenvironmental contamination at the Bridgeport facility could have a materialadverse effect on the Company’s financial position, cash flows or results ofoperations.

 

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**5.****                                      ComprehensiveIncome**

 

For the three- and nine-month periods ended March 29,2009, and March 30, 2008, comprehensive income consisted of the following:

 
| ** **                                 | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                 | ** ** | **March 29,**               | ** ** | **March 30,**              | ** ** | **March 29,** | ** ** | **March 30,** | ** ** |
| ** **                                 | ** ** | **2009**                         | ** ** | **2008**                        | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net income                                 |       | $                                | 178        |                            | $          | 508 |   | $ | 2,998 |   | $ | 3,587 |   |
| Change in  unrecognized pension liability  |       | 1,079                            |       | 845                             |       | 3,239 |   | 2,532 |   |
| Change in  currency translation adjustment |       | 66                               |       | (141                            | )          | (576 | ) | 95 |   |
| Comprehensive  income                      |       | $                                | 1,323      |                            | $          | 1,212 |   | $ | 5,661 |   | $ | 6,214 |   |

 

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

 

Thefollowing table sets forth the computation of basic and diluted earnings (loss)per share for the three- and nine-months ended March 29, 2009, and March 30,2008:

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                            | ** ** | **March 29,**               | ** ** | **March 30,**              | ** ** | **March 29,** | ** ** | **March 30,** | ** ** |
| ** **                                            | ** ** | **2009**                         | ** ** | **2008**                        | ** ** | **2009** | ** ** | **2008** | ** ** |
| Numerator:                                            |       |                             |       |                            |       |   |   |   |   |
| Income from  continuing operations                    |       | $                                | 1,245      |                            | $          | 1,400 |   | $ | 4,240 |   | $ | 4,248 |   |
| Loss from  discontinued operations                    |       | (1,067                           | )          | (892                            | )          | (1,242 | ) | (661 | ) |
| Net income                                            |       | $                                | 178        |                            | $          | 508 |   | $ | 2,998 |   | $ | 3,587 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| Denominator:                                          |       |                             |       |                            |       |   |   |   |   |
| Weighted average  shares - basic earnings per share   |       | 30,866                           |       | 30,377                          |       | 30,774 |   | 30,339 |   |
| Add dilutive effective  of stock based compensation   |       | 26                               |       | 130                             |       | 81 |   | 174 |   |
| Weighted average  shares - diluted earnings per share |       | 30,892                           |       | 30,507                          |       | 30,855 |   | 30,513 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| Basic and  Diluted:                                   |       |                             |       |                            |       |   |   |   |   |
| Income per share  from continuing operations          |       | $                                | 0.04       |                            | $          | 0.05 |   | $ | 0.14 |   | $ | 0.14 |   |
| Loss per share  from discontinued operations          |       | $                                | (0.03      | )                               | $          | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) |
| Net income per  share                                 |       | $                                | 0.01       |                            | $          | 0.02 |   | $ | 0.10 |   | $ | 0.12 |   |

 

Outstanding options to purchase 2.5 million and 3.8million shares of common stock for the three months ended March 29, 2009,and March 30, 2008, respectively, have not been included in the Company’scomputation of weighted average shares for diluted earnings per share becausethe effect would have been anti-dilutive. Outstanding options to purchase 2.0million and 2.9 million shares of common stock for the nine months ended March 29,2009, and March 30, 2008, respectively, have not been included in theCompany’s computation of weighted average shares for diluted earnings per sharebecause the effect would have 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 nine-month periods ended March 29, 2009, and March 30,2008, are as follows:

 
| ** **                                         | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **March 29,**              | ** ** | **March 30,** | ** ** |
| ** **                                         | ** ** | **2009**                        | ** ** | **2008** | ** ** |
| Balance,  beginning of fiscal year                 |       | $                               | 493        |   | $ | 315 |   |
| Changes in  product warranties charged to earnings |       | 64                              |       | 662 |   |
| Use of reserve  for warranty obligations           |       | (198                            | )          | (536 | ) |
| Balance, end of  period                            |       | $                               | 359        |   | $ | 441 |   |

 

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

 

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**8.****                                      PensionExpense**

 

Pension expense related to the Company’s definedbenefit pension plan for the three- and nine-month periods ended March 29,2009, and March 30, 2008, follows:

 
| ** **                       | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                       | ** ** | **March 29,**               | ** ** | **March 30,**              | ** ** | **March 29,** | ** ** | **March 30,** | ** ** |
| ** **                       | ** ** | **2009**                         | ** ** | **2008**                        | ** ** | **2009** | ** ** | **2008** | ** ** |
| Interest Cost                    |       | $                                | 2,799      |                            | $          | 2,606 |   | $ | 8,397 |   | $ | 7,821 |   |
| Expected return  on plan assets  |       | (3,033                           | )          | (3,405                          | )          | (9,098 | ) | (10,213 | ) |
| Recognized net  actuarial losses |       | 1,080                            |       | 845                             |       | 3,240 |   | 2,532 |   |
|                             |       |                             |       |                            |       |   |   |   |   |
| Total net  pension expense       |       | $                                | 846        |                            | $          | 46 |   | $ | 2,539 |   | $ | 140 |   |

 

Undercurrent funding regulations, actuarial projections indicate that the Companywill be required to make contributions to the defined benefit pension plan ofapproximately $6.9 million during the remainder of calendar 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 will likely result inincreased total pension costs in the future and may also result in additionalfuture cash contributions in accordance with the U.S. Pension Protection Act of2006.  The Company is currentlyevaluating the impact of the continuing decline in the financial markets on itsconsolidated financial statements.  Basedon currently available information, the Company expects a significant increasein pension expense for fiscal 2010 from the current year projected pensionexpense of $3.4 million.

 

**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 in assessingthe realization of deferred tax assets.

 

TheCompany’s provision for income taxes for each of the three- and nine-monthperiods ended March 29, 2009 and March 30, 2008 includes $0.3 millionand $0.7 million, respectively, of deferred income tax expense related to theincrease in the Company’s deferred tax liability related to tax-deductibleamortization of goodwill.   The remainingtax provision is comprised of income taxes of the Company’s foreign subsidiaryin Canada.

 

**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 March 29, 2009.

 

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**Item2 — Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

 

**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 for material handling applicationsinclude drive systems, radio remote controls, and braking, collision-avoidance,and electrification subsystems, sold primarily to OEMs of overhead cranes andhoists.  We have a significant marketshare in North America in alternating current (“AC”) control systems and believewe have growth opportunities in direct current (“DC”) control systems forretrofit applications, wireless remote controls and in automating existingmanual material handling processes.

 

Our product offerings for elevator applications arecomprised of highly integrated subsystems and drives used to control motionprimarily in high-rise, high speed elevator applications.  Our products are sold mainly to elevator OEMsand we have a significant share of the available market for DC drives andsubsystems used in high-rise elevators for both new and retrofit projects.  We believe we have opportunities for growthin available elevator markets by introducing new energy-saving productofferings for DC applications, expanding the breadth of our product offering toinclude competitive low-end products for lower performance AC applications, andusing our new product offerings to expand geographically.

 

Our product offerings for energy delivery applicationsinclude power inverters for alternative energy applications, including windturbines and photovoltaic installations, which deliver AC power to the utilitygrid from generators inside wind turbines or from solar panels, or deliverpower for consumption at the source. Both the wind and solar markets have grown rapidly in North America overthe past several years as wind and solar power are becoming increasinglycompetitive from a cost standpoint with more traditional methods of powergeneration.  We believe our productofferings have us well positioned to take advantage of growth in alternativeenergy markets over the next several years.

 

**Continuing Operations**

 

We focus on a variety of key indicators to monitor ourbusiness performance.  These indicators include order rates, sales growth,gross profit margin, operating profit margin, net income, earnings per share,and working capital and cash flow measures.  These indicators are compared to our operating plans as well as to ourprior year actual results, and are used to measure our success relative to ourcompany objectives.  Our company objectives are to grow sales at least 10%on a year-over year basis, to achieve 30% gross margins and 10% operatingprofit margins, and to generate sufficient cash flow to fund our operations andmeet our obligations.

 

During the third quarter of fiscal 2009, we achieved2% year-over-year sales growth from the third quarter of fiscal 2008 due mainlyto continuing acceptance of new products in our served markets.  Third quarter fiscal 2009 sales were $25.1million compared to third quarter fiscal 2008 sales of $24.6 million, as weexperienced year-over-year sales growth in our material handling and energydelivery product lines.  In addition toincreased sales of mining products, we also completed shipment of the remainingunits under our initial order for E-Force wind inverters during the thirdquarter of fiscal 2009.  Fiscal 2009third quarter gross margin was 30.9% of net sales compared to fiscal 2008 thirdquarter gross margin of 27.6% of net sales, and operating profit margin was 4.9%in the third quarter of fiscal 2009 compared to 5.7% in the third quarter offiscal 2008.  The improvement in grossprofit, mainly due to higher volume and favorable sales mix, was largely offsetby an increase in our non-cash pension expense of $0.8 million, higherprofessional fees and increased provisions for incentive compensation.  As a result, our operating profit decreasedmodestly in the third quarter of fiscal 2009 compared to the third quarter offiscal 2008.  Our cash balances decreasedby $0.3 million during the third quarter of fiscal 2009.  However, the decrease reflects payment ofseveral non-recurring items, including $1.0 million for lease terminationcosts, $0.9 million for the second purchase price installment for the businessof Enrange LLC (“Enrange”) that we acquired in February 2008, and $0.7million in severance costs.  We also madea $2.4 million contribution to our defined benefit pension plan during thethird quarter of fiscal 2009.  We have nodebt outstanding as of March 29, 2009.

 

We believe that future increased profitability isdependent upon increased sales revenue, continued improvement in gross margins,and a recovery in the valuation of our pension plan assets, which wouldfavorably impact our periodic pension expense. Our past sales growth has been, and we believe our fiscal 2009 salesgrowth will continue to be, dependent on strong demand for material handlingproducts, our customers’ ability to obtain financing and willingness to investin the 

 

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current economic environment, and successfulintroduction and increasing acceptance of new products, mainly in the elevatorand alternative energy markets.  Recentlyintroduced product offerings such as our Quattro regenerative elevator driveand our AC traction drives for mining applications are gaining acceptance withcustomers in the marketplace.   However,the U.S. industrial slowdown and decline in capital spending began tonegatively impact our business during the third quarter of fiscal 2009.  Sales of our material handling productofferings, which comprise nearly 70% of our sales to date in fiscal 2009, areinfluenced by cyclical forces in the industrial marketplace, and we haverecently seen signs of a softening in demand in certain of our served markets,mainly in the automotive and primary metals industries.  We currently expect net sales in the fourthquarter of fiscal 2009 to decrease on a double-digit percentage basis sequentiallyfrom our third quarter net sales. Accordingly, in March 2009 we reduced our workforce by more than 30positions, approximately 10% of our workforce, and implemented a wage andsalary freeze that will remain in place throughout fiscal 2010.  We believe economic conditions will remainchallenging for the remainder of fiscal 2009 and throughout much of fiscal 2010and as a result, we currently expect fiscal 2010 net sales to decrease fromfiscal 2009 levels.  While we believethat sales of recently introduced products can continue to help mitigate theimpact of declining sales in our base business, we may pursue selectiveexternal growth opportunities to enhance or expand our product offerings,market channels or technical resources.

 

Gross margins in our continuing operations havehistorically been near or above 30% and we are targeting this level of grossmargin going forward.  Improvement ingross margins is mainly dependent upon favorable economic conditions, continuedacceptance of recently introduced product offerings by the marketplace, andsuccessful cost reduction actions related to recently introduced elevator andalternative energy product offerings and reductions in our manufacturing coststructure.

 

We intend to focus our development and marketingefforts on internal sales growth opportunities across all product lines, withan emphasis on energy efficient power products. While we have continued to focus on controlling our operating expenses, theseexpenses increased in the third quarter of fiscal 2009 over the third quarterof fiscal 2008, mainly due to higher book pension expense.  The higher pension expense will recurthroughout fiscal 2009, and our pension expense will increase in fiscal 2010from fiscal 2009 levels, mainly due to negative returns on plan assetsexperienced during fiscal 2008 and fiscal 2009 to date (see Note 8 of Notes toCondensed Consolidated Financial Statements).

 

We expect that fiscal 2009 operating margin as apercent of sales will likely be comparable to fiscal 2008 operating margins of6.8%, due mainly to higher gross profit offset by higher pension expense.  Through utilization of our net operating losscarryforwards for U.S. tax purposes, we believe the majority of our reportedoperating profit can be realized as net income.

 

**Discontinued Operations**

 

In the fourth quarter of fiscal 2008, we classifiedthe assets and liabilities of our telecom power systems (“TPS”) business asheld for sale, and the results of operations of the TPS business asdiscontinued operations.  Our TPS product offerings were focused onproviding back-up power for wireless applications.  We concluded we couldbetter achieve our sales growth objectives by redirecting certain resourcesdeployed in the TPS business to our product offerings in the material handling,elevator and energy delivery markets.  We completed the divestiture of theTPS business during the first quarter of fiscal 2009 (see Note 2 of Notes toCondensed Consolidated Financial Statements).

 

In addition to the operating results of the divestedTPS business, certain expenses related to previously divested businesses havealso been classified as discontinued operations in the accompanying condensedconsolidated financial statements and footnotes for all periods presented (seeNote 2 of Notes to Condensed Consolidated Financial Statements).  Expenses related to previously divestedbusinesses have historically included charges for an arbitration award in apatent infringement claim and related legal fees, as well as certain expensesfor environmental matters, asbestos claims and product liability claims (seeNote 4 of Notes to Condensed Consolidated Financial Statements).  All of these issues relate to businesses we no longer own and most relate toindemnification agreements we provided when we divested those businesses.

 

Going forward, our results of discontinued operationsmay include additional costs incurred related to businesses no longer owned,and may include additional costs above those currently estimated and accruedrelated to the divestiture of our TPS business and our power electronicsbusiness, divested in October 2006.

 

**CriticalAccounting Policies and Estimates**

 

There have been no material changes to our criticalaccounting policies and estimates from the information provided in Item 7,“Management’s Discussion and Analysis of Financial Condition and Results ofOperations”, included in our Annual Report on Form 10-K for the fiscalyear ended June 29, 2008.

 

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**Results of Operations - Three Months Ended March 29,2009 and March 30, 2008**

 

NetSales and Gross Profit

 

Netsales for the three months ended March 29, 2009, were $25.1 million, anincrease of 2.1% from the three months ended March 30, 2008, sales of$24.6 million.  The increase in sales wasdue to higher sales volumes in our material handling and energy deliveryproduct lines, offset by lower sales in our elevator product line.  Net sales by product line were as follows, inmillions:

 
| ** **               | ** ** | **Three Months Ended** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **March 29, 2009**     | ** ** | **March 30, 2008** | ** ** |
| Material  handling       |       | $                                | 16.2       |   | 65 | % | $ | 16.0 |   | 65 | % |
| Elevator motion  control |       | 4.8                              |       | 19 | % | 5.4 |   | 22 | % |
| Energy systems           |       | 4.1                              |       | 16 | % | 3.2 |   | 13 | % |
|                     |       |                             |       |   |   |   |   |   |   |
| Total net sales          |       | $                                | 25.1       |   | 100 | % | $ | 24.6 |   | 100 | % |

 

Grossprofit for the three months ended March 29, 2009, was $7.8 million, or30.9% of sales, versus $6.8 million, or 27.6% of sales, for the three monthsended March 30, 2008.  The increasein gross profit as a percentage of sales for the three months ended March 29,2009, as compared to the three months ended March 30, 2008, was due to improvedsales mix of material handling products, increased sales of higher marginmining products, and improved gross margins due to cost reductions on windinverters.

 

Researchand Development, Pension Expense, and Selling, General and Administrative

 

Researchand development (“R&D”) expense was $0.9 million, or 3.7% of sales, for thethree months ended March 29, 2009, comparable to R&D expense of $0.8million, or 3.3% of sales, for the three months ended March 30, 2008.

 

Pension expense was $0.8million for the three months ended March 29, 2009, versus a negligiblepension expense for the three months ended March 30, 2008 (see Note 8 ofNotes to Condensed Consolidated Financial Statements).

 

Selling, general andadministrative (“SG&A”) expense was $4.8 million (19.0% of sales) for thethree months ended March 29, 2009, versus $4.5 million (18.4% of sales)for the three months ended March 30, 2008. Selling expenses in the three months ended March 29, 2009, were$2.4 million, comparable to $2.3 million in the three months ended March 30,2008.  General and administrative (“G&A”)expense was $2.4 million for the three months ended March 29, 2009,compared to $2.2 million for the three months ended March 30, 2008, mainlydue to higher incentive compensation provisions.

 

Income from Operations

 

Incomefrom operations for the three months ended March 29, 2009, was $1.2million compared to income from operations of $1.4 million for the three monthsended March 30, 2008.  The declinein income from operations for the three months ended March 29, 2009, ascompared to the three months ended March 30, 2008, was due to higheroperating expenses, mainly pension expense partially offset by increased grossprofit on higher sales volume.

 

InterestIncome

 

Interestincome was negligible for the three months ended March 29, 2009.  Interest income was $0.2 million for the threemonths ended March 30, 2008.  Thedecrease in interest income in the three months ended March 29, 2009, ascompared to the three months ended March 30, 2008, was due to lower cashbalances held in short-term investments and reduced interest rates earned oncash balances.

 

Provision(Benefit) for Income Taxes

 

Werecorded a negligible income tax benefit for the three months ended March 29,2009, and a provision of $0.2 million for the three months ended March 30,2008.  The tax benefit for the three monthsended March 29, 2009, includes $0.2 million of tax benefit on our pretaxincome in Canada (see Note 9 of Notes to Condensed Consolidated FinancialStatements).  The tax provision in bothperiods includes non-cash deferred tax provisions of $0.3 million related tochanges in deferred tax liabilities from goodwill amortization.

 

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Incomefrom Continuing Operations

 

Werecorded income from continuing operations of $1.2 million for the three monthsended March 29, 2009, or $0.04 earnings per share on both a basic anddiluted basis, compared to income from continuing operations of $1.4 millionfor the three months ended March 30, 2008, or $0.05 earnings per share onboth a basic and diluted basis.

 

Lossfrom Discontinued Operations

 

We recorded a loss fromdiscontinued operations for the three months ended March 29, 2009, of $1.1million, or a $0.03 loss per share on both a basic and diluted basis, comparedto a loss from discontinued operations of $0.9 million, or a $0.03 loss pershare on both a basic and diluted basis, for the three months ended March 30,2008.  Loss from discontinued operationsin the three months ended March 29, 2009, includes a loss from terminationof a lease agreement of $1.0 million as well as expenses of $0.1 millionrelated to previously divested businesses. Loss from discontinued operations for the three months ended March 30,2008, includes $0.6 million of expense related to previously divestedbusinesses and losses of $0.3 million in the TPS business prior to itsdivestiture.

 

NetIncome

 

Ournet income was $0.2 million in the three months ended March 29, 2009, or$0.01 per share, basic and diluted, compared to net income of $0.5 million inthe three months ended March 30, 2008, or $0.02 per share on both a basicand diluted basis.

 

**Results of Operations - Nine Months Ended March 29,2009 and March 30, 2008**

 

NetSales and Gross Profit

 

Netsales for the nine months ended March 29, 2009, were $78.2 million, anincrease of 7.5% from the nine months ended March 30, 2008, sales of $72.8million.  The increase was due to highersales volume in each of our main product lines, and includes an increase insales of $1.7 million of products from the Enrange business.  Net sales by product line were as follows, inmillions:

 
| ** **               | ** ** | **Nine Months Ended** | ** ** |
|--------------------------|------------|---------------------------------|------------|
| ** **               | ** ** | **March 29, 2009**    | ** ** | **March 30, 2008** | ** ** |
| Material  handling       |       | $                               | 54.2       |   | 69 | % | $ | 51.3 |   | 70 | % |
| Elevator motion  control |       | 15.2                            |       | 20 | % | $ | 14.1 |   | 20 | % |
| Energy systems           |       | 8.8                             |       | 11 | % | $ | 7.4 |   | 10 | % |
|                     |       |                            |       |   |   |   |   |   |   |
| Total net sales          |       | $                               | 78.2       |   | 100 | % | $ | 72.8 |   | 100 | % |

 

Grossprofit for the nine months ended March 29, 2009, was $26.6 million, or34.0% of sales, versus $20.6 million, or 28.3% of sales, for the nine monthsended March 30, 2008.  The increasein gross profit as a percentage of sales for the nine months ended March 29,2009, as compared to the nine months ended March 30, 2008, 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 nine months ended March 30, 2008, wasnegatively impacted by start-up costs and manufacturing variances related toramp up of production of our wind inverter products.

 

Researchand Development, Pension Expense, and Selling, General and Administrative

 

R&Dexpense was $2.7 million, or 3.4% of sales, for the nine months ended March 29,2009, comparable to R&D expense of $2.5 million, or 3.4% of sales, for thenine months ended March 30, 2008. R&D expense for the nine months ended March 29, 2009, reflectshigher payroll costs due to headcount additions.

 

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Pension expense was $2.5million for the nine months ended March 29, 2009, versus pension expenseof $0.1 million for the nine months ended March 30, 2008 (see Note 8 ofNotes to Condensed Consolidated Financial Statements).

 

SG&A expense was$16.2 million (20.7% of sales) for the nine months ended March 29, 2009,compared to $13.7 million (18.8% of sales) for the nine months ended March 30,2008.  Selling expenses for the ninemonths ended March 29, 2009, were $7.6 million, an increase of $0.4million compared to $7.2 million for the nine months ended March 30, 2008,due to higher volume related commissions and trade show expenses.  G&A expense was $8.6 million for the ninemonths ended March 29, 2009, compared to $6.5 million for the nine monthsended March 30, 2008, due to restructuring costs related to managementreorganization of $1.0 million, and higher incentive compensation provisions of$1.1 million.

 

Income from Operations

 

Ourincome from operations for the nine months ended March 29, 2009, was $5.2million compared to income from operations of $4.4 million for the nine monthsended March 30, 2008.  The increasein income from operations for the nine months ended March 29, 2009, ascompared to the nine months ended March 30, 2008, was mainly due to highergross profit on increased sales volume, partially offset by increased SG&Aexpense.

 

InterestIncome and Expense

 

Interestincome was $0.1 million for the nine months ended March 29, 2009.  Interest income was $0.9 million and interestexpense was $0.3 million for the nine months ended March 30, 2008.  The decrease in interest income for the ninemonths ended March 29, 2009, as compared to the nine months ended March 30,2008, was due to lower cash balances and reduced interest rates earned on cashbalances.  Interest expense for the ninemonths ended March 30, 2008, was comprised mainly of deferred financingamortization.

 

Provisionfor Income Taxes

 

Werecorded an income tax provision of $1.1 million for the nine months ended March 29,2009, and $0.7 million for the nine months ended March 30, 2008.  The tax provision for the nine months ended March 29,2009, includes $0.4 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 $0.7 million related to changes in deferredtax liabilities from goodwill amortization.

 

Incomefrom Continuing Operations

 

Werecorded income from continuing operations of $4.2 million for the nine monthsended March 29, 2009, or $0.14 earnings per share on both a basic anddiluted basis, comparable to income from continuing operations of $4.2 millionfor the nine months ended March 30, 2008, also $0.14 earnings per share onboth a basic and diluted basis.

 

Lossfrom Discontinued Operations

 

Our loss fromdiscontinued operations for the nine months ended March 29, 2009, was $1.2million, or a $0.04 loss per share on both a basic and diluted basis, compareda loss from discontinued operations of $0.7 million, or a $0.02 loss per shareon both a basic and diluted basis, for the nine months ended March 30,2008.  Our loss from discontinuedoperations for the nine months ended March 29, 2009, includes a loss fromtermination of a lease agreement of $1.0 million, a loss on the September 2008disposal of our TPS business of $0.4 million, expenses related to previouslydivested businesses of $0.3 million, and losses in our TPS business of $0.1million, partially offset by a settlement gain of $0.5 million from a previousagreement with Federal-Mogul.  Our lossfrom discontinued operations for the nine months ended March 30, 2008, wascomprised of expenses related to previously divested businesses of $1.2 millionand losses in the TPS business of $0.9 million, partially offset by asettlement gain of $1.4 million from the Federal-Mogul agreement.

 

NetIncome

 

Ournet income was $3.0 million for the nine months ended March 29, 2009, or$0.10 earnings per share, basic and diluted, compared to net income of $3.6million for the nine months ended March 30, 2008, or a $0.12 earnings pershare on both a basic and diluted basis.

 

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**Liquidity and Capital Resources**

 

Our cash and cashequivalent balance, including restricted cash, increased $1.4 million duringthe nine months ended March 29, 2009, from $15.5 million at June 29,2008, to $16.9 million at March 29, 2009. Our primary sources of cash during the nine months ended March 29,2009, were income from operations of $5.2 million, $1.2 million from the saleof our TPS business, and a participation payment related to an annuity contractof $0.5 million, and our primary use of cash was for contributions of $6.8million to our defined benefit pension plan. During the nine months ended March 29, 2009, our net inventoriesincreased by $2.4 million, partially related to higher sales activity to datein fiscal 2009.  However, accountsreceivable decreased by $5.1 million from June 29, 2008, as our days salesoutstanding decreased to 48 days as of March 29, 2009.  Our capital expenditures in the nine monthsended March 29, 2009, were $0.7 million. While we may make further investments to increase capacity for andimprove efficiency in the production of wind inverters, we do not anticipatecapital expenditures in fiscal 2009 will exceed $1.5 million.  The expected amount of capital expenditurescould change depending upon changes in revenue levels, our financial conditionand 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 March 29, 2009.

 

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 $12.2 million from April 2008 through April 2009, fundedby cash generated from operations.  Underfunding regulations, current actuarial projections indicate that we will berequired to make additional contributions to the plan aggregating approximately$12.5 million in fiscal 2010.  Requiredcontributions beyond fiscal 2010 could still be significant, and will depend onfuture interest rate levels, values in equity and fixed income markets, and thelevel and timing of additional 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.

 

**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 similarwords and 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 and outsourcingof production capacity, capital spending, research and development expenses,the outcome of pending legal proceedings and environmental matters, payment ofcertain claims by insurance carriers, tax rates, sufficiency of funds to meetour needs including contributions to our defined benefit pension plan, and ourplans for future operations, as well as our assumptions relating to theforegoing, are all subject to risks and uncertainties.

 

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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 March 29, 2009 or March 30, 2008.

 

**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 wereeffective as of March 29, 2009; and (ii) no change in internalcontrol over financial reporting occurred during the quarter ended March 29,2009, that has materially affected, or is reasonably likely to materiallyaffect, such internal control over financial reporting.

 

Attached as exhibits tothis Quarterly Report on Form 10-Q are certifications of the Company’sChief Executive Officer and Chief Financial Officer, which are required inaccordance with Rule 13a-14 of the Securities Exchange Act of 1934.  This “Controls and Procedures” sectionincludes information concerning the controls and evaluation thereof referred toin the attached certifications, and it should be read in conjunction with theattached certifications for a more complete understanding of the topicspresented.

 

**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. Except as stated below, we believe that there have been no materialdevelopments with respect to these matters during the fiscal quarter ended March 29,2009.

 

As previously reported by the Company, Universal Lighting Technologies, Inc.(“ULT”) and Ole K. Nilssen (“Nilssen”)entered into a consent judgment in April,2008, for dismissal, on collateral estoppel grounds, of the patent infringementlawsuit filed by Nilssen against ULT.  Magnetek accepted a claim forindemnification from ULT subject to the terms of the sale agreement under whichULT purchased Magnetek’s lighting business in 2003.  ULT filed a motionseeking costs and attorney’s fees as the prevailing party, which motion wasdenied by the U.S. District Court on January 27, 2009, and ULT has filedan appeal of the order.

 

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**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 fiscalyear ended June 29, 2008.

 

Risk of De-Listing of ourCommon Stock by the NYSE

 

The continued listingstandards of the New York Stock Exchange (the “NYSE”) require us to maintain,among other things, either a market capitalization of at least $75 million or astockholders’ equity balance of at least $75 million during any 30-trading-dayperiod.  In November, 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, becauseover a 30-trading-day period, our average total market capitalization was lessthan $75 million and, during the same period, our stockholders’ equity was lessthan $75 million.  In accordance withapplicable NYSE rules, in January, 2009 we submitted to the NYSE a businessplan that demonstrates how we intend to regain compliance with the continuedlisting standards within 18 months.  Ourplan was accepted by the NYSE in February 2009.  If we are ultimately unable to regaincompliance with the continued listing standards within 18 months, our commonstock could become delisted from the NYSE. A delisting of our common stock from the NYSE could potentiallymaterially and adversely affect us by, among other things, reducing theliquidity and market price of our common stock, reducing the number ofinvestors willing to hold or acquire our common stock, and limiting our abilityto issue additional securities or obtain additional financing in thefuture.  If our common stock is delistedfrom the NYSE, or if it becomes apparent to us that we will be unable to regaincompliance with the continued listing standards within 18 months, we wouldlikely seek to move trading of our common stock to another national securitiesexchange or quotation system.

 

Financial Effect ofUnfunded Pension Obligations

 

Our defined benefitpension plan was underfunded by approximately $38 million as of June 29,2008.  During the first nine months offiscal 2009, based mainly on adverse conditions in the financial markets, ourpension plan assets decreased from $134 million at June 29, 2008, toapproximately $93 million as of March 29, 2009, resulting in an increasein our underfunded status.  The declinein fair value of the pension plan assets experienced to date during fiscal 2009will likely result in increased total pension costs in the future and may alsoresult in future required cash contributions by the Company greater than theamounts previously reported in our Annual Report on Form 10-K for theperiod ended June 29, 2008.  Theimpact on our fiscal 2010 expense will be determined based on the funded statusof our pension plan as of June 28, 2009. These increased pension costs and future cash contributions could have amaterial adverse effect on our results of operations, financial position andcash 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 third fiscal quarterended March 29, 2009.

 

**Item3 — Defaults upon Senior Securities**

 

None.

 

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

 

None.

 

**Item5 — Other Information**

 

As previously reported bythe Company, in December 2008, Riley Investment Management LLC (“RIM”)filed a Statement on Schedule 13D with the Securities and Exchange Commissionand delivered a letter to the Company’s Board of Directors (the “Board”)suggesting that the Board should commence a process to sell the Company andrequesting that the Board appoint a representative of RIM to serve on theBoard.  The Board considered RIM’ssuggestion and request for Board representation at its meeting in February,2009.  The Board concluded that it was in the best interests of theCompany’s shareholders to continue to follow the Company’s strategic planrather than to pursue a potential sale of the Company under current market andeconomic conditions.  On April 16,2009, RIM, Riley Investment Partners Master Fund, L.P., B. Riley &Co., LLC and B. Riley & Co. Retirement Trust executed aconfidentiality agreement with the Company, and Mr. Bryant Riley was inattendance as an observer at the Board meeting and certain committee meetings heldon May 6, 2009.  The Board hasdelegated consideration of RIM’s request for representation on the Board to theBoard’s Nominating and Corporate Governance Committee (the “Committee”), andthe Committee is in discussions with Mr. Riley.

 

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**Item6 - Exhibits**

 

(a)                                  Index to Exhibits

 

3.1                               Magnetek, Inc. Amended and RestatedBy-Laws  * *

 

3.2                               Magnetek, Inc. Amendments toBy-Laws  * *

 

10.1                         Form of Retention Agreement  * *

 

10.2                         Transition, Separation and CompleteRelease Agreement by and between the Company and David P. Reiland dated as of January 5,2009  * * *

 

31.1                         Certification of the Chief ExecutiveOfficer pursuant to Rule 13a-14(a) of the Securities Exchange Act of1934. *

 

31.2                         Certification of the Chief FinancialOfficer pursuant to Rule 13a-14(a) of the Securities Exchange Act of1934. *

 

32.1                         Certification pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

 

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*                                                                 Filedwith this Report on Form 10-Q.

 

* *                                                       Previouslyfiled with Form 8-K filed February 9, 2009 and incorporated herein bythis reference.

 

* * *                                             Previouslyfiled with Form 10-Q filed February 6, 2009 and incorporated hereinby this reference.

 

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                    | MAGNETEK, INC.                              |
|-------------------------|---------------------------------------------|
|                    | (Registrant)                                |
|                    |                                        |
|                    |                                        |
| Date:  May 8, 2009 | /s/ Peter M.  McCormick                     |
|                    | Peter M.  McCormick                         |
|                    | President and  Chief Executive Officer      |
|                    | (Duly authorized  officer of the Registrant |
|                    | and  principal executive officer)           |
|                    |                                        |
|                    |                                        |
| Date:  May 8, 2009 | /s/ Marty J.  Schwenner                     |
|                    | Marty J.  Schwenner                         |
|                    | Vice-President  and Chief Financial Officer |
|                    | (Duly authorized  officer of the Registrant |
|                    | and  principal financial officer)           |

 

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