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 28, 1996
------------------------------
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 1, 1996 was 9,523,304. The number of shares of
Special Common Stock outstanding as of November 1, 1996 was
475,528.
<PAGE>
<TABLE>
<CAPTION>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar Amounts in Thousands)
<S> <C> <C>
Sept. 28, Dec. 31,
1996 1995
---- ----
(Unaudited)
ASSETS
Current Assets:
Unrestricted--
Investments and marketable
securities at cost which
approximates market $ 36,848 $ 60,079
Marketable securities available
for sale 50,828 43,234
Restricted--
Investments and marketable
securities at cost which
approximates market 9,377 9,411
Accounts receivable, less allowances
of $5,214 and $4,546 140,634 118,017
Inventories:
Raw materials 41,880 42,601
Work in process 12,528 14,319
Finished goods 52,837 53,132
------- -------
107,245 110,052
------- -------
Prepaid expenses and other
current assets 18,272 16,927
U. S. Federal prepaid income taxes 19,400 19,100
------- -------
Total Current Assets 382,604 376,820
------- -------
Property and Equipment, at cost:
Land 6,681 6,508
Buildings and improvements 70,109 69,125
Machinery and equipment 169,142 157,884
------- -------
245,932 233,517
Less--Accumulated depreciation 107,653 97,255
------- -------
Total Property and Equipment,
net 138,279 136,262
------- -------
Other Assets:
Goodwill, less accumulated amortiza-
tion of $26,195 and $23,978 90,033 91,347
Deferred debt expense 6,879 7,574
Other 14,941 13,476
------- -------
111,853 112,397
------- -------
$632,736 $625,479
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Continued)
(Dollar Amounts in Thousands)
<S> <C> <C>
Sept. 28, Dec. 31,
1996 1995
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Notes payable and other short-
term obligations $ 30,855 $ 30,226
Current maturities of long-term debt 10,818 11,824
Accounts payable 93,419 73,047
Accrued expenses and taxes, net 101,814 100,970
------- -------
Total Current Liabilities 236,906 216,067
------- -------
Other Liabilities:
Deferred income taxes 25,196 27,780
Other 12,385 9,945
------- -------
37,581 37,725
------- -------
Notes, Mortgage Notes and
Other Notes Payable 243,578 240,396
------- -------
Stockholders' Investment:
Preference stock, $1 par value;
authorized 7,000,000 shares,
none issued --- ---
Common Stock, $1 par value;
authorized 40,000,000 shares,
15,921,295 shares and 15,883,427
shares issued 15,921 15,883
Special Common Stock, $1 par value;
authorized 5,000,000 shares,
753,341 and 774,366 shares issued 753 774
Additional paid-in capital 134,746 134,690
Retained earnings 30,466 15,766
Cumulative translation, pension and
other adjustments (2,761) (2,742)
Less - treasury common stock at
cost, 6,423,935 shares and
4,306,706 shares (62,723) (31,351)
- treasury special common stock
at cost, 276,869 shares and
276,784 shares (1,731) (1,729)
------- -------
Total Stockholders' Investment 114,671 131,291
------- -------
$632,736 $625,479
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
For The
Three Months Ended
------------------
<S> <C> <C>
Sept. 28, Sept. 30,
1996 1995
---- ----
(Unaudited)
Net Sales $248,227 $193,567
------- -------
Costs and Expenses:
Cost of products sold 181,808 143,891
Selling, general and
administrative expense 49,414 39,596
------- -------
231,222 183,487
------- -------
Operating earnings 17,005 10,080
Interest expense (7,261) (5,945)
Interest income 1,256 1,565
Gain on sale of investment securities --- 2,200
------- -------
Earnings before provision
for income taxes 11,000 7,900
Provision for income taxes 4,500 2,700
------- -------
Net Earnings $ 6,500 $ 5,200
======= =======
Net Earnings Per Share:
Primary $ .64 $ .41
======= =======
Fully diluted $ .64 $ .41
======= =======
Weighted Average Number of Shares:
Primary 10,162 12,579
====== ======
Fully diluted 10,169 12,582
====== ======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
For The
Nine Months Ended
-----------------
<S> <C> <C>
Sept. 28, Sept. 30,
1996 1995
---- ----
(Unaudited)
Net Sales $729,447 $572,582
------- -------
Costs and Expenses:
Cost of products sold 539,018 424,032
Selling, general and
administrative expense 147,657 119,248
------- -------
686,675 543,280
------- -------
Operating earnings 42,772 29,302
Interest expense (22,747) (17,784)
Interest income 4,075 4,782
Net gain on investment and
marketable securities --- 2,000
------- -------
Earnings before provision
for income taxes 24,100 18,300
Provision for income taxes 9,400 7,400
------- -------
------- -------
Net Earnings $ 14,700 $ 10,900
======= =======
Net Earnings Per Share:
Primary $ 1.35 $ .86
======= =======
Fully diluted $ 1.35 $ .86
======= =======
Weighted Average Number of Shares:
Primary 10,845 12,663
====== ======
Fully diluted 10,859 12,664
====== ======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
For the
Nine Months Ended
------------------
<S> <C> <C>
Sept. 28, Sept. 30,
1996 1995
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $14,700 $10,900
------ ------
Adjustments to reconcile net earnings
to cash:
Depreciation and amortization 17,558 14,384
Net gain on investment and
marketable securities --- (2,000)
Deferred federal income tax (credit)
provision from continuing operations (875) 1,100
Changes in certain assets and liabilities,
net of effects from acquisitions
and dispositions:
Accounts receivable, net (22,084) (15,970)
Prepaids and other current assets 1,322 (989)
Inventories 3,702 (2,309)
Accounts payable 19,051 3,954
Accrued expenses and taxes (914) (5,402)
Long-term assets, liabilities and
other, net (1,945) 1,377
------ -------
Total adjustments to net earnings 15,815 (5,855)
------ -------
Net Cash Provided by Operating
Activities 30,515 5,045
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,576) (11,120)
Purchase of investments and marketable
securities (45,903) (10,085)
Proceeds from sale of investments and
marketable securities 37,905 20,772
Proceeds relating to businesses sold,
net --- 1,129
Other, net 146 (196)
------ -------
Net Cash (Used in) Provided by
Investing Activities (21,428) 500
------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
(Continued)
For the
Nine Months Ended
------------------
<S> <C> <C>
Sept. 28, Sept. 30,
1996 1995
---- ----
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 11,488 ---
Payment of borrowings (12,143) (633)
Purchase of Nortek Common and
Special Common Stock (31,738) (2,850)
Other, net 75 12
------- -------
Net Cash Used in Financing
Activities (32,318) (3,471)
------- -------
Net (decrease) increase in
unrestricted cash and investments (23,231) 2,074
Unrestricted cash and investments at
the beginning of the period 60,079 77,106
------- -------
Unrestricted cash and investments at
the end of the period $ 36,848 $ 79,180
======= =======
Interest paid $ 27,670 $ 22,530
======= =======
Income taxes paid, net $ 13,490 $ 3,508
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Nortek, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Investment
For the Three Months Ended September 28, 1996 and September 30, 1995
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Cumulative
Translation,
Addi- Pension
Special tional and Other
Common Common Paid-in Retained Adjust- Treasury
Stock Stock Capital Earnings ments Stock
----- ----- ------- -------- --------- -----
(Unaudited)
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)
====== === ======= ====== ====== =======
Balance, June 29,
1996 $15,916 $758 $134,746 $23,966 $(3,193) $(64,454)
5,319 shares of
special common stock
converted into 5,319
shares of common
stock 5 (5) --- --- --- ---
Translation adjustment --- --- --- --- 335 ---
Unrealized appreciation
in marketable
securities --- --- --- --- 97 ---
Net earnings --- --- --- 6,500 --- ---
------ --- ------- ------ ------ -------
Balance, September 28,
1996 $15,921 $753 $134,746 $30,466 $(2,761) $(64,454)
====== === ======= ====== ====== =======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Nortek, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Investment
For the Nine Months Ended September 28, 1996 and September 30, 1995
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Cumulative
Translation,
Addi- Pension
Special tional and Other
Common Common Paid-in Retained Adjust- Treasury
Stock Stock Capital Earnings ments Stock
Balance, December 31, ----- ----- ------- ----------- -------- -----
` (Unaudited)
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)
======= ===== ======== ======= ======== =========
Balance, December 31,
1995 $15,883 $774 $134,690 $15,766 $(2,742) $(33,080)
21,025 shares of
special common stock
converted into
21,025 shares of
common stock 21 (21) --- --- --- ---
16,843 shares of
common stock issued
upon exercise of
stock options 17 --- 56 --- --- ---
2,117,314 shares of
treasury stock
acquired --- --- --- --- --- (31,374)
Translation adjust-
ment --- --- --- --- 396 ---
Unrealized decline
in marketable
securities --- --- --- --- (415) ---
Net earnings --- --- --- 14,700 --- ---
------ --- ------- ------ ------ ------
Balance, September 28,
1996 $15,921 $753 $134,746 $30,466 $(2,761) $(64,454)
======= ===== ======== ======= ======== =========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1996 AND September 30, 1995
(A) The unaudited condensed consolidated financial statements presented
("Unaudited Financial Statements") have been prepared by Nortek, Inc.
and include all of its wholly-owned subsidiaries (the "Company") after
elimination of intercompany accounts and transactions, 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 28, 1996. 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) Acquisitions are accounted for as purchases and, accordingly, have
been included in the Company's consolidated results of operations
since the acquisition date. Purchase price allocations are subject to
refinement until all pertinent information regarding the acquisitions
is obtained.
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 ("Rangaire"), all the capital
stock of Best S.p.A. and related entities ("Best") and all the capital
stock of Venmar Ventilation inc. ("Venmar") and accounted for these
acquisitions under the purchase method of accounting.
<TABLE>
<CAPTION>
The following table presents the approximate unaudited pro forma
operating results of the Company for the third quarter and first nine
months of 1995 and the year ended December 31, 1995, as adjusted for
the pro forma effect of the acquisitions discussed above, assuming
that these transactions occurred at January 1, 1995:
<S> <C> <C> <C>
Three Months Nine Months
Ended Ended Year Ended
Sept. 30, Sept. 30, Dec. 31,
1995 1995 1995
------------ ---------- ----------
(Amounts in Thousands except
per share amounts)
Net sales $225,292 $669,269 $886,210
Operating earnings 11,715 34,136 47,355
Net earnings 5,400 10,800 15,100
Fully diluted net earnings
per share $ .43 $ .85 $ 1.20
</TABLE>
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1996 AND September 30, 1995
(Continued)
In computing the pro forma results, net earnings 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 and by interest expense on indebtedness incurred in connection
with the acquisitions, net of the tax effect. Earnings 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.
The pro forma information presented does not purport to be indicative
of the results which would have been reported if these transactions
had occurred on January 1, 1995, or which may be reported in the
future.
(C) On January 1, 1996, the Company adopted the accounting requirements of
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The statement also
requires that certain long-lived assets and identifiable intangibles
that are to be disposed, be reported at the lower of the carrying
amount or fair value less cost to sell. The application of SFAS No.
121 did not have a significant impact on the Company's results of
operations or financial condition.
(D) In December 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Stock-Based Compensation," which became effective for fiscal
years beginning after December 15, 1995. SFAS No. 123 requires that
employee stock-based compensation be either recorded or disclosed at
its fair value. Management will continue to account for stock-based
compensation under Accounting Principles Board No. 25 and will not
adopt the new accounting provisions for stock-based compensation under
SFAS No. 123, but will include the additional required disclosures, as
necessary, in the Company's consolidated financial statements for the
year ended December 31, 1996.
(E) At September 28, 1996 and December 31, 1995, the reduction in the
Company's stockholders' investment for gross unrealized losses was
approximately $825,000 and $410,000, respectively. At September 28,
1996, there were no gross unrealized gains on the Company's marketable
securities.
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1996 AND September 30, 1995
(Continued)
In 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.
In the third quarter of 1995, the Company sold its investment in the
preferred stock of a subsidiary previously sold, which resulted in a
pre-tax gain of approximately $2,200,000 ($.17 per share, net of tax).
<TABLE>
<CAPTION>
(F) The tax effect of temporary differences which gave rise to significant
portions of deferred income tax assets and liabilities as of September
28, 1996 and December 31, 1995 is as follows:
<S> <C> <C>
Sept. 28, Dec. 31,
1996 1995
---- ----
(Amounts in Thousands)
U. S. Federal Prepaid (Deferred)
Income Tax Assets Arising From:
Accounts receivable $ 1,579 $ 1,425
Inventory (397) (577)
Insurance reserves 5,990 6,036
Other reserves, liabilities
and assets, net 12,228 12,216
------ ------
$19,400 $19,100
====== ======
Deferred (Prepaid) Income Tax
Liabilities Arising From:
Property and equipment, net $15,522 $15,233
Prepaid pension assets 1,049 1,323
Insurance reserves (273) (273)
Other reserves, liabilities and
assets, net 7,373 8,797
Capital loss carryforward (7,313) (7,260)
Other, net (1,741) (1,658)
Valuation allowances 10,579 11,618
------ ------
$25,196 $27,780
====== ======
</TABLE>
At September 28, 1996, the Company has a capital loss carryforward of
approximately $20,893,000, of which approximately $17,500,000 expires
in the year 1997. The Company has provided a valuation allowance
equal to the tax effect of capital loss carryforwards and certain
other tax assets, since realization of these tax assets cannot be
reasonably assured. At September 28, 1996, the Company has
approximately $1,271,000 of net U. S. Federal prepaid income tax
assets which are expected to be realized through future operating
earnings.
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1996 AND September 30, 1995
(Continued)
<TABLE>
<CAPTION>
The table below reconciles the federal statutory income tax rate to
the effective tax rate from continuing operations of approximately
40.9% and 34.2% in the third quarter of 1996 and 1995, respectively
and 39% and 40.4% in the first nine months of 1996 and 1995,
respectively.
Three Nine
Months Ended Months Ended
------------ ------------
<S> <C> <C> <C> <C>
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
---- ---- ---- ----
(Amounts in Thousands)
Provision for income taxes
at the federal statutory
rate $3,850 $2,765 $8,435 $6,405
Net change from statutory
rate:
State taxes, net of federal
tax effect 293 195 780 585
Non-deductible amortization
for tax purposes 278 184 800 553
Other non-deductible
items 81 163 200 243
Change in valuation reserve 199 (730) (549) (660)
Product development tax
credit from foreign
operations (90) --- (314) ---
Tax effect on foreign income (111) 73 48 224
Other, net --- 50 --- 50
----- ----- ----- -----
Provision for income taxes
from continuing operations $4,500 $2,700 $9,400 $7,400
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
(G) On April 26, 1996, the Company purchased 1,189,809 shares of its
common stock, or approximately 10.6% of its outstanding shares, from
three of its directors, who also resigned from the Company's Board of
Directors, for approximately $20,200,000. The Company accounted for
such share purchases as Treasury Stock. From the date the Company
authorized a stock purchase program on November 16, 1995, through
September 28, 1996 the Company purchased 2,301,009 shares of its
Common Stock for approximately $33,238,197 in cash, in negotiated and
open market transactions. Had these shares been purchased as of
January 1, 1995, unaudited pro forma net earnings and fully diluted
net earnings per share would have been:
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1996 AND September 30, 1995
(Continued)
Year
Three Months Ended Nine Months Ended Ended
<S> <C> <C> <C> <C> <C>
Sept. 28, Sept. 30, Sept. 28, Sept. 30, Dec. 31,
1996 1995 1996 1995 1995
---- ---- ---- ---- ----
(Amounts in Thousands except per share amounts)
Net Earnings $6,500 $4,900 $14,400 $10,100 $13,900
===== ===== ====== ====== ======
Fully diluted net
earnings per
share $ .64 $ .48 $ 1.41 $ .96 $ 1.36
===== ===== ====== ====== ======
</TABLE>
On October 25, 1996, the Board of Directors of Nortek, Inc. authorized
the repurchase of up to 500,000 shares of the Company's Common Stock
in open-market or negotiated transactions subject to market conditions
and cash availability.
(H) At September 28, 1996, approximately $6,021,270 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.
(I) Net earnings per share amounts have been computed using the weighted
average number of common and common equivalent shares outstanding
during each period.
(J) On April 1, 1996, the Company extended and amended its shareholder
rights plan to March 31, 2006. Under the amended plan, each right
previously issued under the plan in effect to date, or subsequently
issued under the amended and restated plan, entitles shareholders to
buy 1/100 of a share of a new series of preferred stock of Nortek at
an exercise price of $72 per share, subject to adjustments for stock
dividends, splits and similar events.
The rights, that are not currently exercisable, are attached to each
share of Common Stock and may be redeemed by the Directors at $.01 per
share at any time. After a shareholder acquires beneficial ownership
of 17% or more of the Company's Common Stock and Special Common Stock,
the rights will trade separately and become exercisable entitling a
rights holder to acquire additional shares of the Company's Common
Stock having a market value equal to twice the amount of the exercise
price of the right. In addition, after a person or group ("Acquiring
Company") commences a tender offer or announces an intention to
acquire 30% or more of the Company's Common Stock and Special Common
Stock, the rights will trade separately and, under certain
circumstances, will permit each rights holder to acquire common stock
of the Acquiring Company, having a market value equal to twice the
amount of the exercise price of the right.
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1996 AND September 30, 1995
(Continued)
(K) The accompanying unaudited condensed consolidated statement of cash
flows for the nine months ended September 30, 1995 includes
approximately $2,874,000 of cash proceeds from the sale of the
preferred stock of a subsidiary previously sold (see Note E) and
approximately $1,745,000 of cash paid relating to a business sold.
Significant unaudited non-cash financing and investing activities
excluded from the accompanying unaudited condensed consolidated
statement of cash flows include a decrease of approximately $415,000
in the nine months ended September 28, 1996 and an increase of
approximately $2,522,000 in the first nine months of 1995 in the
approximate market price of marketable securities available for sale.
Depreciation and amortization expense included in the Company's
unaudited condensed consolidated statement of cash flows for the nine
months ended September 28, 1996 and September 30, 1995, includes
approximately $1,000,000 and approximately $800,000, respectively, and
approximately $350,000 and approximately $300,000 for the third
quarter of 1996 and 1995, respectively, of amortization of deferred
debt expense and debt discount, which is recorded as interest expense
in the accompanying unaudited condensed consolidated statement of
operations.
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
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,
Canada and Europe, a wide variety of products for the residential and
commercial construction, manufactured housing, and the do-it-yourself and
professional remodeling and renovation markets. During the fourth quarter
of 1995, the Company acquired three businesses, which are included in the
Residential Building Products Group, and accounted for these acquisitions
under the purchase method of accounting. Accordingly, the results of such
acquisitions are included in the Company's consolidated results since the
date of acquisition. (See Liquidity and Capital Resources and Note B of
the Notes to Unaudited Condensed Consolidated Financial Statements included
elsewhere herein.)
Results of Operations
<TABLE>
<CAPTION>
The tables below and on the next page set forth, for the periods presented,
(a) certain unaudited consolidated operating results, (b) the change in the
amount and the percentage change of such results as compared to the prior
comparable period, (c) the percentage which such results bears to net sales
and (d) the change of such percentages as compared to the prior comparable
period. The results of operations for the third quarter ended September
28, 1996 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 1996
-------------------
<S> <C> <C> <C> <C>
Sept. 28, Sept. 30, as Compared to 1995
1996 1995 $ %
---- ---- ----- -----
(Dollar amounts in millions)
Net sales $248.2 $193.6 54.6 28.2%
Cost of products sold 181.8 143.9 (37.9) (26.3)
Selling, general and
administrative expense 49.4 39.6 (9.8) (24.7)
Operating earnings 17.0 10.1 6.9 68.3
Interest expense (7.3) (5.9) (1.4) (23.7)
Interest income 1.3 1.5 (.2) (13.3)
Gain on sale of investment
securities --- 2.2 (2.2) (100.0)
Earnings before provision
for income taxes 11.0 7.9 3.1 39.2
Provision for income taxes 4.5 2.7 (1.8) (66.7)
----- ----- --- -----
Net earnings $ 6.5 $ 5.2 1.3 25.0%
===== ===== ==== =====
</TABLE>
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
<TABLE>
<CAPTION>
Change in
Percentage of Net Sales Percentage
Third Quarter Ended for the Third
<S> <C> <C> <C>
Sept. 28, Sept. 30, Quarter 1996
1996 1995 as compared to 1995
---- ---- -------------------
Net sales 100.0% 100.0% ---
Cost of products sold 73.3 74.3 1.0
Selling, general and
administrative expense 19.9 20.5 .6
Operating earnings 6.8 5.2 1.6
Interest expense (2.9) (3.0) .1
Interest income .5 .8 (.3)
Gain on sale of investment
securities --- 1.1 (1.1)
Earnings before provision
for income taxes 4.4 4.1 .3
Provision for income taxes 1.8 1.4 (.4)
---- ---- ---
Net earnings 2.6 2.7 (.1)
==== ==== ===
</TABLE>
<TABLE>
<CAPTION>
The tables below and on the next page set forth, for the periods presented,
(a) certain unaudited consolidated operating results, (b) the change in the
amount and the percentage change of such results as compared to the prior
comparable period, (c) the percentage which such results bears to net sales
and (d) the change of such percentages as compared to the prior comparable
period. The results of operations for the nine months ended September 28,
1996 are not necessarily indicative of the results of operations to be
expected for any other interim period or the full year.
Change in the
Nine Months Ended Nine Months 1996
Sept. 28, Sept. 30, as Compared to 1995
<S> <C> <C> <C> <C>
1996 1995 $ %
---- ---- ----- ----
(Dollar amounts in millions)
Net sales $729.4 $572.5 156.9 27.4%
Cost of products sold 539.0 424.0 (115.0) (27.1)
Selling, general and
administrative expense 147.6 119.2 (28.4) (23.8)
Operating earnings 42.8 29.3 13.5 46.1
Interest expense (22.8) (17.8) (5.0) (28.1)
Interest income 4.1 4.8 (.7) (14.6)
Net gain on investment and
marketable securities --- 2.0 (2.0) (100.0)
Earnings before provision
for income taxes 24.1 18.3 5.8 31.7
Provision for income taxes 9.4 7.4 (2.0) (27.0)
----- ----- ---- -----
Net earnings $ 14.7 $ 10.9 $ 3.8 34.9%
===== ===== ==== =====
</TABLE>
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
<TABLE>
<CAPTION>
Change in
Percentage of Net Sales Percentage
Nine Months Ended for the Nine
<S> <C> <C> <C>
Sept. 28, Sept. 30, Months 1996 as
1996 1995 Compared to 1995
---- ---- ----------------
Net sales 100.0% 100.0% ---
Cost of products sold 73.9 74.1 .2
Selling, general and
administrative expense 20.2 20.8 .6
Operating earnings 5.9 5.1 .8
Interest expense (3.1) (3.1) ---
Interest income .6 .8 (.2)
Net gain on investment and
marketable securities --- .4 (.4)
Earnings before provision
for income taxes 3.4 3.2 .2
Provision for income taxes 1.0 1.3 .3
---- ----- ---
Net earnings 2.4% 1.9 .5
==== ===== ===
</TABLE>
<TABLE>
<CAPTION>
The following table presents the net sales for the Company's principal
product groups for the third quarter and nine months ended September 28,
1996 as compared to the third quarter and nine months ended September 30,
1995 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 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. 28, Sept. 30, Increase
----------------
<S> <C> <C> <C> <C>
1996 1995 $ %
---- ---- ----- ------
(000's omitted)
Net Sales:
Residential Building
Products $102,900 $ 64,518 $38,382 59.5%
Air Conditioning and
Heating Products 110,042 95,707 14,335 15.0
Plumbing Products 35,285 33,342 1,943 5.8
------- ------- ----- ----
Total $248,227 $193,567 $54,660 28.2%
======= ======= ====== ====
</TABLE>
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
Sept. 28, Sept. 30, Increase
-----------------
<S> <C> <C> <C> <C>
1996 1995 $ %
Net Sales: ---- ---- ----- -----
(000's omitted)
Residential Building
Products $310,404 $194,597 $115,807 59.5%
Air Conditioning and
Heating Products 313,369 277,848 35,521 12.8
Plumbing Products 105,674 100,137 5,537 5.5
------- ------- ------- ----
Total $729,447 $572,582 $156,865 27.4%
======= ======= ======= ====
</TABLE>
Operating Results
Net sales increased approximately $54,600,000, or approximately 28.2%, and
increased approximately $156,900,000, or approximately 27.4%, for the
third quarter and the first nine months of 1996, respectively, as compared
to 1995. The Residential Building Products Group net sales increased
principally as a result of acquisitions in the fourth quarter of 1995,
which contributed approximately $31,900,000 and $103,600,000 in the third
quarter and first nine months, respectively. Shipments of new and
replacement air conditioning and heating ("HVAC") products to manufactured
housing customers and increased sales levels of commercial and industrial
HVAC products were the primary reasons for increased sales in the Air
Conditioning and Heating Products Group. Modest sales price increases in
certain product lines of the Residential Building Products Group, were also
a factor, and were partially offset by lower sales prices of certain
products in the Plumbing Products Group and certain residential HVAC
products in the Air Conditioning and Heating Products Group. Sales levels
in the third quarter of 1996 were lower than the second quarter of 1996, in
part, as a result of an extended shutdown period for vacations by the
Company's European subsidiaries, which is common practice in Europe, during
which time there was limited sales or manufacturing activity.
Cost of products sold as a percentage of net sales decreased from
approximately 74.3% in the third quarter of 1995 to approximately 73.3% in
the third quarter of 1996, and decreased from approximately 74.1% in the
first nine months of 1995 to approximately 73.9% in the first nine months
of 1996. These decreases in the percentages principally resulted from a
reduction in cost in the third quarter and the first nine months of 1996 of
certain raw materials and components compared to costs in effect in 1995
and decreased overhead costs as a percentage of sales in the Residential
Building Products and Air Conditioning and Heating Products Groups due to
increased volume and improved efficiency. A reduction in unit costs of
certain residential HVAC products in the Air Conditioning and Heating
Products Group was also a factor in the decreases in the percentages.
These decreases were partially offset by the 1995 acquisitions, which have a
higher level of
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
cost of sales to net sales than the overall group of businesses owned prior
to the acquisitions, the effect of development and introduction of new
products in Europe and by increased direct labor and overhead costs in the
Plumbing Products Group. Overall, changes in cost of products sold as a
percentage of net sales for one period as compared to another period may
reflect the effect of a number of factors, including changes in the
relative mix of products sold, the effect of changes in sales prices, the
unit cost of products sold and changes in productivity levels.
Selling, general and administrative expense as a percentage of net sales
decreased from approximately 20.5% in the third quarter of 1995 to
approximately 19.9% in the third quarter of 1996 and from approximately
20.8% in the first nine months of 1995 to approximately 20.2% in the first
nine months of 1996. The decrease in the third quarter and first nine
months is due principally to the 1995 acquisitions which have a lower level
of selling, general and administrative expense to net sales than the
overall group of businesses owned prior to the acquisitions and increased
sales levels without a proportionate increase in expense in all three of
the Company's product groups, partially offset by the effect of limited
sales activity during an extended shutdown period in the third quarter by
the Company's European subsidiaries without a proportionate reduction in
expense.
Segment earnings were approximately $18,800,000 for the third quarter of
1996, as compared to approximately $11,700,000 for the third quarter of
1995, and approximately $51,700,000 for the first nine months of 1996 as
compared to approximately $35,800,000 for the first nine months of 1995.
Fourth quarter 1995 acquisitions contributed approximately $600,000 to
segment earnings in the third quarter of 1996 and approximately $5,600,000
for the first nine months of 1996. Segment earnings have been reduced by
depreciation and amortization expense of approximately $5,400,000 and
approximately $4,400,000 for the third quarter of 1996 and 1995,
respectively, and by approximately $16,500,000 and approximately
$13,400,000 for the first nine months of 1996 and 1995, respectively.
Acquisitions contributed approximately $1,100,000 and approximately
$3,500,000 of the increase in depreciation and amortization expense in the
third quarter and first nine months of 1996, respectively.
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
Foreign segment earnings, consisting primarily of the results of operations
of the Company's Canadian and European subsidiaries, which manufacture
built-in ventilating products, decreased to approximately 3.7% of segment
earnings in the third quarter of 1996 from approximately 7.0% of such
earnings in the third quarter of 1995 and increased to approximately 10.2%
of segment earnings in the first nine months of 1996 from approximately
6.0% of such earnings in the first nine months of 1995. The decline in the
third quarter 1996 was primarily attributable to an approximate 67%
increase in domestic segment earnings in 1996, as compared to a 15%
decrease in foreign earnings and a decline in the segment earnings of the
Company's European subsidiaries due to the extended shutdown period
previously discussed. This decrease was partially offset by an improvement
in the third quarter earnings in Canada due, in part, to a 1995
acquisition. The increase in the first nine months was primarily
attributable to earnings of the Company's 1995 European and Canadian
acquisitions. Sales and earnings derived from the international market are
subject to the risks of currency fluctuations.
Operating earnings in the third quarter of 1996 increased approximately
$6,900,000, or approximately 68.3%, as compared to the third quarter of
1995 and increased approximately $13,500,000, or approximately 46.1%, for
the first nine months of 1996 as compared to 1995, primarily due to the
factors previously discussed.
Interest expense in the third quarter of 1996 increased approximately
$1,400,000, or approximately 23.7%, as compared to the third quarter of
1995, and increased approximately $5,000,000, or approximately 28.1%, as
compared to the first nine months of 1995, primarily as a result of higher
borrowings resulting from the 1995 acquisitions including existing short-
term working capital borrowings of the acquired subsidiaries.
Interest income in the third quarter of 1996 decreased approximately
$200,000, or approximately 13.3%, as compared to the third quarter of 1995,
and decreased approximately $700,000, or approximately 14.6%, as compared
to the first nine months of 1995, principally due to lower average invested
balances of short-term investments and marketable securities and slightly
lower yields.
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
The provision for income taxes was approximately $4,500,000 for the third
quarter of 1996, as compared to approximately $2,700,000 for the third
quarter of 1995 and was approximately $9,400,000 for the first nine months
of 1996, as compared to approximately $7,400,000 for the first nine months
of 1995. The provision in all periods except the third quarter of 1996
reflects the reversal of tax valuation reserves no longer required,
including $670,000 in the third quarter of 1995 relating to the $2,200,000
gain on investment securities. The income tax rates principally differed
from the United States Federal statutory rate of 35%, as a result of state
income tax provisions, nondeductible amortization expense (for tax
purposes), the change in tax valuation reserves, the effect of foreign
income tax on foreign source income, in all periods and in 1996 from the
effect of product development tax credits from foreign operations. (See
Note F of the Notes to the Unaudited Financial Statements included
elsewhere herein.)
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of liquidity in 1996 and 1995 have been funds
provided by subsidiary operations and unrestricted short-term investments
and marketable securities. Unrestricted cash, investments and marketable
securities were approximately $87,676,000 at September 28, 1996 as compared
to $103,313,000 at December 31, 1995.
The Company's investment in marketable securities at September 28, 1996
consisted primarily of investments in United States Treasury securities,
certificates of deposit and bank notes and at September 28, 1996,
approximately $9,377,000 of the Company's cash and investments were pledged
as collateral for insurance and other requirements and were classified as
restricted in current assets in the Company's accompanying unaudited
condensed consolidated balance sheet.
On November 16, 1995, the Company's Board of Directors authorized a program
to purchase shares of the Company's Common Stock, subject to market
conditions and cash availability. On April 26, 1996, the Company announced
the purchase of 1,189,809 shares of its common stock, or approximately
10.6% of its outstanding shares, from three of its directors, who also
resigned from the Company's Board of Directors, for approximately
$20,200,000. From November 16, 1995 to September 28, 1996, the Company
purchased 2,301,009 shares of its Common Stock for approximately
$33,238,197. On October 25, 1996, the Board of Directors of Nortek, Inc.
authorized the repurchase of up to 500,000 shares of the Company's Common
Stock in open-market or negotiated transactions subject to market
conditions and cash availability. (See below and Note G of the Notes to
the Unaudited Condensed Consolidated Financial Statements included
elsewhere herein.)
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
At September 28, 1996, approximately $6,021,270 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 decreased from
approximately $160,753,000 and 1.7:1, respectively, to approximately
$145,698,000 and 1.6:1, respectively, between December 31, 1995 and
September 28, 1996, principally as a result of purchases of the Company's
common stock described above and the factors described below. Working
capital included approximately $103,313,000 at December 31, 1995 and
approximately $87,676,000 at September 28, 1996 of unrestricted cash,
investments and marketable securities.
Accounts receivable increased approximately $22,617,000, or approximately
19.2%, between December 31, 1995 and September 28, 1996, while net sales
increased approximately 21.9% in the third quarter of 1996 as compared to
the fourth quarter of 1995. The increase in accounts receivable is
principally as a result of increased net sales. 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 increases or decreases in net sales near the end of any period
generally result in significant changes in the amount of accounts
receivable on the date of the balance sheet at the end of such period, as
was the situation on September 28, 1996 as compared to December 31, 1995.
The Company has not experienced any significant changes in credit terms,
collection efforts, credit utilization or delinquency in accounts
receivable in 1995 or 1996.
Inventories decreased approximately $2,807,000 or approximately 2.6%,
between December 31, 1995 and September 28, 1996.
Accounts payable increased approximately $20,372,000 or approximately 27.9%
between December 31, 1995 and September 28, 1996.
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
<TABLE>
<CAPTION>
Unrestricted cash and investments decreased approximately $23,231,000 from
December 31, 1995 to September 28, 1996, principally as a result of the
following:
<S> <C>
Condensed
Consolidated
Cash Flows
----------
Operating Activities--
Cash flow from operations, net $ 31,383,000
Increase in accounts receivable, net (22,084,000)
Decrease in inventories 3,702,000
Increase in trade accounts payable 19,051,000
Decrease in accrued expenses and taxes (914,000)
Investing Activities--
Purchase of marketable securities (45,903,000)
Proceeds from the sale of marketable securities 37,905,000
Capital expenditures (13,576,000)
Financing Activities--
Increase in borrowings 11,488,000
Payment of borrowings (12,143,000)
Purchase of Nortek Common and Special
Common Stock (31,738,000)
Other, net (402,000)
-----------
$(23,231,000)
===========
</TABLE>
The Company's debt-to-equity ratio increased from approximately 2.2:1 at
December 31, 1995 to 2.5:1 at September 28, 1996, primarily as a result of
the effect of the purchase of the Company's Common and Special Common Stock
(see Note G of the Notes to the Unaudited Condensed Consolidated Financial
Statements) and a slight net increase in borrowings, partially offset by
net earnings for the first nine months of 1996. (See the Company's
Unaudited Condensed Consolidated Statement of Stockholders' Investment
included elsewhere herein.)
At September 28, 1996, the Company has approximately $1,271,000 of net
U. S. Federal prepaid income tax assets which are expected to be realized
through future operating earnings. (See Note F of Notes to the Unaudited
Condensed Consolidated Financial Statements.)
On April 1, 1996, the Company extended and amended its shareholder rights
plan to March 31, 2006. Under the amended plan, each right previously
issued under the plan in effect to date, or subsequently issued under the
amended and restated plan, entitles shareholders to buy 1/100 of a share of
a new series of preferred stock of Nortek at an exercise price of $72 per
share, subject to adjustments for stock dividends, splits and similar
events. (See Note J of the Notes to the Unaudited Condensed Consolidated
Financial Statements included elsewhere herein.)
<PAGE>
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 28, 1996
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Continued)
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.
When used in this discussion, the words "believes," "anticipates," and
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and
uncertainties, over which the Company has no control, which could cause
actual results to differ materially from those projected. These risks and
uncertainties include increases in raw material costs (including, among
others, steel, copper, packaging material, plastics, resins and aluminum)
and purchased component costs, the level of domestic and foreign
construction and remodeling activity affecting residential and commercial
markets, interest rates, inflation, consumer spending levels, operating in
international economies, the rate of sales growth, price and product
competition, new product introduction, material shortages and product
liability claims. Readers are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date hereof.
The Company undertakes no obligation to republish revised forward-looking
statements to reflect events or circumstances after the date thereof or to
reflect the occurrence of unanticipated events. Readers are also urged to
carefully review and consider the various disclosures made by the Company,
in this report, as well as the Company's periodic reports on Forms 10-K, 10-
Q and 8-K filed with the Securities and Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
3.3 By-laws of Nortek, Inc. (as amended through
September 19, 1996) (filed herewith).
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.
<PAGE>
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 5, 1996
- ------------------------------
(Date)
<PAGE>
<TABLE>
<CAPTION>
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
--------------------------
<S> <C> <C>
Sept. 28, Sept. 30,
1996 1995
---- ----
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 16,674,636 16,844,777
Less average common and special common shares
held in the Treasury (6,700,804) (4,366,666)
---------- ----------
Weighted average number of common and special
common shares outstanding during the period 9,973,832 12,478,111
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average
price during the period 188,061 100,658
---------- ----------
Weighted average number of common and common
equivalent shares outstanding during the
period 10,161,893 12,578,769
========== ==========
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 9,973,832 12,478,111
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 195,067 103,421
---------- ----------
10,168,899 12,581,532
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
--------------------------
<S> <C> <C>
Sept. 28, Sept. 30,
1996 1995
---- ----
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 17,362,207 16,893,214
Less average common and special common shares
held in the Treasury (6,700,804) (4,366,666)
---------- ----------
Weighted average number of common and special
common shares outstanding during the period 10,661,403 12,526,548
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average
price during the period 183,172 136,733
---------- ----------
Weighted average number of common and common
equivalent shares outstanding during the
period 10,844,575 12,663,281
========== ==========
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 10,661,403 12,526,548
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 198,046 137,654
---------- ----------
10,859,448 12,664,202
========== ==========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-28-1996
<CASH> 42,424
<SECURITIES> 54,629
<RECEIVABLES> 145,848
<ALLOWANCES> 5,214
<INVENTORY> 107,245
<CURRENT-ASSETS> 382,604
<PP&E> 245,932
<DEPRECIATION> 107,653
<TOTAL-ASSETS> 632,736
<CURRENT-LIABILITIES> 236,906
<BONDS> 243,578
0
0
<COMMON> 16,674
<OTHER-SE> 97,997
<TOTAL-LIABILITY-AND-EQUITY> 632,736
<SALES> 729,447
<TOTAL-REVENUES> 729,447
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As Amended through EXHIBIT 3.3
September 19, 1996
BY-LAWS
of
NORTEK, INC.
SECTION 1.
LAW, CERTIFICATE OF INCORPORATION
AND BY- LAWS
1.1. These by-laws are subject to the certificate of
incorporation of the corporation. In these by-laws, references
to law, the certificate of incorporation and by-laws mean the
law, the provisions of the certificate of incorporation and
the by-laws as from time to time in effect.
SECTION 2.
STOCKHOLDERS
2.1. Annual Meeting. The annual meeting of stockholders
shall be held at 11:00 A.M. on the third Wednesday in July in
each year, unless that day be a legal holiday at the place
where the meeting is to be held, in which case the meeting
shall be held at the same hour on the next succeeding day not
a legal holiday, or at such other date and time as shall be
designated from time to time by the board of directors and
stated in the notice of the meeting, at which they shall elect
a board of directors and transact such other business as may
be required by law or these by-laws or as may properly come
before the meeting.
2.2 Special Meeting in Place of Annual Meeting. If the
election for directors shall not be held on the day designated
by these by-laws, the directors shall cause the election to be
held as soon thereafter as convenient, and to that end, if the
annual meeting is omitted on the day herein provided therefor
or if the election of directors shall not be held thereat, a
special meeting of the stockholders may be held in place of
such omitted meeting or election, and any business transacted
or election held at such special meeting shall have the same
effect as if transacted or held at the annual meeting, and in
such case all references in these by-laws to the annual
meeting of the stockholders, or to the annual election of
directors, shall be deemed to refer to or include such special
meeting. Any such special meeting shall be called, and the
purposes thereof shall be specified in the call, as provided
in Section 2.3.
2.3. Special Meetings. A special meeting of the
stockholders may be called at any time by the chairman of the
board, if any, the president or by the board of directors.
2.4. Place of Meeting. All meetings of the stockholders
for the election of directors or for any other purpose shall
be held at such place within or without the State of Delaware
as may be determined from time to time by the chairman of the
board, if any, the president or the board of directors. Any
adjourned session of any meeting of the stockholders shall be
held at the place designated in the vote of adjournment.
2.5. Notice of Meetings. Except as otherwise provided by
law, a written notice of each meeting of stockholders stating
the place, day and hour thereof and, in the case of a special
meeting, the purposes for which the meeting is called, shall
be given not less then ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to
each stockholder who, by law, by the certificate of
incorporation or by these by-laws, is entitled to notice, by
leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States
mail, postage prepaid, and addressed to such stockholder at
his address as it appears in the records of the corporation.
Such notice shall be given by the secretary, or by an officer
or person designated by the board of directors, or in the case
of a special meeting by the officer calling the meeting. As to
any adjourned session of any meeting of stockholders, notice
of the adjourned meeting need not be given if the time and
place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for
more than thirty days or if after the adjournment a new record
date is set for the adjourned session, notice of any such
adjourned session of the meeting shall be given in the manner
heretofore described. No notice of any meeting of stockholders
or any adjourned session thereof need be given to a
stockholder if a written waiver of notice, executed before or
after the meeting or such adjourned session by such
stockholder, is filed with the records of the meeting or if
the stockholder attends such meeting without objecting at the
beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of,
any meeting of the stockholders or any adjourned session
thereof need be specified in any written waiver of notice.
2.6. Quorum of Stockholders. At any meeting of the
stockholders, whether the same be an original or an adjourned
session, a quorum shall consist of a majority in interest of
all stock issued and outstanding and entitled to vote at the
meeting, provided that, except as may otherwise be provided in
the certificate of incorporation, when a specified item of
business is required to be voted on by a class or series,
voting as a class, the holders of one-third of the shares of
such class or series shall constitute a quorum for the
transaction of such specified item of business. Any meeting
may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is
present.
2.7. Action by Vote. When a quorum is present at any
meeting, whether the same be an original or an adjourned
session, a plurality of the votes properly cast for election
to any office shall elect to such office and a majority of the
votes properly cast upon any question other than an election
to an office shall decide the question, except when a larger
vote is required by law, by the certificate of incorporation
or by these by-laws. No ballot shall be required for any
election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the
election. Every reference in these by-laws or in the
certificate of incorporation to a majority or other proportion
of the stock or the shares of the corporation shall refer to
such majority or other proportion of the votes of such stock
or shares.
2.8. Action without Meetings. Unless otherwise provided
in the certificate of incorporation, any action required or
permitted to be taken by stockholders for or in connection
with any corporate action may be taken without a meeting,
without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by
the holders of all of the shares of outstanding stock of the
corporation having power to vote.
If action is taken by unanimous consent of stockholders,
the writing or writings comprising such unanimous consent
shall be filed with the records of the meetings of
stockholders.
In the event that the action which is consented to is
such as would have required the filing of a certificate under
any of the provisions of the General Corporation Law of
Delaware, if such action had been voted upon by the
stockholders at a meeting thereof, the certificate filed under
such provision shall state that written consent has been given
under Section 228 of said General Corporation Law, in lieu of
stating that the stockholders have voted upon the corporate
action in question, if such last mentioned statement is
required thereby.
2.9. Proxy Representation. Every stockholder may
authorize another person or persons to act for him by proxy in
all matters in which a stockholder is entitled to participate,
whether by waiving notice of any meeting, objecting to or
voting or participating at a meeting, or expressing consent or
dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be
voted or acted upon after three years from its date unless
such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and,
if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a
proxy may but need not be limited to specified action,
provided, however, that if a proxy limits its authorization to
a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder
thereof to vote at any adjourned session but shall not be
valid after the final adjournment thereof.
2.10. Inspectors. The directors or the person presiding
at the meeting may, but need not, appoint one or more
inspectors of election and any substitute inspectors to act at
the meeting or any adjournment thereof. Each inspector, before
entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the
number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the
meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a
certificate of any fact found by them.
2.11. List of Stockholders. The secretary shall prepare
and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of
shares registered in his name. The stock ledger shall be the
only evidence as to who are stockholders entitled to examine
such list or to vote in person or by proxy at such meeting.
SECTION 3.
BOARD OF DIRECTORS
3.1. Number. The number of directors which shall
constitute the whole board shall not be less than three. The
number of directors of the corporation at any time shall be
the number of directors fixed by resolution adopted by the
board of directors. No decrease in the number of directors
shall have the effect of shortening the term of any incumbent
director.
3.2. Classification, Election and Tenure. The
directors, other than those who may be elected by the holders
of any class or series of preference stock voting separately
by class or series, shall be classified, with respect to the
duration of the term for which they severally hold office,
into three classes, designated Class I, Class II, and Class
III, which shall be as nearly equal in number as possible and
as provided by resolution of the board of directors in
connection with such election.
Each initial director in Class I shall hold office for a
term expiring at the 1990 annual meeting of stockholders; each
initial director of Class II shall hold office for a term
expiring at the 1991 annual meeting of stockholders; and each
initial director of Class III shall hold office for a term
expiring at the 1992 annual meeting of stockholders. Each
director shall serve until his successor is duly elected and
qualified or until his earlier death, resignation, removal or
disqualification. At each annual meeting of stockholders
following the 1989 annual meeting, the stockholders shall
elect the successors to the class of directors whose term
expires at that meeting to hold office for a term expiring at
the annual meeting of stockholders held in the third year
following the year of their election and until their
successors have been duly elected and qualified or until their
earlier death, resignation, removal or disqualification.
The board of directors shall increase or decrease the
number of directors in one or more classes as may be
appropriate whenever it increases or decreases the number of
directors pursuant to Section 3.1, in order to ensure that the
three classes shall be as nearly equal in number as possible.
3.3. Powers and Qualifications. The business of the
corporation shall be managed by or under the direction of the
board of directors who shall have and may exercise all the
powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or
these by-laws directed or required to be exercised or done by
the stockholders. Directors need not be residents of the State
of Delaware or stockholders of the corporation. No person
shall be qualified for election as a director who has not
reached the age of twenty-one years.
3.4. Nominations. Nominations of persons to be elected
directors of the corporation, other than nominations submitted
on behalf of the incumbent board of directors, must
(a) be submitted in writing to the secretary or
chief executive officer of the corporation not less than
30 days before the meeting of the stockholders at which
such election is to be held;
(b) be accompanied by a written statement, as to
each such nominee, of his residence and business (if any)
address, occupation (if any), date of birth, and record
and beneficial holdings of the shares of the corporation;
and
(c) accompanied by a petition in support of such
nomination signed by at least 100 record holders of share
of capital stock of the corporation entitled to vote in
elections of directors, holding in the aggregate not less
than 1% of the shares of capital stock of the corporation
entitled to vote in elections of directors outstanding as
of the date such petition is submitted.
3.5. Vacancies. Vacancies and any newly created
directorships resulting from any increase in the number of
directors may be filled by vote of a majority of the directors
then in office, although less than a quorum. When one or more
directors shall resign from the board, effective at a future
date, a majority of the directors then in office, including
those who have resigned, shall have power to fill such vacancy
or vacancies, the vote or action in writing thereon to take
effect when such resignation or resignations shall become
effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies
in their number, subject to any requirements of law or of the
certificate of incorporation or of these by-laws as to the
number of directors required for a quorum or for any vote or
other actions.
3.6. Executive and Other Committees of Directors. The
board of directors, by resolution adopted by a majority of the
full board of directors, may designate from among its members
an executive committee and one or more other committees each
of which, to the extent provided in the resolution or these by-
laws, shall have and may exercise all the authority of the
board of directors, but no such committee shall have the
authority of the board of directors in reference to amending
the certificate of incorporation, adopting a plan of merger or
consolidation, recommending to the shareholders the sale,
lease, exchange or other disposition of all or substantially
all the property and assets of the corporation otherwise than
in the usual and regular course of its business, recommending
to the stockholders a voluntary dissolution of the corporation
or a revocation thereof, or amending these by-laws. Except as
the board of directors may otherwise determine, any such
committee may make rules for the conduct of its business, but
unless otherwise provided by the board of directors or such
rules, its business shall be conducted as nearly as may be in
the same manner as is provided by these by-laws for the
conduct of business of the board of directors. Each such
committee shall serve at the pleasure of the board of
directors. Such committees shall keep regular minutes or other
records of their proceedings and report the same to the board
of directors upon request.
3.7. Regular Meetings. Regular meetings of the board of
directors may be held without call or notice at such places
within or without the State of Delaware and at such times as
the board may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent directors. A regular
meeting of the directors may be held without call or notice
immediately after and at the same place as the annual meeting
of stockholders.
3.8. Special Meetings. Special meetings of the board of
directors may be held at any time and at any place within or
without the State of Delaware designated in the notice of the
meeting, when called by the chairman of the board, if the
meeting, when called by the chairman of the board, if any, the
president, or by one-third or more in number of the directors,
reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the
president or any one of the directors calling the meeting.
3.9. Notice. It shall be reasonable and sufficient
notice to a director to send notice by mail at least forty-
eight hours or by telegram at least twenty-four hours before
the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in
person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any director
if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting, or to
any director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him.
Neither notice of a meeting nor a waiver of a notice need
specify the purposes of the meeting.
3.10. Quorum. Except as may be otherwise provided by
law, by the certificate of incorporation or by these by-laws,
at any meeting of the directors a majority of the directors
then in office shall constitute a quorum; a quorum shall not
in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be
adjourned from time to time by a majority of the votes cast
upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice.
3.11. Action by Vote. Except as may be otherwise
provided by law, by the certificate of incorporation or by
these by-laws, when a quorum is present at any meeting the
vote of a majority of the directors present shall be the act
of the board of directors.
3.12. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the board of directors
or a committee thereof may be taken without a meeting if all
the members of the board or of such committee, as the case may
be, consent thereto in writing, and such writing or writings
are filed with the records of the meetings of the board or of
such committee. Such consent shall be treated for all purposes
as the act of the board or of such committee, as the case may
be.
3.13. Participation in Meetings by Conference Telephone.
Members of the board of directors, or any committee designated
by such board, may participate in a meeting of such board or
committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other or by any
other means permitted by law. Such participation shall
constitute presence in person at such meeting.
3.14. Compensation. In the discretion of the board of
directors, each director may be paid such fees for his
services as director and be reimbursed for his reasonable
expenses incurred in the performance of his duties as a
director as the board of directors from time to time may
determine. Nothing contained in this section shall be
construed to preclude any director from serving the
corporation in any other capacity and receiving reasonable
compensation therefor.
3.15. Interested Directors and Officers.
(a) No contract or transaction between the corporation
and one or more of its directors or officers, or between the
corporation and any other corporation, partnership,
association, or other organization in which one or more of the
corporation's directors or officers are directors or officers,
or have a financial interest, shall be void or voidable solely
for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or
committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted
for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the board of directors or the
committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum;
or
(2) The material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified, by the board of directors, a committee thereof,
or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board
of directors or of a committee which authorizes the contract
or transaction.
SECTION 4.
OFFICERS AND AGENTS
4.1. Enumeration, Qualification. The officers of the
corporation shall be a president, a treasurer, a secretary and
such other officers, if any, as the board of directors from
time to time may in its discretion elect or appoint including
without limitation a chairman of the board, a vice chairman of
the board, one or more vice presidents and a controller. The
corporation may also have such agents, if any, as the board of
directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder.
Any two or more offices may be held by the same person. Any
officer may be required by the board of directors to secure
the faithful performance of his duties to the corporation by
giving bond in such amount and with sureties or otherwise as
the board of directors may determine.
4.2. Powers. Subject to law, to the certificate of
incorporation and to the other provisions of these by-laws,
each officer shall have, in addition to the duties and powers
herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers
as the board of directors may from time to time designate.
4.3. Election. The officers may be elected by the board
of directors at the first meeting following the annual meeting
of the stockholders or at any other time. At any time or from
time to time the directors may delegate to any officer their
power to elect or appoint any other officer or any agents.
4.4. Tenure. Each officer shall hold office until the
first meeting of the board of directors following the next
annual meeting of the stockholders and until his respective
successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or
appointment, or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Each agent shall retain his
authority at the pleasure of the directors, or the officer by
whom he was appointed or by the officer who then holds agent
appointive power.
4.5. Chairman and Vice Chairman of the Board of
Directors, President and Vice President. The chairman of the
board, if any, and the vice chairman if any, shall have such
duties and powers as shall be designated from time to time by
the board of directors. If there is a chairman of the board,
he shall preside at all meetings of the stockholders and of
the board of directors at which he is present, except as
otherwise voted by the board of directors. If there is no
chairman of the board or in the absence of the chairman of the
board, the president shall preside at all meetings of the
stockholders and of the board of directors at which he is
present, except as otherwise voted by the board of directors.
The vice chairman, if any, shall upon the death or
resignation of the chairman as a director or in the event the
chairman becomes totally and permanently incapacitated and is
unable to serve as a director, succeed to the office of the
chairman of the board. If such chairman was also chief
executive officer of the corporation, the vice chairman shall
succeed to the office of chief executive officer as well.
Unless the board of directors otherwise specifies, the
chairman of the board, if any, shall be the chief executive
officer and shall have direct charge of all business
operations of the corporation, and subject to the control of
the directors, shall have general supervision over the entire
business of the corporation. If a chairman of the board is
not elected, the president shall be the chief executive
officer.
The president shall have the duties and powers specified
in these by-laws, shall be the chief operating officer if a
chairman of the board is elected and is the chief executive
officer, and shall have such other duties and powers as may be
determined by the board of directors or by the chief executive
officer.
Any vice presidents shall have such duties and powers as
shall be set forth in these by-laws or as shall be designated
from time to time by the board of directors or by the chief
executive officer.
4.6. Treasurer and Assistant Treasurers. Except as the
board of directors shall otherwise determine, the treasurer
shall be the chief financial officer of the corporation and
shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from
time to time by the board of directors or by the president. If
no controller is elected, the treasurer shall also have the
duties and powers of the controller.
Any assistant treasurers shall have such duties and
powers as shall be designated from time to time by the board
of directors, the president or the treasurer.
4.7. Secretary and Assistant Secretaries. The secretary
shall record all proceedings of the stockholders, of the board
of directors and of committees of the board of directors in a
book or series of books to be kept therefor and shall file
therein all actions by written consent of stockholders or
directors. In the absence of the secretary from any meeting,
an assistant secretary, or if there be none or he is absent, a
temporary secretary chosen at the meeting, shall record the
proceedings thereof. Unless a transfer agent has been
appointed the secretary shall keep or cause to be kept the
stock and transfer records of the corporation, which shall
contain the names and record addresses of all stockholders and
the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may
from time to time be designated by the board of directors or
the president.
Any assistant secretaries shall have such duties and
powers as shall be designated from time to time by the board
of directors, the president or the secretary.
4.8. Compensation. The officers of the corporation shall
receive such compensation as shall be affixed from time to
time by the board of directors, except that the board of
directors may delegate to any officer or officers the power to
fix the compensation of any officer, except the chief
executive officer of the corporation. No officer shall be
prohibited from receiving such salary by reason of the fact
that he is also a director of the corporation.
SECTION 5.
RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by
delivering his resignation in writing to the chairman of the
board, if any, the president, or the secretary or to a meeting
of the board of directors. Such resignation shall be effective
upon receipt unless specified to be effective at some other
time, and without in either case the necessity of its being
accepted unless the resignation shall so state. Except as
otherwise provided in the certificate of incorporation or
these by-laws relating to the rights of the holders of any
class or series of preference stock, voting separately by
class or series, to elect directors under specified
circumstances, any director or directors may be removed from
office at any time, but only for cause and only by the
affirmative vote, at any regular meeting or special meeting of
the stockholders, of not less than two-thirds of the total
number of votes of the then outstanding shares of capital
stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class, but
only if notice of such proposal was contained in the notice of
such meeting. Any vacancy in the board of directors resulting
from any such removal may be filled by vote of a majority of
the directors then in office, although less than a quorum, and
any director or directors so chosen, shall hold office until
the next election of the class for which such directors shall
have been chosen and until their successors shall be elected
and qualified or until their earlier death, resignation or
removal. The board of directors may at any time remove any
officer either with or without cause. The board of directors
may at any time terminate or modify the authority of any
agent. No director or officer resigning and (except where a
right to receive compensation shall be expressly provided in a
duly authorized written agreement with the corporation) no
director or officer removed shall have any right to any
compensation as such director or officer (but not excluding
rights to indemnification provided in the certificate of
incorporation or these by-laws) for any period following his
resignation or removal, or any right to damages on account of
such removal, whether his compensation be by the month or by
the year or otherwise; unless, in the case of a resignation,
the directors, or, in the case of removal, the body acting on
the removal, shall in their or its discretion provide for
compensation.
SECTION 6.
VACANCIES
If the office of the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor
by vote of a majority of the directors then in office. If the
office of any other officer becomes vacant, any person or body
empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the
unexpired term, and in the case of the president, the
treasurer and the secretary until his successor is chosen and
qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship
shall be filled as specified in Section 3.5 of these by-laws.
SECTION 7.
CAPITAL STOCK
7.1. Stock Certificates. Each stockholder shall be
entitled to a certificate stating the number and the class and
the designation of the series, if any, of the shares held by
him, in such form as shall, in conformity to law, the
certificate of incorporation and the by-laws, be prescribed
from time to time by the board of directors. Such certificate
shall be signed by the chairman or vice chairman of the board,
if any, or the president or a vice president and by the
treasurer or an assistant treasurer or by the secretary or an
assistant secretary. Any of or all the signatures on the
certificate may be a facsimile. In case an officer, transfer
agent, or registrar who has signed or whose facsimile
signature has been placed on such certificate shall have
ceased to be such officer, transfer agent, or registrar before
such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer,
transfer agent, or registrar at the time of its issue.
7.2. Loss of Certificates. In the case of the alleged
theft, loss, destruction or mutilation of a certificate of
stock, a duplicate certificate may be issued in place thereof,
upon such terms, including receipt of a bond sufficient to
indemnify the corporation and its agents against any claim on
account thereof, as the board of directors may prescribe.
SECTION 8.
TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if
any, stated or noted on the stock certificate, shares of stock
may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the
certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed,
with necessary transfer stamps affixed, and with such proof of
the authenticity of signature as the board of directors or the
transfer agent of the corporation may reasonably require.
Except as may be otherwise required by law, by the certificate
of incorporation or by these by-laws, the corporation shall be
entitled to treat the record holder of stock as shown on its
books as the owner of such stock for all purposes, including
the payment of dividends and the Right to receive notice and
to vote or to give any consent with respect thereto and to be
held liable for such calls and assessments, if any, as may
lawfully be made thereon, regardless of any transfer, pledge
or other disposition of such stock until the shares have been
properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the
corporation of his post office address.
8.2. Record Date and Closings Transfer Books. In order
that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor
less than ten days (or such longer period as may be required
by law) before the date of such meeting, nor more than sixty
days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders
entitled to notice of or to vote it a meeting of
stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(b) The record date for determining stockholders for
any other purpose shall be at the close of business on
the day on which the board of directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the
board of directors may fix a new record date for the adjourned
meeting.
SECTION 9.
INDEMNIFICATION
9.1. The corporation shall, to the maximum extent
permitted from time to time under the law of the State of
Delaware, indemnify and upon request shall advance expenses to
any person who is or was a party or is threatened to be made a
party to any threatened, pending or completed action, suit,
proceeding or claim, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or
was or has agreed to be a director or officer of this
corporation or while a director or officer is or was serving
at the request of this corporation as a director, officer,
partner, trustee, fiduciary, employee or agent of any
corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, against expenses (including attorney's fees and
expenses), judgments, fines, penalties and amounts paid in
settlement incurred in connection with the investigation,
preparation in connection with such action, suit, proceeding
or claim; provided, however, that the foregoing shall not
require this corporation to indemnify or advance expenses to
any person in connection with any action, suit, proceeding,
claim or counterclaim initiated by or on behalf of such
person, other than an action to enforce indemnification
rights. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement,
vote of directors or stockholders or otherwise and shall inure
to the benefit of the heirs and legal representatives of such
person. Any such person seeking indemnification under this
Section 9.1 shall be deemed to have met the standard of
conduct required for such indemnification unless the contrary
shall be established. The corporation shall have the power to
provide indemnification and advance expenses to any other
person, including employees and agents of the corporation and
stockholders purporting to act on behalf of the corporation,
to the extent permitted by the law of the State of Delaware.
SECTION 10.
CORPORATE SEAL
10.1. Subject to alteration by the directors, the seal
of the corporation shall consist of a flat-faced circular die
with the word "Delaware" and the name of the corporation cut
or engraved thereon, together with such other words, dates or
images as may be approved from time to time by the directors.
SECTION 11.
EXECUTION OF PAPERS
11.1. Except as the board of directors may generally or
in particular cases authorize the execution thereof in some
other manner, all deeds, leases, transfers, contracts, bonds,
notes, checks, drafts or other obligations made, accepted or
endorsed by the corporation shall be signed by the chairman of
the board, if any, the president, a vice president or the
treasurer.
SECTION 12.
FISCAL YEAR
12.1. The fiscal year of the corporation shall end on
the 31st day of December of each year, or such other date as
may be fixed by the board of directors.
SECTION 13.
AMENDMENTS
13.1. Except as otherwise provided in the certificate of
incorporation, and other than Section 3.4 hereof, these by-
laws may be amended by the favorable vote of the holders of
three-fourths of the shares of the corporation entitled to
vote generally in the election of directors or by a majority
of a quorum of the board of directors, in either case at any
regular or special meeting; any such amendment by the board of
directors may be changed by the favorable vote of the holders
of three-fourths of the shares of the corporation entitled to
vote generally in the election of directors. Section 3.4
hereof may not be amended or rescinded except by the
affirmative vote of the holders of not less than two-thirds of
the outstanding shares of the corporation entitled to vote
generally in the election of directors, at any regular or
special meeting, but only if notice of the proposed alteration
or amendment was contained in the notice of such meeting.
SECTION 14.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
14.1 The provisions of Section 203 of the Delaware
General Corporation Law shall not apply to the corporation.
