FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- -----------
Commission File No. 1-6112
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NORTEK, INC.
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 05-0314991
- ------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Kennedy Plaza, Providence, RI 02903-2360
- ------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(401) 751-1600
- ------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- ------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last year)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---------- -----------
The number of shares of Common Stock outstanding as of
November 3, 1995 was 11,722,228. The number of shares of
Special Common Stock outstanding as of November 3, 1995 was
501,049.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar Amounts in Thousands)
Sept. 30, Dec. 31,
1995 1994
---- ----
(Unaudited)
ASSETS
Current Assets:
Unrestricted--
Cash and investments at cost which
approximates market $ 79,180 $ 77,106
Marketable securities available
for sale 19,573 27,974
Restricted--
Cash and investments at cost which
approximates market 9,434 9,337
Accounts receivable, less allowances
of $4,204 and $4,030 107,665 91,687
Inventories:
Raw materials 33,569 32,660
Work in process 11,244 9,497
Finished goods 51,100 53,191
------- -------
95,913 95,348
------- -------
Prepaid expenses 6,224 4,611
Other current assets 3,744 2,931
U. S. Federal prepaid income taxes 17,500 19,800
------- -------
Total Current Assets 339,233 328,794
------- -------
Property and Equipment, at cost:
Land 6,361 6,069
Buildings and improvements 56,138 55,639
Machinery and equipment 131,701 123,848
------- -------
194,200 185,556
Less--Accumulated depreciation 96,575 87,475
------- -------
Total Property and Equipment,
net 97,625 98,081
------- -------
Other Assets:
Goodwill, less accumulated amortiza-
tion of $23,281 and $21,459 71,081 72,682
Deferred debt expense 7,805 8,502
Other 8,735 11,158
------- -------
87,621 92,342
------- -------
$524,479 $519,217
======= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Continued)
(Dollar Amounts in Thousands)
Sept. 30, Dec. 31,
1995 1994
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Notes payable, current maturities
of long-term debt and other short-
term obligations $ 4,464 $ 4,629
Accounts payable 56,651 52,697
Accrued expenses and taxes, net 88,255 98,009
------- -------
Total Current Liabilities 149,370 155,335
------- -------
Other Liabilities:
Deferred income taxes 19,226 18,232
Other 7,450 7,909
------- -------
26,676 26,141
------- -------
Notes, Mortgage Notes and
Debentures Payable 219,583 219,951
------- -------
Stockholders' Investment:
Preference stock, $1 par value;
authorized 7,000,000 shares,
none issued --- ---
Common Stock, $1 par value;
authorized 40,000,000 shares,
15,834,766 shares and 15,814,246
shares issued 15,834 15,814
Special Common Stock, $1 par value;
authorized 5,000,000 shares,
785,177 and 802,097 shares issued 785 802
Additional paid-in capital 134,631 134,627
Retained earnings 11,666 766
Cumulative translation, pension and
other adjustments (3,165) (6,168)
Less - treasury common stock at
cost, 4,093,982 shares and
3,795,035 shares (29,210) (26,371)
- treasury special common stock
at cost, 272,684 shares and
271,576 shares (1,691) (1,680)
------- -------
Total Stockholders' Investment 128,850 117,790
------- -------
$524,479 $519,217
======= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
For The
Three Months Ended
------------------
Sept. 30, Oct. 1,
1995 1994
---- ----
(Unaudited)
Net Sales $193,567 $197,012
------- -------
Costs and Expenses:
Cost of products sold 143,891 138,937
Selling, general and
administrative expense 39,596 42,721
------- -------
183,487 181,658
------- -------
Operating earnings 10,080 15,354
Interest expense (5,945) (6,112)
Interest income 1,565 1,258
Gain on sale of investment securities 2,200 ---
------- -------
Earnings before provision
for income taxes 7,900 10,500
Provision for income taxes 2,700 4,100
------- -------
Earnings before extraordinary
loss 5,200 6,400
Extraordinary loss from debt
retirements --- (100)
------- -------
Net Earnings $ 5,200 $ 6,300
======= =======
Net Earnings (Loss) Per Share:
Earnings Before Extraordinary Loss--
Primary $ .41 $ .50
------- ------
Fully diluted $ .41 $ .50
------- ------
Extraordinary Loss--
Primary $ --- $ (.01)
------- ------
Fully diluted $ --- $ (.01)
------- ------
Net Earnings--
Primary $ .41 $ .49
====== ======
Fully diluted $ .41 $ .49
====== ======
Weighted Average Number of Shares:
Primary 12,579 12,730
====== ======
Fully diluted 12,582 13,059
====== ======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
For The
Nine Months Ended
------------------
Sept. 30, Oct. 1,
1995 1994
---- ----
(Unaudited)
Net Sales $572,582 $559,754
------- -------
Costs and Expenses:
Cost of products sold 424,032 394,283
Selling, general and
administrative expense 119,248 127,062
------- -------
543,280 521,345
------- -------
Operating earnings 29,302 38,409
Interest expense (17,784) (20,198)
Interest income 4,782 3,789
Net loss on marketable securities (200) ---
Gain on sale of investment securities 2,200 ---
------- -------
Earnings before provision
for income taxes 18,300 22,000
Provision for income taxes 7,400 9,400
------- -------
Earnings before extraordinary
gain 10,900 12,600
Extraordinary gain from debt
retirements --- 200
------- -------
Earnings before the cumulative
effect of an accounting change 10,900 12,800
Cumulative effect of an
accounting change --- 400
------- -------
Net Earnings $ 10,900 $ 13,200
======= =======
Net Earnings Per Share:
Earnings Before Extraordinary Gain--
Primary $ .86 $ .99
------- -------
Fully diluted $ .86 $ .98
------- -------
Extraordinary Gain--
Primary $ --- $ .02
------- -------
Fully diluted $ --- $ .02
------- -------
Cumulative Effect of an
Accounting Change--
Primary $ --- $ .03
------- -------
Fully diluted $ --- $ .03
------- -------
Net Earnings--
Primary $ .86 $ 1.04
======= =======
Fully diluted $ .86 $ 1.03
======= =======
Weighted Average Number of Shares:
Primary 12,663 12,697
====== ======
Fully diluted 12,664 13,212
====== ======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
For the
Nine Months Ended
------------------
Sept. 30, Oct. 1,
1995 1994
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $10,900 $ 13,200
------ -------
Adjustments to reconcile net earnings
to cash:
Depreciation and amortization 14,384 14,060
Net loss on marketable securities 200 ---
Gain on sale of investment securities (2,200) ---
Extraordinary gain from debt retirements --- (250)
Cumulative effect of an accounting
change --- (400)
Deferred federal income tax provision
(credit) from continuing operations 1,100 (3,200)
Deferred federal income tax provision
on discontinued operations --- 2,200
Deferred federal income tax provision
on extraordinary items --- 1,350
Changes in certain assets and liabilities,
net of effects from acquisitions
and dispositions:
Accounts receivable, net (15,970) (26,228)
Prepaids and other current assets (989) (3,436)
Inventories (2,309) (12,083)
Accounts payable 3,954 13,831
Accrued expenses and taxes (5,402) 11,550
Long-term assets, liabilities and
other, net 1,377 (5,917)
------- -------
Total adjustments to net earnings (5,855) (8,523)
------- -------
Net Cash Provided by Operating
Activities 5,045 4,677
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,120) (13,640)
Purchase of investments and marketable
securities (10,085) (5,032)
Proceeds from sale of investments and
marketable securities 20,772 ---
Proceeds relating to businesses sold
or discontinued, net 1,129 12,468
Change in restricted cash and
investments (416) (2,475)
Other, net 220 410
------- -------
Net Cash Provided by (Used in)
Investing Activities 500 (8,269)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Notes, net --- 209,195
Purchase and redemption of
debentures and notes payable --- (185,209)
Payment of borrowings (633) (8,185)
Purchase of Nortek Common and
Special Common Stock (2,850) ---
Other, net 12 (87)
------- -------
Net Cash Provided by (Used in)
Financing Activities (3,471) 15,714
------- -------
Net increase in unrestricted
cash and investments 2,074 12,122
Unrestricted cash and investments at
the beginning of the period 77,106 56,606
------- -------
Unrestricted cash and investments at the
end of the period $ 79,180 $ 68,728
======= =======
Interest paid $ 22,530 $ 21,436
======= =======
Income taxes paid, net $ 3,508 $ 4,530
======= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Nortek, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Investment
For the Three Months Ended September 30, 1995 and October 1, 1994
(Dollar Amounts in Thousands)
Cumulative
Translation,
Addi- Retained Pension
Special tional Earnings and Other
Common Common Paid-in (Accumulat- Adjust-Treasury
Stock Stock Capital ed Deficit) ments Stock
----- ----- ------- ----------- ----- -----
(Unaudited)
Balance, July 2, 1994 $15,788 $820 $134,627 $(10,134) $(5,390) $(28,051)
10,406 shares of
special common stock
converted into
10,406 shares of
common stock 10 (10) --- --- --- ---
1,744 shares of common
stock issued upon
exercise of stock
options 2 --- (2) --- --- ---
Translation adjust-
ment --- --- --- --- 430 ---
Unrealized decline in
marketable securities --- --- --- --- (261) ---
Net earnings --- --- --- 6,300 --- ---
------ --- ------- ------ ------ -------
Balance, Oct. 1, 1994 $15,800 $810 $134,625 $(3,834) $(5,221) $(28,051)
====== === ======= ====== ====== =======
Balance, July 1, 1995 $15,829 $790 $134,631 $ 6,466 $(3,185) $(28,051)
5,056 shares of
special common stock
converted into 5,056
shares of common
stock 5 (5) --- --- --- ---
299,851 shares of
treasury stock
acquired --- --- --- --- --- (2,850)
Translation adjust-
ment --- --- --- --- (18) ---
Unrealized appreci-
ation in marketable
securities --- --- --- --- 38 ---
Net earnings --- --- --- 5,200 --- ---
------ --- ------- ------ ----- -------
Balance, September 30,
1995 $15,834 $785 $134,631 $11,666 $(3,165) $(30,901)
====== === ======= ====== ====== =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Nortek, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Investment
For the Nine Months Ended September 30, 1995 and October 1, 1994
(Dollar Amounts in Thousands)
Cumulative
Translation,
Addi- Retained Pension
Special tional Earnings and Other
Common Common Paid-in (Accumulat- Adjust-Treasury
Stock Stock Capital ed Deficit) ments Stock
----- ----- ------- ----------- ------ -----
(Unaudited)
Balance, December 31,
1993 $15,759 $849 $134,627 $(17,034) $(2,143) $(28,051)
39,483 shares of
special common stock
converted into
39,483 shares of
common stock 39 (39) --- --- --- ---
1,744 shares of common
stock issued upon
exercise of stock
options 2 --- (2) --- --- ---
Translation adjustment --- --- --- --- (161) ---
Cumulative effect of
an accounting change
(see Note F) --- --- --- --- (400) ---
Unrealized decline in
marketable securities --- --- --- --- (2,517) ---
Net earnings --- --- --- 13,200 --- ---
------ --- ------- ------- ------ ------
Balance, October 1,
1994 $15,800 $810 $134,625 $ (3,834) $(5,221) $(28,051)
Balance, December 31, ======= ==== ======== ========= ======= ========
1994 $15,814 $802 $134,627 $ 766 $(6,168) $(28,051)
16,920 shares of
special common
stock converted
into 16,920 shares
of common stock 17 (17) --- --- --- ---
3,600 shares of
common stock issued
upon exercise of
stock options 3 --- 4 --- --- ---
300,055 shares of
treasury stock
acquired --- --- --- --- --- (2,850)
Translation adjust-
ment --- --- --- --- 481 ---
Unrealized appreci-
ation in marketable
securities --- --- --- --- 2,522 ---
Net earnings --- --- --- 10,900 --- ---
Balance, September 30, ------- ---- -------- ------- ------- -------
1995 $15,834 $785 $134,631 $11,666 $(3,165) $(30,901)
====== === ======= ======= ====== =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 AND October 1, 1994
(A) The unaudited condensed consolidated financial statements
presented ("Unaudited Financial Statements") have been prepared
by Nortek, Inc. and subsidiaries (the "Company") without audit
and, in the opinion of management, reflect all adjustments of a
normal recurring nature necessary for a fair statement of the
interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been omitted, although, the Company believes that the disclosures
included are adequate to make the information presented not
misleading. Certain amounts in the Unaudited Financial
Statements for the prior periods have been reclassified to
conform to the presentation at September 30, 1995. It is
suggested that these Unaudited Financial Statements be read in
conjunction with the financial statements and the notes included
in the Company's latest Annual Report on Form 10-K.
(B) In the fourth quarter of 1995, several of the Company's wholly
owned subsidiaries completed the acquisition of the assets,
subject to certain liabilities, of Rangaire Company of Cleburne,
Texas ("Rangaire"), all the capital stock of Best S.p.A. of
Fabriano, Italy and related entities ("Best") and all the capital
stock of Venmar Ventilation, Inc. of Drummondville, Quebec,
Canada ("Venmar"). The aggregate purchase price for these
acquisitions was approximately $36,700,000, consisting of cash of
approximately $26,000,000 and future payments of approximately
$10,700,000 (including approximately $7,500,000 payable in
January 1996). Certain of the selling shareholders of these
acquisitions are entitled to additional purchase price payments
of up to approximately $7,900,000, depending on subsequent
operating results of such acquisitions.
Approximately $9,600,000 of the cash was borrowed under the terms
of the secured Line of Credit of the Company's wholly owned
subsidiary, Broan Limited.
Assuming that these acquisitions had occurred on January 1, 1994,
the following table represents the unaudited pro forma operating
results for the nine months ended September 30, 1995 and October
1, 1994 and for the year ended December 31, 1994:
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 AND October 1, 1994
(Continued)
Nine
Months Ended Year Ended
------------ ------------
Sept. 30, Oct. 1, Dec. 31,
1995 1994 1994
---- ---- ----
(Amounts in Thousands Except
Per Share Amounts)
Net Sales $669,269 $643,139 $851,249
Earnings from Continuing
Operations $ 10,800 $ 14,800 $ 19,900
Fully Diluted Earnings
Per Share $ .85 $ 1.15 $ 1.55
In computing the pro forma results, earnings from continuing
operations have been reduced by net interest income on the
aggregate cash portion of the purchase price of such acquisitions
at the historical rates earned by the Company during these
periods, and by interest expense on indebtedness incurred in
connection with the acquisitions for all periods presented, net
of the tax effect. Earnings from continuing operations have also
been reduced by amortization of goodwill and reflect net
adjustments to depreciation expense, as a result of an increase
to estimated fair market value of property and equipment and the
Company's basis of accounting upon acquisition.
The pro forma information presented does not purport to be
indicative of the results which would have been reported if the
acquisitions had occurred on January 1, 1994, or which may be
reported in the future.
(C) On January 14, 1994, the Company redeemed $22,600,000 principal
amount of its 11 1/2% Senior Subordinated Debentures due May
1994, which were called for redemption in December 1993. In
February 1994, the Company sold in a public offering $218,500,000
of its 9 7/8% Senior Subordinated Notes due 2004 ("9 7/8% Notes")
at a slight discount. On March 24, 1994, a portion of the net
proceeds from the sale of the 9 7/8% Notes was used to redeem
approximately $153,000,000 of certain of the Company's
outstanding principal amount of indebtedness, and to pay accrued
interest. Interest expense, net of interest income, in the first
quarter and first nine months of 1994 was approximately
$1,300,000 greater than it would have been had the debt
redemption occurred on the same day as the financing. Earnings
from continuing operations and fully diluted earnings per share
for the nine months ended October 1, 1994, as adjusted for the
pro forma effect of the debt financing and the debt redemptions
would have been $13,500,000 and $1.05, respectively.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 AND October 1, 1994
(Continued)
In computing the pro forma earnings from continuing operations,
interest expense on the indebtedness redeemed during the period
that such indebtedness was outstanding was excluded from
operating results at an average interest rate of approximately
13.5% (including amortization of debt discounts and deferred debt
expense), net of the tax effect. Interest expense was included
on the 9 7/8% Notes at a rate of approximately 9 7/8%, plus
amortization of deferred debt expense and debt discount, net of
the tax effect. Investment income was assumed earned on the
remaining cash proceeds from the debt financing at a rate of
3.5%.
On March 31, 1994, the Company sold all the capital stock of its
Dixieline Lumber Company subsidiary ("Dixieline") for
approximately $18,800,000 in cash and $6,000,000 in preferred
stock of the purchaser. In the third quarter of 1993, the
Company provided a valuation reserve to reduce the Company's net
investment in Dixieline to estimated net realizable value. No
additional loss in 1994 was necessary in connection with the
sale.
In the third quarter of 1995, the Company sold its investment in
the preferred stock of Dixieline, which resulted in a pre-tax
gain of approximately $2,200,000 ($.17 per share, net of tax).
(D) In the second quarter of 1994, the Company recorded pre-tax
income of approximately $3,200,000 ($1,900,000 after-tax, or $.14
per share) resulting from the settlement of certain insurance
claims and disputes.
(E) On October 24, 1994, the Company redeemed its remaining
outstanding $6,373,000 principal amount of 7 1/2% Convertible
Debentures due May 1, 2006 ("7 1/2% Debentures"), which were
called for redemption in September 1994, plus paid accrued
interest and a slight redemption premium. This call for
redemption resulted in an extraordinary loss of approximately
$100,000, net of income taxes of $100,000 ($.02 per share) in the
third quarter of 1994.
During the second quarter of 1994, the Company purchased in the
open market approximately $5,121,000 principal amount of
its 7 1/2% Debentures. During the first quarter of 1994, the
Company purchased, at a discount, in the open market
approximately $4,000,000 principal amount of its 7 1/2%
Debentures. These transactions resulted in an extraordinary loss
of approximately $100,000, net of income taxes of $50,000 ($.01
per share) in the second quarter and an extraordinary gain of
approximately $400,000, net of income taxes of $200,000 ($.03 per
share) in the first quarter of 1994.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 AND October 1, 1994
(Continued)
(F) On January 1, 1994, the Company adopted the accounting
requirements of Statement of Financial Accounting Standards
("SFAS") No. 115 "Accounting for Certain Investments in Debt and
Equity Securities", and recorded as income the accumulated
unrealized marketable security reserve recorded at December 31,
1993 of approximately $400,000 ($.03 per share) as the cumulative
effect of an accounting change. Under the new accounting method,
the Company records unrealized gains or losses on such investment
securities as adjustments to stockholders' investment.
Previously, such gains or losses were recorded in the Company's
statement of operations. At September 30, 1995, the accumulated
reduction in the Company's stockholders' investment under the new
accounting method for unrealized losses was approximately
$857,000 as compared to approximately $3,379,000 at December 31,
1994.
During the second quarter of 1995, the Company recorded a pre-tax
loss of approximately $200,000 ($.02 per share, net of tax) on
the sale of marketable securities. At September 30, 1995, there
were no unrealized gains on the Company's marketable securities.
(G) The tax effect of temporary differences which gave rise to
significant portions of deferred income tax assets and
liabilities as of September 30, 1995 and December 31, 1994 is as
follows:
Sept. 30, Dec. 31,
1995 1994
---- ----
(Amounts in Thousands)
U. S. Federal Prepaid (Deferred)
Income Tax Assets Arising From:
Accounts receivable $ 1,456 $ 1,399
Inventory (100) (468)
Insurance reserves 5,234 7,688
Other reserves, liabilities
and assets, net 10,910 11,181
------ ------
$17,500 $19,800
====== ======
Deferred (Prepaid) Income Tax
Liabilities Arising From:
Property and equipment, net $12,489 $12,406
Prepaid pension assets 1,116 1,230
Insurance reserves (521) (643)
Other reserves, liabilities and
assets, net 3,621 2,476
Capital loss carryforward (6,898) (6,217)
Unrealized loss on business sold --- (604)
Other tax assets (2,266) (3,642)
Valuation allowances 11,685 13,226
------ ------
$19,226 $18,232
====== ======
At September 30, 1995, the Company has a capital loss
carryforward of approximately $17,700,000, which expires in the
year 1997. The Company has provided a valuation allowance equal
to the tax effect of capital loss carryforwards and certain other
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 AND October 1, 1994
(Continued)
tax assets, since realization of these tax assets cannot be
reasonably assured. At September 30, 1995, the Company has
approximately $2,000,000 of net U. S. Federal prepaid income tax
assets which are expected to be realized through future operating
earnings.
The table below reconciles the provision for income taxes from
continuing operations at the federal statutory income tax rate to
the actual provision for income taxes:
Three Nine
Months Ended Months Ended
------------ ------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
---- ---- ---- ----
(Amounts in Thousands)
Provision for income taxes
at the federal statutory
rate $2,765 $3,675 $6,405 $7,700
Net change from statutory
rate:
State taxes, net of federal
tax effect 195 66 585 650
Non-deductible amortization
for tax purposes 184 184 553 553
Other non-deductible
items 163 91 243 273
Change in valuation reserve (730) 132 (660) 123
Tax effect on foreign income 73 142 224 292
Other, net 50 (190) 50 (191)
----- ----- ----- -----
Provision for income taxes
from continuing operations $2,700 $4,100 $7,400 $9,400
===== ===== ===== =====
(H) Net earnings per share amounts have been computed using the
weighted average number of common and common equivalent shares
outstanding during each year. Fully diluted earnings per share
calculations for 1994 include the effect of convertible
debentures (and the reduction in related interest expense).
(I) At September 30, 1995, approximately $30,300,000 was available
for the payment of cash dividends or stock payments under the
terms of the Company's Indenture governing the 9 7/8% Notes.
(J) On September 29, 1995, the Company acquired 298,772 shares of its
Common Stock and 971 shares of its Special Common Stock in a
negotiated transaction for approximately $2,848,000.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 AND October 1, 1994
(Continued)
(K) The following table summarizes the unaudited activity of
businesses sold or discontinued included in the accompanying
unaudited condensed consolidated statement of cash flows:
Nine Months Ended
------------------
Sept. 30, Oct. 1,
1995 1994
---- ----
(Amounts in Thousands)
Fair value of assets sold $ --- $39,439
Non-cash proceeds received as part
of the proceeds --- (6,000)
Liabilities assumed by the purchaser --- (16,143)
Cash proceeds from the sale of
Dixieline preferred stock (See
Note C) 2,874 ---
Cash paid relating to businesses
sold or discontinued (1,745) (4,828)
------ ------
Net cash proceeds relating to
businesses sold or discontinued $ 1,129 $12,468
====== ======
Significant unaudited non-cash financing and investing activities
excluded from the accompanying unaudited condensed consolidated
statement of cash flows include an increase of approximately
$2,522,000 in the first nine months ended September 30, 1995 and
a decline of approximately $2,517,000 in the first nine months of
1994 in the fair market value of marketable securities available
for sale.
Depreciation and amortization included in the Company's unaudited
condensed consolidated statement of cash flows for the nine
months ended September 30, 1995 and October 1, 1994, includes
approximately $800,000 and approximately $1,100,000 of
amortization of deferred debt expense and debt discount,
respectively, which is recorded as interest expense in the
accompanying unaudited condensed consolidated statement of
operations.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
The Company is a diversified manufacturer of residential and
commercial building products, operating within three principal product
groups: the Residential Building Products Group; the Air Conditioning
and Heating Products Group; and the Plumbing Products Group. Through
these product groups, the Company manufactures and sells, primarily in
the United States and Canada, a wide variety of products for the
residential and commercial construction, manufactured housing, and the
do-it-yourself and professional remodeling and renovation markets.
Results of Operations
The tables below and on the next page set forth, for the periods
presented, (a) certain unaudited consolidated operating results, (b)
the percentage change of such results as compared to the prior
comparable period, (c) the percentage which such results bear to net
sales and (d) the change of such percentages as compared to the prior
comparable period. The results for the third quarter ended September
30, 1995 are not necessarily indicative of the results of operations
to be expected for any other interim period or the full year.
Change in the
Third Quarter Ended Third Quarter 1995
Sept. 30, Oct. 1, As Compared to 1994
1995 1994 $ %
---- ---- ----- ------
(Dollar amounts in millions)
Net sales $193.6 $197.0 (3.4) (1.7)
Cost of products sold 143.9 138.9 (5.0) (3.6)
Selling, general and
administrative expense 39.6 42.8 3.2 7.5
Operating earnings 10.1 15.3 (5.2) (34.0)
Interest expense (5.9) (6.1) .2 3.3
Interest income 1.5 1.3 .2 15.4
Gain on sale of investment
securities 2.2 --- 2.2 ---
Earnings before provision
for income taxes 7.9 10.5 (2.6) (24.8)
Provision for income taxes 2.7 4.1 1.4 34.1
Earnings before extra-
ordinary loss 5.2 6.4 (1.2) (18.8)
Extraordinary loss from
debt retirements --- (.1) .1 100.0
---- ---- ---- -----
Net earnings $ 5.2 $ 6.3 (1.1) (17.5)
==== ==== ===== =====
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
Percentage Change in
of Net Sales Percentage
Third Quarter Ended for the Third
Sept. 30, Oct. 1, Quarter 1995
1995 1994 As Compared to 1994
---- ---- -------------------
Net sales 100.0% 100.0% ---
Cost of products sold 74.3 70.5 (3.8)
Selling, general and
administrative expense 20.5 21.7 1.2
Operating earnings 5.2 7.8 (2.6)
Interest expense (3.0) (3.1) .1
Interest income .8 .7 .1
Gain on sale of investment
securities 1.1 --- 1.1
Earnings before provision
for income taxes 4.1 5.4 (1.3)
Provision for income taxes 1.4 2.1 .7
Earnings before extraordinary
loss 2.7 3.3 (.6)
Extraordinary loss from debt
retirements --- (.1) .1
---- ---- ----
Net earnings 2.7 3.2 (.5)
==== ==== ====
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
The tables below and on the next page set forth, for the periods presented,
(a) certain unaudited consolidated operating results, (b) the percentage
change of such results as compared to the prior comparable period, (c) the
percentage which such results bear to net sales and (d) the change of such
percentages as compared to the prior comparable period. The results for
the nine months ended September 30, 1995 are not necessarily indicative of
the results of operations to be expected for any other interim period or
the full year.
Change in the First
Nine Months Ended Nine Months of 1995
Sept. 30, Oct. 1, As Compared to 1994
1995 1994 $ %
---- ---- ----- ------
(Dollar amounts in millions)
Net sales $572.5 $559.8 12.7 2.3
Cost of products sold 424.0 394.3 (29.7) (7.5)
Selling, general and
administrative expense 119.2 127.1 7.9 6.2
Operating earnings 29.3 38.4 (9.1) (23.7)
Interest expense (17.8) (20.2) 2.4 11.9
Interest income 4.8 3.8 1.0 26.3
Net loss on marketable
securities (.2) --- (.2) *
Gain on sale of investment
securities 2.2 --- 2.2 ---
Earnings before provision
for income taxes 18.3 22.0 (3.7) (16.8)
Provision for income taxes 7.4 9.4 2.0 21.3
Earnings before extraordinary
gain and the cumulative
effect of an accounting
change 10.9 12.6 (1.7) (13.5)
Extraordinary gain from debt
retirements --- .2 (.2) (100.0)
Cumulative effect of an
accounting change --- .4 (.4) (100.0)
----- ----- ---- -----
Net earnings $ 10.9 $ 13.2 (2.3) ( 17.4)
===== ===== ==== ======
*Not meaningful
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
Percentage of
Net Sales Change in Percentage
Nine Months Ended for the First Nine
Sept. 30, Oct. 1, Months of 1995
1995 1994 As Compared to 1994
---- ---- -------------------
Net sales 100.0% 100.0% ---
Cost of products sold 74.1 70.5 (3.6)
Selling, general and
administrative expense 20.8 22.7 1.9
Operating earnings 5.1 6.8 (1.7)
Interest expense (3.1) (3.6) .5
Interest income .8 .7 .1
Net loss on marketable
securities --- --- ---
Gain on sale of investment
securities .4 --- .4
Earnings before provision
for income taxes 3.2 3.9 (.7)
Provision for income taxes 1.3 1.7 .4
Earnings before extraordinary
gain and the cumulative
effect of an accounting
change 1.9 2.2 (.3)
Extraordinary gain from debt
retirements --- .1 (.1)
Cumulative effect of an
accounting change --- .1 (.1)
---- ---- ----
Net earnings 1.9 2.4 (.5)
==== ==== ====
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
The following table presents the net sales for the Company's principal
product groups for the third quarter and nine months ended September 30,
1995 as compared to the third quarter and nine months ended October 1, 1994
and the amount and the percentage change of such results as compared to the
prior comparable period. The results of operations for the third quarter
and first nine months of 1995 are not necessarily indicative of the results
of operations to be expected for any other interim period or the full year.
Third Quarter Ended
----------------------------------------
Sept. 30, Oct. 1, Increase (Decrease)
1995 1994 $ %
---- ---- ----- -----
(000's omitted)
Net Sales:
Residential Building
Products $ 64,518 $ 67,832 $(3,314) (4.9)
Air Conditioning and
Heating Products 95,707 93,573 2,134 2.3
Plumbing Products 33,342 35,607 (2,265) (6.4)
------- ------- ------ ----
Total $193,567 $197,012 $(3,445) (1.7)
======= ======= ====== ====
Nine Months Ended
----------------------------------------
Sept. 30, Oct. 1, Increase (Decrease)
1995 1994 $ %
---- ---- ----- -----
(000's omitted)
Net Sales:
Residential Building
Products $194,597 $199,271 $(4,674) (2.3)
Air Conditioning and
Heating Products 277,848 258,082 19,766 7.7
Plumbing Products 100,137 102,401 (2,264 (2.2)
------- ------- ------ ----
Total $572,582 $559,754 $12,828 2.3
======= ======= ====== ====
Operating Results
Net sales decreased approximately $3,450,000, or approximately 1.7%, and
increased approximately $12,800,000, or approximately 2.3%, for the third
quarter and the first nine months of 1995, respectively, as compared to
1994. The increase in net sales in the first nine months was due
principally as a result of increased shipments of new and replacement air
conditioning and heating (HVAC) products to manufactured housing customers,
increased sales levels of commercial and industrial HVAC products by the
Air Conditioning and Heating Products Group, and increased sales volume of
residential HVAC products. These increases were partially offset by lower
sales levels in the Residential Building Products Group and lower sales
volume and prices of vitreous china products in the Plumbing Products
Group. The decrease in net sales in the third quarter is due primarily as
a result of lower sales levels in the Residential Building Products Group,
lower sales volume and prices of vitreous china products in the
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
Plumbing Products Group and a decrease in the sales volume of residential
HVAC products. These decreases were partially offset by increased sales to
manufactured housing customers and increased sales levels of commercial and
industrial HVAC products by the Air Conditioning and Heating Products
Group.
Cost of products sold as a percentage of net sales increased from
approximately 70.5% in the third quarter of 1994 to approximately 74.3% in
the third quarter of 1995, and increased from approximately 70.5% in the
first nine months of 1994 to approximately 74.1% in the first nine months
of 1995 primarily as a result of higher material costs in each of the
Company's operating groups in both periods of 1995. Increased direct labor
and overhead costs in the Air Conditioning and Heating Products Group also
contributed to the increased percentages. To a lesser extent, decreased
sales levels (principally in the third quarter) without a proportionate
decrease in overhead costs in Plumbing Products was also a factor. The
increases in the percentages were partially offset by lower direct labor
and overhead costs, in Residential Building Products.
Selling, general and administrative expense as a percentage of net sales
decreased from approximately 21.7% in the third quarter of 1994 to
approximately 20.5% in the third quarter of 1995 and decreased from
approximately 22.7% in the first nine months of 1994 to approximately 20.8%
in the first nine months of 1995. The decreases in selling, general and
administrative expense as a percentage of net sales in the third quarter
and first nine months of 1995 were principally due to increased HVAC
product net sales, principally to residential and manufactured housing
customers, without a proportionate increase in expense. To a lesser
extent, decreased expenses in the Plumbing Products Group and lower non-
segment expense were also factors. These decreases in the percentage were
partially offset by the effect of approximately $3,200,000 of income in
1994 from the settlement of insurance claims and disputes.
Segment earnings were approximately $11,700,000 for the third quarter of
1995, as compared to approximately $17,700,000 for the third quarter of
1994, and approximately $35,800,000 for the first nine months of 1995 as
compared to approximately $46,900,000 for the first nine months of 1994.
The decline in segment earnings for both periods was due principally to
increased material costs in each of the Company's operating groups,
partially offset by higher earnings from increased sales volume of HVAC
products, without a proportionate increase in expense, and lower selling,
general and administrative expense (as a percentage of net sales) in the
Air Conditioning and Heating Products and Plumbing Products Groups.
Approximately $1,600,000 of the decline in segment earnings in the first
nine months resulted from the effect of income in the second quarter of
1994 from the settlement of insurance claims and disputes.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
Operating earnings in the third quarter of 1995 decreased approximately
$5,200,000, or approximately 34.0%, as compared to the third quarter of
1994 and decreased approximately $9,100,000, or approximately 23.7%, for
the first nine months of 1995 as compared to 1994, primarily due to
approximately $3,200,000 (including $1,600,000 relating to the Company's
operating segments) of income in the second quarter of 1994 from the
settlement of insurance claims and disputes and from the factors discussed
above.
Interest expense decreased approximately $200,000, or approximately 3.3% in
the third quarter of 1995, as compared to 1994 and approximately
$2,400,000, or approximately 11.9% in the first nine months of 1995, as
compared to 1994. In February 1994, the Company sold in a public offering
$218,500,000 of its 9 7/8% Notes and used a portion of the proceeds to
redeem, on March 24, 1994 approximately $153,000,000 of certain of the
Company's outstanding indebtedness. Interest expense (net of interest
income) for the first nine months of 1994 was approximately $1,300,000
greater than it would have been had the debt redemption occurred on the
same day as the financing. The effect of the redemption of certain other
outstanding indebtedness in the first nine months of 1994 was also a
factor. (See Note C and E of the Notes to Unaudited Condensed Consolidated
Financial Statements included elsewhere herein.)
Interest income increased approximately $200,000, or approximately 15.4%,
and approximately $1,000,000, or approximately 26.3%, for the third quarter
and first nine months of 1995, respectively, as compared to the same
periods in 1994, principally due to higher yields earned on short-term
investments and marketable securities, partially offset by lower average
invested balances of short-term investments and marketable securities.
The provision for income taxes was approximately $2,700,000 for the third
quarter of 1995, as compared to approximately $4,100,000 for the third
quarter of 1994 and was approximately $7,400,000 for the first nine months
of 1995, as compared to approximately $9,400,000 for 1994. The income tax
rates principally differ from the United States federal statutory rate of
35% as a result of state income tax provisions, nondeductible amortization
expense (for tax purposes), the effect of foreign income tax on foreign
source income and the reversal in the third quarter of 1995 of certain tax
valuation reserves no longer required (See Note G of the Notes to Unaudited
Condensed Consolidated Financial Statements included elsewhere herein.)
The Company recorded an extraordinary loss of approximately $100,000 in the
third quarter of 1994 and an extraordinary gain of approximately $200,000
in the first nine months of 1994. The extraordinary loss and gain resulted
from the purchase in the open market of the Company's 7 1/2% Convertible
debentures. (See Note E of the Notes to Unaudited Condensed Consolidated
Financial Statements included elsewhere herein.)
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
The cumulative effect of an accounting change resulted in earnings of
approximately $400,000 in the first nine months of 1994 from the adoption
of SFAS No. 115. (See Note F of the Notes to Unaudited Condensed
Consolidated Financial Statements included elsewhere herein.)
Inflation has not had a material effect on the Company's results of
operations and financial condition until mid-1994, when the Company
experienced increases in certain costs and expenses including raw material
costs. In the third quarter and first nine months of 1995, material costs
as a percentage of net sales increased by 2.8% and 3.0%, respectively, as
compared to the third quarter and first nine months of 1994. The Company
has not been able to and there can be no assurance that the Company will be
able to sufficiently increase its sales prices in the future.
Liquidity and Capital Resources
The Company's primary sources of liquidity in 1995 and 1994 have been funds
provided by subsidiary operations, unrestricted short-term investments and
marketable securities and in 1994 included funds from the sale of 9 7/8%
Notes (See Note C of the Notes to the Unaudited Condensed Consolidated
Financial Statements included elsewhere herein) and proceeds from a
business sold. Unrestricted cash, investments and marketable securities
were approximately $98,753,000 at September 30, 1995 as compared to
$105,080,000 at December 31, 1994. The Company's Canadian subsidiary,
Broan Limited, has a $20,100,000 Canadian (approximately $15,000,000 U. S.
at exchange rates prevailing at September 30, 1995) secured line of credit
("Line of Credit"). Borrowings under the Line of Credit are available for
working capital and other general corporate purposes. The Line of Credit
contains covenants requiring Broan Limited to maintain (i) a ratio of
earnings before interest and taxes to interest of at least 2 to 1, (ii) a
working capital ratio of at least 1.5 to 1 and (iii) a debt to equity ratio
of no higher than 3 to 1. The Line of Credit also limits the annual amount
of capital expenditures which Broan Limited may make to $1,000,000 Canadian
(approximately $750,000 U. S. at exchange rates prevailing at September 30,
1995). Broan Limited pays a commitment fee of .25% per annum on the
unutilized portion of the Line of Credit payable monthly on a pro rata
basis, and the Line of Credit is subject to an annual review by the lender
in April of each year. At November 3, 1995, borrowings outstanding under
the Line of Credit were approximately $13,000,000 Canadian (approximately
$9,600,000 U.S. at exchange rates prevailing at November 3, 1995).
On October 9, 1995, the Company announced the completion of the purchase of
the assets, subject to certain liabilities, of Rangaire Company of
Cleburne, Texas ("Rangaire"). Rangaire manufactures and sells kitchen
range hoods and lighting fixtures to appliance and original equipment
manufacturing customers and electrical distributors. Rangaire also
manufactures lighting fixtures for distribution primarily in the
Southeastern United States.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
On October 31, 1995, certain wholly owned subsidiaries of the Company
completed the acquisition of the capital stock of Best S.p.A. and related
entities ("Best"). Best is a manufacturer of Eurostyle kitchen range hoods
headquartered in Fabriano, Italy. Best manufactures range hoods which are
distributed to Eastern and Western Europe, North and South America, the
Middle East, Australia, New Zealand and the Orient. On November 1, 1995,
Broan Ltd., a wholly owned subsidiary of the Company acquired the stock of
Venmar Ventilation, Inc. of Canada, along with related entities ("Venmar").
Venmar, a leader in the indoor air quality market in Canada, manufactures
continuous ventilation systems and energy recovery ventilators for
distribution primarily to Canadian and United States markets. Venmar is
headquartered in Drummondville, Quebec, Canada.
The aggregate purchase price for these acquisitions was approximately
$36,700,000, consisting of cash of approximately $26,000,000 and future
payments of approximately $10,700,000 (including approximately $7,500,000
payable in January 1996). Certain of the selling shareholders of these
acquisitions are entitled to additional purchase price payments of up to
approximately $7,900,000, depending on subsequent operating results of such
acquisitions. Approximately $9,600,000 of the cash was borrowed under the
terms of the Broan Limited Line of Credit.
The Company believes that cash flow from subsidiary operations,
unrestricted cash and marketable securities and borrowings under the Line
of Credit or under new credit facilities or arrangements which may be
entered into will provide sufficient liquidity to meet the Company's
working capital, capital expenditure, debt service and other business needs
through the next 12 months. At November 3, 1995, approximately $1,800,000
Canadian (approximately $1,300,000 U. S. at exchange rates prevailing at
November 3, 1995), in the aggregate is available to the Company under the
Line of Credit.
The Company's investment in marketable securities at September 30, 1995
consisted primarily of investments in United States Treasury securities.
(See Note F of Notes to Unaudited Condensed Consolidated Financial
Statements included elsewhere herein.) At September 30, 1995,
approximately $9,434,000 of the Company's cash and investments were pledged
as collateral with insurance companies and were classified as restricted in
current assets in the Company's accompanying unaudited condensed
consolidated balance sheet.
At September 30, 1995, approximately $30,300,000 was available for the
payment of cash dividends or stock payments under the terms of the
Company's indenture governing the 9 7/8% Notes.
The Company's working capital and current ratio increased from
approximately $173,459,000 and approximately 2.1:1, respectively, at
December 31, 1994 to approximately $189,863,000 and approximately 2.3:1,
respectively, at September 30, 1995, principally as a result of the factors
described below.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
Accounts receivable increased approximately $15,978,000, or approximately
17.4%, between December 31, 1994 and September 30, 1995, while net sales
increased approximately 9.1% in the third quarter of 1995 as compared to
the fourth quarter of 1994. The increase in accounts receivable is
principally as a result of increased net sales of new and replacement
products from residential and manufactured housing customers by the Air
Conditioning and Heating Products Group. The rate of change in accounts
receivable in certain periods may be different than the rate of change in
sales in such periods principally due to the timing of net sales.
Significant net sales near the end of any period generally result in
significant amounts of accounts receivable on the date of the balance sheet
at the end of such period, as was the situation on September 30, 1995 as
compared to December 31, 1994. In recent periods, the Company has not
experienced any significant changes in credit terms, collection efforts,
credit utilization or delinquency.
Inventories increased approximately $565,000 or approximately .6%, between
December 31, 1994 and September 30, 1995.
Accounts payable increased approximately $3,954,000 or approximately 7.5%
between December 31, 1994 and September 30, 1995.
Unrestricted cash and investments increased approximately $2,074,000 from
December 31, 1994 to September 30, 1995, principally as a result of cash
provided by (used in) the following:
Condensed
Consolidated
Cash Flows
----------
Operating Activities--
Cash flow from operations, net $24,384,000
Increase in accounts receivable, net (15,970,000)
Increase in inventories (2,309,000)
Increase in trade accounts payable 3,954,000
Change in accrued expenses, taxes, prepaids,
other assets, liabilities, and other, net (5,014,000)
Investing Activities--
Net cash proceeds relating to businesses sold 1,129,000
Purchase of marketable securities (10,085,000)
Proceeds from the sale of marketable
securities 20,772,000
Capital expenditures (11,120,000)
Financing Activities--
Payment of borrowings (633,000)
Purchase of Nortek Common and Special
Common Stock (2,849,000)
All other, net (185,000)
----------
$ 2,074,000
==========
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 1994
(Continued)
The Company's debt-to-equity ratio decreased from approximately 1.9:1 at
December 31, 1994 to 1.7:1 at September 30, 1995, primarily as a result of
the effect of increased stockholders' investment as a result of net
earnings and changes in the cumulative translation and marketable
securities adjustments in the first nine months of 1995. (See Note F of the
Notes to the Unaudited Condensed Consolidated Financial Statements and the
Company's Unaudited Condensed Consolidated Statement of Stockholders'
Investment included elsewhere herein.)
At September 30, 1995, the Company has approximately $2,000,000 of net
U. S. Federal prepaid income tax assets which are expected to be realized
through future operating earnings. (See Note G of Notes to the Unaudited
Condensed Consolidated Financial Statements.)
The Company believes that its growth will be generated largely by internal
growth in each of its product groups, augmented by strategic acquisitions.
The Company regularly evaluates potential acquisitions which would increase
or expand the market penetration of, or otherwise complement, its current
product lines.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
4.1 Amendment No. 2 dated as of September 27,
1995 to Amended and Restated Rights Agreement dated as
of March 18, 1991 (incorporated herein by reference
from Exhibit 1 to Form 8-K filed October 12, 1995, File
No. 1-6112).
11.1 Calculation of shares used in determining
earnings per share (filed herewith).
27. Financial Data Schedule (filed herewith).
(b) No reports on Form 8-K were filed by the
Registrant during the period:
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTEK, INC.
(Registrant)
/s/ Almon C. Hall
---------------------------------
Almon C. Hall, Vice President and
Controller and Chief Accounting Officer
November 13, 1995
- ------------------------------
(Date)
EXHIBIT 11.1
(Page 1 of 2)
NORTEK, INC. AND SUBSIDIARIES
CALCULATION OF SHARES USED IN DETERMINING EARNINGS PER SHARE
For the Three Months Ended
--------------------------
Sept. 30, Oct 1,
1995 1994
---- ----
Calculation of the number of shares to be
used in computing primary earnings per share:
Weighted average common and special common
shares issued during the period 16,844,777 16,609,857
Less average common and special common shares
held in the Treasury (4,366,666) (4,066,602)
---------- ----------
Weighted average number of common and special
common shares outstanding during the period 12,478,111 12,543,255
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average
price during the period 100,658 187,141
---------- ----------
Weighted average number of common and common
equivalent shares outstanding during the
period 12,578,769 12,730,396
========== ==========
Calculation of the number of shares to be used
in computing fully diluted earnings per share:
Weighted average number of common and special
common shares outstanding during the period 12,478,111 12,543,255
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the greater of
the price at the end of the period or the
average price during the period 103,421 220,518
Dilutive effect of assuming conversion of the
Company's 7.5% Convertible Debentures --- 295,594
---------- ----------
12,581,532 13,059,367
========== ==========
NOTE: Earnings per share calculations for 1994 include the effect of
convertible debentures (and the reduction in related expense).
EXHIBIT 11.1
(Page 2 of 2)
NORTEK, INC. AND SUBSIDIARIES
CALCULATION OF SHARES USED IN DETERMINING EARNINGS PER SHARE
For the Nine Months Ended
--------------------------
Sept. 30, Oct. 1,
1995 1994
---- ----
Calculation of the number of shares to be
used in computing primary earnings per share:
Weighted average common and special common
shares issued during the period 16,893,214 16,609,072
Less average common and special common shares
held in the Treasury (4,366,666) (4,066,602)
---------- ----------
Weighted average number of common and special
common shares outstanding during the period 12,526,548 12,542,470
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average
price during the period 136,733 154,498
---------- ----------
Weighted average number of common and common
equivalent shares outstanding during the
period 12,663,281 12,696,968
========== ==========
Calculation of the number of shares to be used
in computing fully diluted earnings per share:
Weighted average number of common and special
common shares outstanding during the period 12,526,548 12,542,470
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the greater of
the price at the end of the period or the
average price during the period 137,654 168,606
Dilutive effect of assuming conversion of the
Company's 7.5% Convertible Debentures --- 500,527
---------- ----------
12,664,202 13,211,603
========== ==========
Note: Earnings (loss) per share calculations for 1994 include the
effect of convertible debentures (and the reduction in related expense).
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 88,614
<SECURITIES> 19,573
<RECEIVABLES> 111,869
<ALLOWANCES> 4,204
<INVENTORY> 95,913
<CURRENT-ASSETS> 339,233
<PP&E> 194,200
<DEPRECIATION> 96,575
<TOTAL-ASSETS> 524,479
<CURRENT-LIABILITIES> 149,370
<BONDS> 219,583
<COMMON> 16,619
0
0
<OTHER-SE> 112,231
<TOTAL-LIABILITY-AND-EQUITY> 524,479
<SALES> 572,582
<TOTAL-REVENUES> 572,582
<CGS> 424,032
<TOTAL-COSTS> 424,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,784
<INCOME-PRETAX> 18,300
<INCOME-TAX> 7,400
<INCOME-CONTINUING> 10,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,900
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
