FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2000
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.
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(Exact name of registrant as specified in its charter)
Delaware 05-0314991
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Kennedy Plaza, Providence, RI 02903-2360
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(Address of principal executive offices)
(Zip Code)
(401) 751-1600
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(Registrant's telephone number, including area code)
N/A
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(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 August 4, 2000 was
10,371,147. The number of shares of Special Common Stock outstanding as of
August 4, 2000 was 541,145.
1
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands)
July 1, Dec. 31,
2000 1999
---------- ----------
(Unaudited)
Assets
Current Assets:
Unrestricted
Cash and cash equivalents $ 84,743 $ 80,893
Marketable securities available for
sale --- 34,219
Restricted
Investments and marketable securities
at cost, which approximates market 22,095 11,240
Accounts receivable, less allowances
of $11,866,000 and $13,019,000 311,248 243,763
Inventories:
Raw materials 99,013 89,581
Work in process 21,980 20,844
Finished goods 128,466 102,253
---------- ----------
249,459 212,678
---------- ----------
Prepaid expenses 17,171 11,864
Other current assets 11,762 16,787
Prepaid income taxes 67,300 66,824
---------- ----------
Total current assets 763,778 678,268
---------- ----------
Property and Equipment, at Cost:
Land 17,049 16,270
Buildings and improvements 126,278 127,736
Machinery and equipment 360,312 348,445
---------- ----------
503,639 492,451
Less accumulated depreciation 181,080 163,834
---------- ----------
Total property and equipment, net 322,559 328,617
---------- ----------
Other Assets:
Goodwill, less accumulated amortization
of $65,059,000 and $56,942,000 582,591 589,532
Intangible assets, less accumulated
amortization of $18,959,000 and
$15,956,000 128,476 133,040
Deferred debt expense 20,422 22,068
Restricted investments and marketable
securities 20,053 15,677
Other 43,638 42,482
---------- ----------
795,180 802,799
---------- ----------
$1,881,517 $1,809,684
========== ==========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
2
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands)
(Continued)
July 1, Dec. 31,
2000 1999
---------- ----------
(Unaudited)
Liabilities and Stockholders' Investment
Current Liabilities:
Notes payable and other short-term
obligations $ 8,286 $ 8,476
Current maturities of long-term debt 5,515 5,564
Accounts payable 190,090 149,772
Accrued expenses and taxes, net 207,239 189,964
---------- ----------
Total current liabilities 411,130 353,776
---------- ----------
Other Liabilities
Deferred income taxes 73,755 73,499
Other 101,201 98,976
---------- ----------
174,956 172,475
---------- ----------
Notes, Mortgage Notes and Obligations
Payable, Less Current Maturities 1,017,657 1,023,616
Stockholders' Investment:
Preference stock, $1 par value;
authorized 7,000,000 shares, none issued --- ---
Common stock, $1 par value; authorized
40,000,000 shares; 18,744,638 and
18,738,292 shares issued 18,744 18,738
Special common stock, $1 par value;
authorized 5,000,000 shares; 835,590
and 840,436 shares issued 836 841
Additional paid-in capital 208,808 208,755
Retained earnings 166,366 143,266
Accumulated other comprehensive loss (14,277) (11,822)
Less --treasury common stock at cost,
7,929,630 and 7,793,217 shares (100,635) (97,894)
--treasury special common stock
at cost, 290,106 and
290,054 shares (2,068) (2,067)
---------- ----------
Total stockholders' investment 277,774 259,817
---------- ----------
$1,881,517 $1,809,684
========== ==========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
For The
Three Months Ended
------------------------
July 1, July 3,
2000 1999
---- ----
(Unaudited)
Net Sales $603,943 $544,088
-------- --------
Costs and Expenses:
Cost of products sold 437,921 384,971
Selling, general and administrative
expense 103,052 95,842
Amortization of goodwill and
intangible assets 5,653 5,055
-------- --------
546,626 485,868
-------- --------
Operating earnings 57,317 58,220
Interest expense (24,284) (24,373)
Investment income 1,467 1,653
-------- --------
Earnings before provision for income
taxes 34,500 35,500
Provision for income taxes 15,400 15,700
-------- --------
Net Earnings $ 19,100 $ 19,800
======== ========
Net Earnings per share of common
stock:
Basic $1.68 $1.67
===== =====
Diluted $1.67 $1.64
===== =====
Weighted Average Number of Shares:
Basic 11,388 11,850
====== ======
Diluted 11,428 12,051
====== ======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
4
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
For The
Six Months Ended
--------------------------
July 1, July 3,
2000 1999
---- ----
(Unaudited)
Net Sales $1,095,450 $950,788
---------- --------
Costs and Expenses:
Cost of products sold 796,139 681,887
Selling, general and administrative
expense 200,789 173,225
Amortization of goodwill and
intangible assets 11,405 9,839
---------- --------
1,008,333 864,951
---------- ---------
Operating earnings 87,117 85,837
Interest expense (48,594) (48,339)
Investment income 3,377 4,502
---------- --------
Earnings before provision for income
taxes 41,900 42,000
Provision for income taxes 18,800 18,700
---------- --------
Net Earnings $ 23,100 $ 23,300
========== ========
Net Earnings per share of common
stock:
Basic $2.02 $1.97
===== =====
Diluted $2.01 $1.94
===== =====
Weighted Average Number of Shares:
Basic 11,436 11,798
====== ======
Diluted 11,488 11,988
====== ======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
For the
Six Months Ended
----------------------
July 1, July 3,
2000 1999
---- ----
(Unaudited)
Cash Flows from operating activities:
Net earnings $ 23,100 $ 23,300
-------- --------
Adjustments to reconcile net earnings
to cash:
Depreciation and amortization expense 30,953 26,812
Non-cash interest expense 1,986 1,832
Gain on sale of land (1,712) ---
Changes in certain assets and
liabilities, net of effects from acquisitions
and dispositions:
Accounts receivable, net (69,101) (63,527)
Prepaids and other current assets (1,781) 2,973
Inventories (36,454) (29,060)
Accounts payable 41,517 43,503
Accrued expenses and taxes 16,545 9,118
Long-term assets, liabilities and other,
net (1,033) (1,659)
--------- --------
Total adjustments to net earnings (19,080) (10,008)
--------- --------
Net cash provided by operating
activities $ 4,020 $ 13,292
-------- --------
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
6
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Continued)
For the
Six Months Ended
-----------------------
July 1, July 3,
2000 1999
---- ----
(Unaudited)
Cash Flows from investing activities:
Capital expenditures $(14,300) $(25,349)
Net cash paid for businesses acquired --- (86,571)
Purchase of investments and marketable
securities (4,004) (54,310)
Proceeds from the sale of investments
and marketable securities 38,439 145,538
Proceeds from the sale of fixed assets 5,361 380
Acquisition deposit held in escrow (10,628) ---
Change in restricted cash and (4,061) 3,798
investments
Other, net (2,643) (5,953)
-------- --------
Net cash provided by (used in)
investing activities 8,164 (22,467)
-------- --------
Cash Flows from financing activities:
Payment of borrowings, net (5,669) (2,734)
Purchase of Nortek Common and Special
Common Stock (2,671) (3,770)
Other, net 6 (54)
-------- --------
Net cash used in financing activities (8,334) (6,558)
-------- --------
Net increase (decrease) in unrestricted
cash and cash equivalents 3,850 (15,733)
Unrestricted cash and cash equivalents
at the beginning of the period 80,893 87,876
-------- --------
Unrestricted cash and cash equivalents
at the end of the period $ 84,743 $ 72,143
======== ========
Interest paid $ 46,509 $ 45,992
======== ========
Income taxes paid, net $ 3,292 $ 7,736
======== ========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
7
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE THREE MONTHS ENDED JULY 3, 1999
<TABLE>
<CAPTION>
Addi- Accumulated
Special tional Other
Common Common Paid in Retained Treasury Comprehensive Comprehensive
Stock Stock Capital Earnings Stock Income(Loss) Income(Loss)
-------------------------------------------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 3, 1999 $18,680 $849 $207,796 $97,466 $(88,059) $(12,592) $ ---
Net earnings --- --- --- 19,800 --- --- 19,800
Other comprehensive
income(loss):
Currency translation
adjustment --- --- --- --- --- (941) (941)
Unrealized increase in
the value of market-
able securities --- --- --- --- --- 25 25
-------
Comprehensive income $18,884
=======
2,893 shares of
special common stock
converted into 2,893
shares of common stock 3 (3) --- --- --- ---
9,750 shares of common
stock issued upon
exercise of stock
options 9 --- 61 --- --- ---
50,742 shares of
treasury stock
acquired --- --- --- --- (1,380) ---
------- ---- -------- -------- -------- --------
Balance, July 3, 1999 $18,692 $846 $207,857 $117,266 $(89,439) $(13,508)
======= ==== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
8
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE THREE MONTHS ENDED JULY 1, 2000
<TABLE>
<CAPTION>
Addi- Accumulated
Special tional Other
Common Common Paid in Retained Treasury Comprehensive Comprehensive
Stock Stock Capital Earnings Stock Loss Income(Loss)
-------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 2000 $18,740 $840 $208,808 $147,266 $(100,998) $(13,027) $ ---
Net earnings --- --- --- 19,100 --- --- 19,100
Other comprehensive
income(loss):
Currency translation
adjustment --- --- --- --- --- (1,150) (1,150)
Unrealized decrease in
the value of market-
able securities --- --- --- --- --- (100) (100)
-------
Comprehensive income $17,850
=======
4,121 shares of
special common stock
converted into 4,121
Shares of common stock 4 (4) --- --- --- ---
85,452 shares of
treasury stock
acquired --- --- --- --- (1,705) ---
------- ---- -------- -------- -------- --------
Balance, July 1, 2000 $18,744 $836 $208,808 $166,366 $(102,703) $(14,277)
======= ==== ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
9
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE SIX MONTHS ENDED JULY 3, 1999
<TABLE>
<CAPTION>
Addi- Accumulated
Special tional Other
Common Common Paid in Retained Treasury Comprehensive Comprehensive
Stock Stock Capital Earnings Stock Income(Loss) Income(Loss)
---------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1998 $18,428 $855 $201,626 $93,966 $(85,669) $(11,596) $ ---
Net earnings --- --- --- 23,300 --- --- 23,300
Other comprehensive
income(loss):
Currency translation
adjustment --- --- --- --- --- (2,149) (2,149)
Unrealized increase in
the value of market-
able securities --- --- --- --- --- 237 237
-------
Comprehensive income $21,388
=======
9,175 shares of
special common stock
converted into 9,175
Shares of common stock 9 (9) --- --- --- ---
20,615 shares of common
Stock issued upon exercise
of stock options 20 --- 151 --- --- ---
140,250 shares of
treasury stock
acquired --- --- --- --- (3,770) ---
235,000 shares of common
stock issued as
partial consideration
for an acquisition 235 --- 6,080 --- --- ---
------- ---- -------- -------- -------- --------
Balance, July 3, 1999 $18,692 $846 $207,857 $117,266 $(89,439) $(13,508)
======= ==== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
10
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE SIX MONTHS ENDED JULY 1, 2000
<TABLE>
<CAPTION>
Addi- Accumulated
Special tional Other
Common Common Paid in Retained Treasury Comprehensive Comprehensive
Stock Stock Capital Earnings Stock Loss Income(Loss)
------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1999 $18,738 $841 $208,755 $143,266 $(99,961) $(11,822) $ ---
Net earnings --- --- --- 23,100 --- --- 23,100
Other comprehensive
income(loss):
Currency translation
adjustment --- --- --- --- --- (2,310) (2,310)
Unrealized decrease in
the value of market-
able securities --- --- --- --- --- (145) (145)
-------
Comprehensive income $20,645
=======
4,846 shares of
special common stock
converted into 4,846
shares of common stock 5 (5) --- --- --- ---
1,500 shares of common
stock issued upon exercise
of stock options 1 --- 53 --- --- ---
136,465 shares of
treasury stock
acquired --- --- --- --- (2,742) ---
------- ---- -------- -------- -------- --------
Balance, July 1, 2000 $18,744 $836 $208,808 $166,366 $(102,703) $(14,277)
======= ==== ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
11
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2000 AND JULY 3, 1999
(A) The unaudited condensed consolidated financial statements (the "Unaudited
Financial Statements") presented have been prepared by Nortek, Inc. and
include the accounts of Nortek, Inc., and all of its significant 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. Although certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have
been omitted, the Company believes that the disclosures included are
adequate to make the information presented not misleading. 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 as filed with the Securities and Exchange Commission.
(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.
(C) On July 3, 2000, the Company acquired Eaton-Williams Holdings Limited
("Eaton-Williams"), of Edenbridge, England. Eaton-Williams designs,
manufactures, installs and services a leading range of custom-made and
standard air conditioning and humidification equipment. For its fiscal year
ended April 2, 2000, Eaton-Williams reported sales of approximately
(pound)27,000,000 ($41,000,000). At July 1, 2000, approximately $10,600,000
was included in restricted investments and marketable securities, in the
Company's accompanying Unaudited Condensed Consolidated Balance Sheet, and
was held in escrow until July 3, 2000 when it was used to fund the
acquisition of Eaton-Williams.
(D) The Company's Board of Directors has authorized a number of programs to
purchase shares of the Company's Common and Special Common Stock. The most
recent of these programs was announced on May 4, 2000, and allows the
Company to purchase up to 1,000,000 shares of the Company's Common and
Special Common Stock in open market or negotiated transactions, subject to
market conditions, cash availability and provisions of the Company's
outstanding debt instruments. As of August 4, 2000, the Company has
purchased approximately 460,700 shares of its Common and Special Common
Stock under this program for approximately $9,200,000 and accounted for
such share purchases as Treasury Stock.
12
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2000 AND JULY 3, 1999
(Continued)
At August 4, 2000 approximately $90,700,000 was available for the payment
of cash dividends, stock purchases or other restricted payments as defined
under the terms of the Company's most restrictive Indenture.
(E) Basic earnings per share amounts have been computed using the weighted
average number of common and common equivalent shares outstanding during
each period. Special Common Stock is treated as the equivalent of Common
Stock in determining earnings per share results. Diluted earnings per share
amounts have been computed using the weighted average number of common and
common equivalent shares and the dilutive potential common and special
common shares outstanding during each period.
A reconciliation between basic and diluted earnings per share from
continuing operations is as follows:
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
---- ---- ---- ----
(In thousands except per share
amounts)
<S> <C> <C> <C> <C>
Net earnings $19,100 $19,800 $23,100 $23,300
Basic EPS:
Basic common shares 11,388 11,850 11,436 11,798
======= ======= ======= =======
Basic EPS $1.68 $1.67 $2.02 $1.97
===== ===== ===== =====
Diluted EPS:
Basic common shares 11,388 11,850 11,436 11,798
Plus: Impact of
stock options 40 201 52 190
------- ------- ------- -------
Diluted common shares 11,428 12,051 11,488 11,988
======= ======= ======= =======
Diluted EPS $1.67 $1.64 $2.01 $1.94
===== ===== ===== =====
</TABLE>
(F) In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" as amended
by SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133 - Amendment of
SFAS No. 133" (combined "SFAS 133"). SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in
the balance sheet as either an asset or liability measured at its fair
value. SFAS 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
13
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2000 AND JULY 3, 1999
(Continued)
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item
in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that
receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15, 2000. A
company may also implement SFAS 133 as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1999
and thereafter). SFAS 133 cannot be applied retroactively. SFAS 133 must be
applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the Company's
election, before January 1, 1998).
The Company is in the process of quantifying the impacts of adopting SFAS
133 on its financial statements and has not determined the timing of or
method of adoption of SFAS 133.
(G) The Securities and Exchange Commission released Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101"), on
December 3, 1999. This SAB provides additional guidance on the accounting
for revenue recognition including both broad conceptual discussions as well
as certain industry-specific guidance. The Company is reviewing with its
subsidiaries the potential impact of this new guidance, if any.
(H) The Company has three reportable segments: the Residential Building
Products Segment; the Air Conditioning and Heating Products Segment; and
the Windows, Doors and Siding Products Segment. In the tables below, Other
includes corporate related items, results of insignificant operations,
intersegment eliminations and certain income and expense items not
allocated to reportable segments.
The Company evaluates segment performance based on operating earnings
before allocations of corporate overhead costs. The income statement impact
of all purchase accounting adjustments, including goodwill and intangible
assets amortization, is included in the operating earnings of the
applicable segment. Intersegment net sales and eliminations were not
material for any of the periods presented.
Summarized financial information for the Company's reportable segments is
presented in the tables that follow for the three months and six months
ended July 1, 2000 and July 3, 1999.
14
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2000 AND JULY 3, 1999
(Continued)
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Residential building products $166,199 $161,074 $ 338,161 $315,368
Air conditioning and heating
products 179,641 157,312 307,287 273,746
Windows, doors and siding
products 239,466 205,540 412,014 322,971
Other 18,637 20,162 37,988 38,703
-------- -------- ---------- --------
$603,943 $544,088 $1,095,450 $950,788
======== ======== ========== ========
Operating Earnings (Loss):
Residential building products $23,308 $23,434 $ 48,374 $42,581
Air conditioning and heating
products 24,212 19,540 36,866 31,255
Windows, doors and siding
products 15,787 21,370 11,234 21,151
Other, net (5,990) (6,124) (9,357) (9,150)
------- ------- ------- -------
$57,317 $58,220 $ 87,117 $85,837
Unallocated:
Interest expense (24,284) (24,373) (48,594) (48,339)
Investment income 1,467 1,653 3,377 4,502
------- ------- ---------- -------
Earnings before provision
for income taxes $34,500 $35,500 $ 41,900 $42,000
======= ======= ========== =======
</TABLE>
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C>
Depreciation and
Amortization:
Residential building products $ 5,284 $ 5,038 $ 10,843 $10,060
Air conditioning and heating
Products 3,017 2,627 6,014 5,212
Windows, doors and siding
Products 6,731 5,609 13,345 10,558
Other 366 497 751 982
------- ------- ---------- -------
$15,398 $13,771 $ 30,953 $26,812
======= ======= ========== =======
</TABLE>
15
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2000 AND JULY 3, 1999
(Continued)
(I) The Company has recorded liabilities in connection with acquisitions
related to employee terminations and other exit costs associated with
management's plans to eliminate certain activities of acquired entities.
The Company recorded no liabilities in the three months and approximately
$2,200,000 in the six months ended July 1, 2000, which principally relate
to the termination of certain employees. As of July 1, 2000, plans for
eliminating certain activities of all acquisitions entered into through
July 1, 2000 have been finalized for all significant acquisitions.
Charges to these liabilities for employee termination costs include
payroll, payroll taxes and insurance benefits related to severance
arrangements and were approximately $450,000 and $900,000 for the three
months and six months ended July 1, 2000, respectively. Charges to the
liabilities for other exit costs relate principally to lease costs and
other costs of closing facilities and legal and consulting fees that were
incurred due to the implementation of the Company's exit strategies.
Charges to the liabilities for other exit costs were approximately $500,000
and $560,000 for the three months and six months ended July 1, 2000,
respectively. At July 1, 2000, liabilities in connection with acquisitions
related to employee terminations and other exit costs totaled approximately
$3,600,000.
(J) In the second quarter of 2000, the Company sold a parcel of land resulting
in a pre-tax gain of approximately $1,700,000 ($.10 net after tax per
share) which is included in operating earnings.
16
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
The Company is a diversified manufacturer of residential and commercial building
products, operating within three principal segments: the Residential Building
Products Segment, the Air Conditioning and Heating Products Segment, and the
Windows, Doors and Siding Products Segment. In the results of operations
presented below, Other includes corporate related items, results of
insignificant operations and certain income and expenses not allocable to
reportable segments. Through its principal segments, 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,
the do-it-yourself ("DIY") and professional remodeling and renovation markets.
(As used in this report, the terms "Company" and "Nortek" refer to Nortek, Inc.,
together with its subsidiaries, unless the context indicates otherwise. Such
terms as "Company" and "Nortek" are used for convenience only and are not
intended as a precise description of any of the separate corporations, each of
which manages its own affairs.)
The Residential Building Products Segment manufactures and distributes built-in
products primarily for the residential new construction, DIY and professional
remodeling and renovation markets. The principal products sold by the Segment
include, kitchen range hoods, bath fans and combination units (fan, heater and
light combinations). The Air Conditioning and Heating Products Segment
manufactures and sells heating, ventilating, and air conditioning systems
("HVAC") for custom-designed commercial applications and for manufactured and
site-built residential housing. The Windows, Doors and Siding Products Segment
principally manufactures and distributes vinyl, wood and composite windows;
vinyl, wood, steel and composite patio and entry doors; vinyl siding, skirting,
soffit and accessories; aluminum trim coil, siding, soffit and accessories;
blocks, vents, shutters, sunrooms, fencing, railing and decking for use in the
residential construction, DIY and professional renovation markets.
The Company acquired Webco, Inc. ("Webco") on March 8, 1999. On April 23, 1999,
the Company acquired three businesses from Caradon plc of the United Kingdom:
Peachtree Windows and Doors, Thermal-Gard and CWD Windows and Doors (the
"Caradon Acquired Companies"). Other 1999 acquisitions included Multiplex
Technologies, Inc. ("Multiplex") on May 28, 1999, Kroy Building Products, Inc.
("Kroy") on September 9, 1999 and Xantech Corporation ("Xantech") on December 3,
1999. These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the results of Webco, the Caradon Acquired Companies,
Multiplex, Kroy and Xantech are included in the Company's consolidated results
since the date of their acquisition.
17
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
Results of Operations
---------------------
The tables that follow present the unaudited net sales and operating earnings
for the Company's principal segments for the second quarter and six months ended
July 1, 2000 and July 3, 1999, and the dollar amount and percentage change of
such results as compared to the prior comparable period.
<TABLE>
<CAPTION>
Change in
Second Quarter Ended Second Quarter 2000
July 1, July 3, as Compared to 1999
2000 1999 $ %
---- ---- ----- -----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Residential building
products $166,199 $161,074 $ 5,125 3.2%
Air conditioning and
heating products 179,641 157,312 22,329 14.2
Windows, doors and
siding products 239,466 205,540 33,926 16.5
Other 18,637 20,162 (1,525) (7.6)
-------- -------- -------
$603,943 $544,088 $59,855 11.0%
======== ======== =======
Operating Earnings:
-------------------
Residential building
products $23,308 $23,434 $ (126) (.5)%
Air conditioning and
heating products 24,212 19,540 4,672 23.9
Windows, doors and
siding products 15,787 21,370 (5,583) (26.1)
Other (5,990) (6,124) 134 2.2
------- ------ -------
$57,317 $58,220 $ (903) (1.6)%
======= ======= =======
</TABLE>
18
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
<TABLE>
<CAPTION>
Change in
Six Months Ended First Six Months 2000
July 1, July 3, as Compared to 1999
2000 1999 $ %
---- ---- ---- ----
(Dollar amounts in thousands)
Net Sales:
-----------
<S> <C> <C> <C> <C>
Residential building
products $ 338,161 $315,368 $ 22,793 7.2%
Air conditioning and
heating products 307,287 273,746 33,541 12.3
Windows, doors and
siding products 412,014 322,971 89,043 27.6
Other 37,988 38,703 (715) (1.8)
---------- -------- -------
$1,095,450 $950,788 $144,662 15.2%
========== ======== ========
Operating Earnings:
-------------------
Residential building
products $ 48,374 $ 42,581 $ 5,793 13.6%
Air conditioning and
heating products 36,866 31,255 5,611 18.0
Windows, doors and
siding products 11,234 21,151 (9,917) (46.9)
Other (9,357) (9,150) (207) (2.3)
---------- -------- --------
$ 87,117 $ 85,837 $ 1,280 1.5%
========== ======== ========
</TABLE>
19
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
The tables that follow, 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 bear to net sales, and (d) the change of
such percentages as compared to the prior comparable period. The results of
operations for the second quarter and six months ended July 1, 2000 are not
necessarily indicative of the results of operations to be expected for any other
interim period or the full year.
Change in
Second Quarter Ended Second Quarter 2000
July 1, July 3, as Compared to 1999
2000 1999 $ %
---- ---- ----- -----
(Dollar amounts in millions)
Net sales $603.9 $544.1 $59.8 11.0%
Cost of products sold 437.9 385.0 (52.9) (13.7)
Selling, general and
administrative expense 103.1 95.8 (7.3) (7.6)
Amortization of goodwill
and intangible assets 5.6 5.1 (.5) (9.8)
------ ------ ----
Operating earnings 57.3 58.2 (.9) (1.5)
Interest expense (24.3) (24.4) .1 .4
Investment income 1.5 1.7 (.2) (11.8)
------ ------ ----
Earnings before provision
for income taxes 34.5 35.5 (1.0) (2.8)
Provision for income taxes 15.4 15.7 .3 1.9
------ ------ ----
Net earnings $ 19.1 $ 19.8 (.7) (3.5)%
====== ====== ====
20
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
Change in
Percentage of Net Sales Percentage
Second Quarter Ended for the Second
July 1, July 3, Quarter 2000
2000 1999 as Compared to
1999
-------- -------- --------
Net sales 100.0% 100.0% ---%
Cost of products sold 72.5 70.8 (1.7)
Selling, general and
administrative expense 17.1 17.6 .5
Amortization of goodwill
and intangible assets .9 .9 ---
----- ----- ----
Operating earnings 9.5 10.7 (1.2)
Interest expense (4.0) (4.5) .5
Investment income .2 .3 (.1)
----- ----- ----
Earnings before provision
for income taxes 5.7 6.5 (.8)
Provision for income taxes 2.5 2.9 .4
----- ----- ----
Net earnings 3.2% 3.6% (.4)%
===== ===== ====
Change in
Six Months Ended First Six Months 2000
July 1, July 3, as Compared to 1999
2000 1999 $ %
---- ---- ----- -----
(Dollar amounts in millions)
Net sales $1,095.4 $950.8 $144.6 15.2%
Cost of products sold 796.1 681.9 (114.2) (16.7)
Selling, general and
administrative expense 200.8 173.3 (27.5) (15.9)
Amortization of goodwill
and intangible assets 11.4 9.8 (1.6) (16.3)
-------- ------ -----
Operating earnings 87.1 85.8 1.3 1.5
Interest expense (48.6) (48.3) (.3) (.6)
Investment income 3.4 4.5 (1.1) (24.4)
-------- ------ -----
Earnings before provision
for income taxes 41.9 42.0 (.1) (.2)
Provision for income
taxes 18.8 18.7 (.1) (.5)
-------- ------ -----
Net earnings $ 23.1 $ 23.3 $ (.2) (.9)%
======== ====== =====
21
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
Change in
Percentage of Net Sales Percentage
Six Months Ended for the Six
July 1, July 3, Months 2000
2000 1999 as Compared to 1999
-------- --------- ------------------
Net sales 100.0% 100.0% ---%
Cost of products sold 72.7 71.7 (1.0)
Selling, general and
administrative expense 18.3 18.3 ---
Amortization of goodwill
and intangible assets 1.1 1.0 (.1)
----- ----- ----
Operating earnings 7.9 9.0 (1.1)
Interest expense (4.4) (5.1) .7
Investment income .3 .5 (.2)
----- ----- ----
Earnings before provision
for income taxes 3.8 4.4 (.6)
Provision for income
taxes 1.7 1.9 .2
----- ----- ----
Net earnings 2.1% 2.5% (.4)%
===== ===== ====
Net sales increased approximately $59,800,000 or approximately 11.0% for the
second quarter of 2000, as compared to 1999 (or increased approximately
$61,800,000 or approximately 11.4% excluding the effect of changes in foreign
exchange rates) and increased approximately $144,600,000 or approximately 15.2%
for the first six months of 2000, as compared to 1999 (or increased
approximately $148,500,000 or approximately 15.6% excluding the effect of
changes in foreign exchange rates). Net sales increased for the second quarter
and six months ended July 1, 2000 as compared to the second quarter and six
months ended July 3, 1999 as a result of acquisitions, price increases and
higher sales volume. Acquisitions contributed approximately $35,800,000 and
$93,400,000 of the total increase in net sales for the second quarter and six
months ended July 1, 2000, respectively. In the Residential Building Products
Segment, net sales increased approximately $5,100,000 or approximately 3.2% (or
approximately $7,100,000 excluding the effect of changes in foreign exchange
rates) in the second quarter of 2000 as compared to 1999 and increased
approximately $22,800,000 or approximately 7.2% (or approximately $26,700,000
excluding the effect of foreign exchange rates) in the first six months of 2000
as compared to 1999, principally as a result of approximately $5,400,000 and
$14,800,000 of sales from acquisitions in the second quarter and first six
months of 2000, respectively, and higher sales volume of kitchen range hoods and
bath fans. In the Air Conditioning and Heating Products Segment, net sales
22
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
increased approximately $22,300,000 or 14.2% and $33,500,000 or 12.3% for the
second quarter and first six months of 2000, respectively, as compared to 1999.
The increase in net sales in this segment is principally as a result of higher
sales volume of products sold to customers serving the residential site-built
and commercial markets, partially offset by lower sales of products to customers
serving the manufactured housing market, in line with the overall softness in
business being experienced in the manufactured housing industry. Also, the 1999
acquisition of Webco contributed approximately $4,000,000 to the increase in net
sales in the first six months of 2000 in this Segment. It is anticipated that
the weakness in the manufactured housing industry will continue throughout the
balance of the year and is expected to continue to have an adverse effect on
this Segment's sales as compared to 1999. In the Windows, Doors and Siding
Segment, net sales increased approximately $33,900,000 or 16.5% and $89,000,000
or 27.6% in the second quarter and first six months of 2000, respectively,
principally as a result of 1999 acquisitions which contributed approximately
$30,400,000 and $74,600,000 in the second quarter and first six months of 2000,
respectively. The increase in net sales in this Segment in the second quarter
and first six months of 2000 also resulted from increased sales prices and sales
volume of vinyl siding and related products and accessories.
Cost of products sold as a percentage of net sales increased from approximately
70.8% in the second quarter of 1999 to approximately 72.5% in the second quarter
of 2000 and increased from approximately 71.7% in the first six months of 1999
to 72.7% in the first six months of 2000. These increases in the percentages
principally resulted from the effect of higher vinyl resin cost, without a
proportionate increase in sales prices and acquisitions in the Windows, Doors
and Siding Products Segment (which have a higher cost of products sold as a
percentage of net sales then the overall group of businesses owned prior to the
acquisition). The rising cost of vinyl resin, as a result of rising petroleum
prices, is expected to continue to adversely impact cost of sales percentages
over the next several quarters. This situation, however, may be mitigated as
cost reduction measures and price stabilization for this Segment's vinyl
products are implemented. Also higher than anticipated costs during the second
quarter and first six months of 2000 as a result of delays in the
rationalization and relocation of some of NuTone's manufacturing operations into
the Residential Building Products Segment was a factor in the increase in the
percentages. These factors were partially offset by the effect of higher sales
levels in the Residential Building Products (in the first six months) and the
Air Conditioning and Heating Products Segments without a proportionate increase
in costs, and reflects the effect of acquisitions in both segments which have a
lower cost of products sold as a percentage of net sales than the overall group
23
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
of businesses owned prior to the acquisitions. Overall, changes in the cost of
products sold as a percentage of net sales for one period as compared to another
period may reflect a number of factors including changes in the relative mix of
products sold, the effect of changes in sales prices, material costs and changes
in productivity levels.
Selling, general and administrative expense as a percentage of net sales
decreased from approximately 17.6% in the second quarter of 1999 to
approximately 17.1% and was unchanged at 18.3% for the first six months of 1999
and 2000. Selling, general and administrative expense was reduced by
approximately $1,700,000 from the gain on the sale of land in the second quarter
of 2000. Selling, general and administrative expense as a percentage of net
sales, excluding the effect of the gain on the sale of land in the second
quarter of 2000, decreased from approximately 17.6% in the second quarter of
1999 to approximately 17.4% in the second quarter of 2000 and increased from
approximately 18.3% for the first six months of 1999 to approximately 18.5% in
the first six months of 2000. The percentage decrease in the second quarter of
2000 is primarily due to an increase in sales without a proportionate increase
in expense in the Residential Building Products and Air Conditioning and Heating
Products segments. Overall, changes in the percentages for both periods were
primarily effected by increased sales volume and sales prices without a
proportionate increase in expense and, to a lesser extent, reflect the results
of expense reduction measures implemented, including lower expense from the
integration of certain acquisitions. Increases in the percentages, in both
periods, occurred as a result of the 1999 acquisitions, which have a higher
expense level as a percentage of net sales than the overall group of businesses
owned prior to the acquisitions.
Amortization of goodwill and intangible assets, as a percentage of net sales,
remained unchanged at approximately .9% of net sales in the second quarter of
1999 and 2000 and increased slightly from 1.0% of net sales in the first six
months of 1999 to 1.1% in the first six months of 2000 principally as a result
of increased amortization in relation to 1999 acquisitions partially offset by
increased sales volume.
Consolidated operating earnings decreased approximately $900,000 from
approximately $58,200,000 in the second quarter of 1999 to approximately
$57,300,000 in the second quarter of 2000, and increased approximately
$1,300,000 from approximately $85,800,000 in the fist six months of 1999 to
approximately $87,100,000 in the first six months of 2000. Included in
consolidated operating earnings for the second quarter and first six months of
2000 was a gain on the sale of land of approximately $1,700,000. Acquisitions
24
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
contributed approximately $3,500,000 in operating earnings in the second quarter
of 2000 which consisted of an increase of approximately $700,000 in the
Residential Building Products Segment and an increase of approximately
$2,800,000 in the Windows, Doors and Siding Products Segment. Acquisitions
contributed approximately $2,900,000 in operating earnings in the first six
months of 2000, which consisted of an increase of approximately $1,100,000 in
the Residential Building Products Segment, an increase of approximately $500,000
in the Air Conditioning and Heating Products Segment and an increase of
approximately $1,300,000 in the Windows, Doors and Siding Products Segment.
Higher than anticipated costs have occurred during the second quarter and the
first six months of 2000 as a result of delays in the rationalization and
relocation of some of NuTone's manufacturing operations into the Residential
Building Products Segment.
Consolidated operating earnings have been reduced by depreciation and
amortization expense (other than amortization of deferred debt expense and debt
discount) of approximately $15,400,000 and approximately $13,800,000 for the
second quarter ended July 1, 2000 and July 3, 1999, respectively, and
approximately $31,000,000 and approximately $26,800,000 for the first six months
ended July 1, 2000 and July 3, 1999, respectively. Businesses acquired
contributed approximately $1,100,000 and approximately $2,900,000 of the
increase in depreciation and amortization expense in the second quarter and
first six months of 2000, respectively, of which approximately $300,000 was in
the Residential Building Products Segment and approximately $800,000 was in the
Windows, Doors and Siding Products Segment in the second quarter of 2000 and
approximately $700,000 was in the Residential Building Products Segment,
approximately $100,000 was in the Air Conditioning and Heating Products Segment
and approximately $2,100,000 was in the Windows, Doors and Siding Products
Segment in the first six months of 2000.
Consolidated operating earnings, excluding earnings from acquisitions and the
$1,700,000 gain on the sale of land, decreased approximately $6,100,000 from
approximately $58,200,000 in the second quarter of 1999 to approximately
$52,100,000 in the second quarter of 2000 and decreased approximately $3,300,000
in the first six months of 1999 to approximately $82,500,000 in the first six
months of 2000 from approximately $85,800,000 in the first six months of 1999.
These changes in operating earnings were due, in part, to an approximate
$800,000 decrease in the second quarter of 2000 and an approximate $4,700,000
increase in the first six months of 2000 in operating earnings excluding
25
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
acquisitions in the Residential Building Products Segment. The increase in the
first six months of 2000 within the Residential Building Products Segment was
due primarily to increased sales volume without a proportionate increase in cost
and expenses while the decrease in the second quarter of 2000 was primarily due
to increased manufacturing costs noted above related to the NuTone integration.
Operating earnings increased approximately $4,700,000 and approximately
$5,100,000 in the second quarter and first six months of 2000, respectively,
excluding the effect of acquisitions in the Air Conditioning and Heating
Products Segment. The increase in operating earnings, in both periods, in the
Air Conditioning and Heating Products Segment arose from higher sales levels of
commercial and site-built residential products, partially offset by a decline in
operating earnings from lower sales volume of air conditioning and heating
products sold to the manufactured housing market as compared to the six months
ended July 3, 1999 due to a slowdown in the manufactured housing industry. The
softness in the manufactured housing industry is expected to adversely effect
this Segment's operating earnings during the next several quarters as compared
to 1999. It is expected, that over the next several quarters, the effect of this
softness will continue to be somewhat offset by increased earnings from higher
sales levels of site-built residential air conditioning products. Operating
earnings decreased approximately $8,400,000 in the second quarter of 2000 and
approximately $11,200,000 in the first six months of 2000, excluding
acquisitions, in the Windows, Doors and Siding Products Segment. These decreases
in operating earnings were primarily as a result of rising petroleum prices
which have caused significantly higher PVC resin cost and have substantially
raised manufacturing costs of vinyl products in this segment. These decreases
were partially offset by the effect of increased sales volume of vinyl siding
and increased sales prices of vinyl siding and windows and lower costs and
expenses of certain window products. The Company expects future operating
earnings in this segment to be adversely affected by higher vinyl resin costs
until cost reduction measures and price stabilization for this Segment's vinyl
products occur.
Operating earnings of foreign operations, consisting primarily of the results of
operations of the Company's Canadian and European subsidiaries which manufacture
built-in ventilation products and windows and doors, were approximately 5.3% and
4.8% of operating earnings (before corporate overhead) in the second quarter of
2000 and 1999, respectively, and were approximately 5.6% and 4.5% of operating
earnings (before corporate overhead) in the first six months of 2000 and 1999,
respectively. The increase in foreign operating earnings as a percentage of net
sales is principally as a result of the increased foreign sales and operating
earnings from acquisitions. Sales and earnings derived from the international
market are subject to the risks of currency fluctuations.
26
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
Interest expense in the second quarter of 2000 decreased approximately $100,000
or approximately .4% as compared to 1999 and increased approximately $300,000 or
approximately .6% in the first six months of 2000 as compared to 1999. The
decrease in the second quarter of 2000 as compared to 1999 is primarily the
result of debt payments in the quarter. The increase in the first six months of
2000 as compared to 1999 is primarily as a result of increased debt acquired and
issued in connection with 1999 acquisitions, net of payments.
Investment income in the second quarter and first six months of 2000 decreased
approximately $200,000 or approximately 11.8%, and approximately $1,100,000 or
approximately 24.4%, respectively, as compared to 1999, primarily due to lower
average invested balances as a result of funds used for acquisitions in 1999,
partially offset by slightly higher yields.
The provision for income taxes was approximately $15,400,000 for the second
quarter of 2000, as compared to approximately $15,700,000 for the second quarter
of 1999 and approximately $18,800,000 for the first half of 2000, as compared to
$18,700,000 for the first half of 1999. The income tax rates differed from the
United States Federal statutory rate of 35% principally as a result of state
income tax provisions, nondeductible amortization expense (for tax purposes) and
the effect of foreign income tax on foreign source income.
Liquidity and Capital Resources
-------------------------------
The Company is highly leveraged, expects to continue to reduce its leverage but
expects to continue to remain highly leveraged for the foreseeable future. At
July 1, 2000, the Company had consolidated debt of approximately $1,031,458,000
consisting of (i) $13,801,000 of short-term borrowings and current maturities of
long-term debt, (ii) $122,059,000 of notes, mortgage notes and other
indebtedness, (iii) $209,344,000 of the 8 7/8% Senior Notes due 2008 ("8 7/8%
Notes"), (iv) $174,225,000 of the 9 1/4% Senior Notes due 2007 ("9 1/4% Notes"),
(v) $204,033,000 of the 9 7/8% Senior Subordinated Notes due 2004 ("9 7/8%
Notes") and (vi) $307,996,000 of the 9 1/8% Senior Notes due 2007 ("9 1/8%
Notes"). At July 1, 2000, the Company had consolidated unrestricted cash, cash
equivalents and marketable securities of approximately $84,743,000 as compared
to approximately $115,112,000 at December 31, 1999 and the Company's debt to
equity ratio was approximately 3.7:1 at July 1, 2000 as compared to 4.0:1 at
December 31, 1999.
27
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
The Company's ability to pay interest on or to refinance its indebtedness
depends, among other items, on the successful integration of the operations of
recent acquisitions and the Company's future performance, which, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. There can be no assurance that the Company will
generate sufficient cash flow from the operation of its subsidiaries or that
future financings will be available on acceptable terms or in amounts sufficient
to enable the Company to service or refinance its indebtedness, or to make
necessary capital expenditures.
The Company has evaluated and expects to evaluate possible acquisition
transactions and possible dispositions of certain of its businesses on an
ongoing basis and at any given time may be engaged in discussions or
negotiations with respect to possible acquisitions or dispositions.
The indentures and other agreements governing the Company and its subsidiaries'
indebtedness (including the indentures for the 8 7/8% Notes, the 9 1/4% Notes,
the 9 7/8% Notes and the 9 1/8% Notes and a credit facility agreement for the
Company's wholly owned subsidiary Ply Gem Industries, Inc. ("Ply Gem")) contain
restrictive financial and operating covenants including covenants that restrict
the ability of the Company and its subsidiaries to complete acquisitions, pay
dividends, incur indebtedness, make investments, sell assets and take certain
other corporate actions.
The Company expects to meet its cash flow requirements through fiscal 2000 from
cash generated from operations, existing cash, cash equivalents and marketable
securities, and financings, which may include securitization of accounts
receivable and mortgage or capital lease financings.
On July 3, 2000, the Company acquired Eaton-Williams Holdings Limited
("Eaton-Williams"), of Edenbridge, England. Eaton-Williams designs,
manufactures, installs and services a leading range of custom-made and standard
humidification and air conditioning equipment. For its fiscal year ended April
2, 2000, Eaton-Williams reported sales of approximately $41,000,000. (See Note C
of the Notes to the Unaudited Condensed Consolidated Financial Statements
included elsewhere herein.)
28
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
The Company is in the process of integrating the recent acquisitions into its
businesses, and it has and expects to achieve incremental synergies, cost
savings and reductions during 2000, partially offset by certain costs and
expenses. Plans for eliminating certain activities have been finalized for all
significant acquisitions acquired through July 1, 2000. The total future
expenditures associated with exit costs related to the integration effort are
expected to be funded from the Company's operating cash flow. The integration of
the NuTone acquisition and the acquisitions within the Windows, Doors and Siding
Products Segment is taking longer than originally planned. If significant
difficulty is encountered with the integration of acquisitions within the
Windows, Doors and Siding Products Segment or acquisitions within other
Segments, or if such synergies and cost savings are not realized, the results of
operations, cash flow and financial condition of the Company likely will be
adversely affected. There can be no assurance that the Company will be able to
successfully manage and integrate recent acquisitions. (See Note I of the Notes
to the Unaudited Condensed Consolidated Financial Statements included elsewhere
herein.)
Unrestricted cash and cash equivalents increased from approximately $80,893,000
at December 31, 1999 to approximately $84,743,000 at July 1, 2000. Marketable
securities available for sale of approximately $34,219,000 at December 31, 1999
were sold during the first six months of 2000. At July 1, 2000, approximately
$22,100,000 of the Company's cash and investments was classified as restricted
in current assets in the Company's accompanying Unaudited Condensed Consolidated
Balance Sheet. Approximately $10,600,000 of this amount was held in escrow until
July 3, 2000 when it was used to fund the acquisition of Eaton-Williams and the
balance of approximately $11,500,000 was pledged as collateral for insurance,
employee benefits and other requirements.
Capital expenditures were approximately $14,300,000 for the first six months of
2000 and approximately $25,300,000 in the first six months of 1999. Capital
expenditures were approximately $42,000,000 for the year ended December 31, 1999
and are expected to be approximately $45,000,000 for all of 2000.
The Company's Board of Directors has authorized a number of programs to purchase
shares of the Company's Common and Special Common Stock. The most recent of
these programs was announced on May 4, 2000, and allows the Company to purchase
up to 1,000,000 shares of the Company's Common and Special Common Stock in open
market or negotiated transactions, subject to market conditions, cash
availability and provisions of the Company's outstanding debt instruments. As of
August 4, 2000, the Company has purchased approximately 460,700 shares of its
Common and Special Common Stock under this program for approximately $9,200,000
and accounted for such share purchases as Treasury Stock.
29
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
At August 4, 2000, approximately $90,700,000 was available for the payment of
cash dividends, stock payments or other restricted payments as defined under the
terms of the Company's most restrictive indenture. (See Note D of the Notes to
the Unaudited Condensed Consolidated Financial Statements included elsewhere
herein.)
The Company's working capital increased from approximately $324,492,000 at
December 31, 1999 to approximately $352,648,000 at July 1, 2000 and its current
ratio remained unchanged at 1.9:1 between December 31, 1999 and July 1, 2000.
Accounts receivable increased approximately $67,485,000 or approximately 27.7%,
between December 31, 1999 and July 1, 2000, while net sales increased
approximately $115,404,000 or approximately 23.6% in the second quarter of 2000
as compared to the fourth quarter of 1999. 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. 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 July 1, 2000 as
compared to December 31, 1999. The Company has not experienced any significant
overall changes in credit terms, collection efforts, credit utilization or
delinquency in accounts receivable in 2000.
Inventories increased approximately $36,781,000 or approximately 17.3%, between
December 31, 1999 and July 1, 2000. The increase in inventories is primarily a
result of expanded distribution of HVAC residential site-built products by the
Company's Air Conditioning and Heating Products Segment and planned increases
within the Windows, Doors and Siding Products Segment to meet anticipated higher
demand within the third quarter of 2000.
Accounts payable increased approximately $40,318,000 or approximately 26.9%,
between December 31, 1999 and July 1, 2000. The increase in accounts payable is
primarily the result of increased inventory levels as discussed above.
30
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
Unrestricted cash and cash equivalents increased approximately $3,850,000 from
December 31, 1999 to July 1, 2000, principally as a result of the following:
Condensed
Consolidated
Cash Flows*
-----------------
Operating Activities--
Cash flow from operations, net $ 54,327,000
Increase in accounts receivable, net (69,101,000)
Increase in inventories (36,454,000)
Increase in prepaids and
other current assets (1,781,000)
Increase in accounts payable 41,517,000
Increase in accrued expenses and taxes 16,545,000
Investing Activities---
Acquisition deposit held in escrow (10,628,000)
Proceeds from the sale of marketable
securities, net 34,435,000
Proceeds from the sale of fixed assets 5,361,000
Capital expenditures (14,300,000)
Increase in restricted cash and investments (4,061,000)
Financing Activities---
Payment of borrowings, net (5,669,000)
Purchase of Nortek Common and Special
Common Stock (2,671,000)
Other, net (3,670,000)
------------
$ 3,850,000
============
(*)Prepared from the Company's Consolidated Statement of Cash Flows for the six
months ended July 1, 2000. (See Nortek, Inc. and Subsidiaries Unaudited
Condensed Consolidated Financial Statements included elsewhere herein.)
The impact of changes in foreign currency exchange rates on cash was not
material and has been included in other, net.
The Company's debt-to-equity ratio decreased from approximately 4.0:1 at
December 31, 1999 to 3.7:1 at July 1, 2000, primarily as a result of an increase
in equity due to net earnings for the first six months of 2000 and the net
payment of borrowings, partially offset by the effect of the purchase of Nortek
Common and Special Common Stock and changes in currency translation. (See the
Consolidated Statement of Stockholders' Investment included elsewhere herein.)
At December 31, 1999, the Company's wholly-owned subsidiary, Ply Gem, had a net
operating loss carry forward of approximately $21,300,000 that expires in 2011
and is subject to certain limitations imposed by the Internal Revenue Code. The
Company expects to utilize approximately $17,500,000 of this net operating loss
in its 2000 federal tax return, which will result in lower federal tax payments
of approximately $6,125,000 for 2000.
31
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
Inflation, Trends and General Considerations
--------------------------------------------
The Company has evaluated and expects to continue to evaluate possible
acquisition transactions and the possible dispositions of certain of its
businesses on an ongoing basis and at any given time may be engaged in
discussions or negotiations with respect to possible acquisitions or
dispositions.
The Company's performance is dependent to a significant extent upon the levels
of new residential construction, residential replacement and remodeling and
non-residential construction, all of which are affected by such factors as
interest rates, inflation and unemployment. In the near term, the Company
expects to operate in an environment of relatively stable levels of construction
and remodeling activity. However, increases in interest rates could have a
significant negative impact on the level of housing construction and remodeling
activity.
The demand for the Company's products is seasonal, particularly in the Northeast
and Midwest regions of the United States where inclement weather during the
winter months usually reduces the level of building and remodeling activity in
both the home improvement and new construction markets. The Company's lower
sales levels usually occur during the first and fourth quarters. Since a high
percentage of the Company's manufacturing overhead and operating expenses are
relatively fixed throughout the year, operating income and net earnings tend to
be lower in quarters with lower sales levels. As a result of the recent
acquisitions in the Windows, Doors and Siding Products Segment, the performance
of this Segment will be more seasonal than in prior years due to the number of
businesses that are affected by winter weather conditions. In addition, the
demand for cash to fund the working capital of the Company's subsidiaries is
greater from late in the first quarter until early in the fourth quarter.
Market Risk
-----------
As discussed more specifically below, the Company is exposed to market risks
related to changes in interest rates, foreign currencies and commodity pricing.
The Company uses derivative financial instruments on a limited basis to hedge
economic exposures. The Company typically does not enter into derivative
financial instruments or other financial instruments for trading purposes.
There have been no significant changes in market risk from the December 31, 1999
disclosures included in the Company's Annual Report on Form 10-K.
32
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
A. Interest Rate Risk
-----------------------
The Company is exposed to market risk from changes in interest rates primarily
through its investing and borrowing activities. In addition, the Company's
ability to finance future acquisition transactions may be impacted if the
Company is unable to obtain appropriate financing at acceptable interest rates.
The Company's strategy for managing interest rate exposure is to invest in
short-term, highly liquid investments and marketable securities. Short-term
investments primarily consist of money market accounts, certificates of deposit
and, corporate commercial paper with original maturities of 90 days or less.
The Company manages its borrowing exposure to changes in interest rates by
optimizing the use of fixed rate debt with extended maturities. In addition, the
Company has hedged its exposure on a substantial portion of its variable rate
debt by entering into interest rate swap agreements to lock in a fixed rate
within a range of fluctuation.
B. Foreign Currency Risk
The Company's results of operations are affected by fluctuations in the value of
the U.S. dollar as compared to the value of currencies in foreign markets
primarily related to changes in the Italian Lira and the Canadian Dollar. For
the first six months of 2000, the net impact of foreign currency changes was not
material to the Company's financial condition or results of operations. The
Company manages its exposure to foreign currency exchange risk principally by
trying to minimize the Company's net investment in foreign assets through the
use of strategic short and long-term borrowings at the foreign subsidiary level.
The Company generally does not enter into derivative financial instruments to
manage foreign currency exposure. At July 1, 2000 the Company did not have any
outstanding foreign currency hedging contracts.
C. Commodity Pricing Risk
The Company is subject to significant market risk with respect to the pricing of
its principal raw materials, which include, among others, steel, copper,
packaging material, plastics, resins, glass, wood and aluminum. If prices of
these raw materials were to increase dramatically, the Company may not be able
to pass such increases on to its customers and, as a result, gross margins could
decline significantly. The Company manages its exposure to commodity pricing
risk by continuing to diversify its product mix, strategic buying programs and
vendor partnering.
33
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
The Company generally does not enter into derivative financial instruments to
manage commodity-pricing exposure. At July 1, 2000, the Company did not have any
outstanding commodity forward contracts.
Year 2000 Disclosure
--------------------
The following Year 2000 statements constitute a Year 2000 Readiness Disclosure
within the meaning of the Year 2000 Information and Readiness Disclosure Act of
1998.
As of August 4, 2000, none of the Company's subsidiaries had experienced any
significant Year 2000 related problems. There have been no instances where
mission-critical and non-mission-critical systems have failed to perform
correctly. However, the Year 2000 issue still poses several potential risks to
the Company and its subsidiaries. A number of the Company's customers and
suppliers (third parties) utilize computers and computer software to varying
degrees in conjunction with the operation of their businesses. The customers and
suppliers of those businesses may utilize computers as well. Should the
Company's customers and suppliers, or the businesses on which they depend
experience any Year 2000 related computer problems, such third parties' cash
flow could be disrupted, adversely affecting their ability to pay the Company,
if a customer, or, if a supplier, their ability to pay their suppliers for goods
needed to supply the Company. Such disruptions could have adverse effects on the
Company and its subsidiaries. The Company assessed its Year 2000 third party
exposure through the use of questionnaires and personal interviews during 1999.
As of August 4, 2000, the Company was not aware of any supply or credit problems
related to the Year 2000 issue.
Should Year 2000 related problems occur which cause any of the systems of
certain third parties upon which the Company and its subsidiaries depends to
become inoperative, increased personnel costs could be incurred if additional
staff is required to perform functions that the inoperative systems would have
otherwise performed. As of August 4, 2000, the Company had not experienced any
disruptions of third party services related to the Year 2000 issue.
34
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
The Company's expenditures for remediation directly related to correcting Year
2000 issues were approximately $6,000,000, including businesses acquired in
1999. The total expenditures of approximately $6,000,000 substantially all of
which were incurred prior to December 31, 1999, consisted of approximately
$2,000,000 of IT computer hardware equipment costs, approximately $3,000,000 of
IT software and non-IT computer hardware expenditures and approximately
$1,000,000 of other non-IT expenditures. All of the Company's Year 2000
compliance expenditures have been funded from the Company's operating cash flow.
The Company's Year 2000 compliance budget did not include significant amounts
for hardware replacement because the Company has historically employed a
strategy to continually upgrade its computer systems. Consequently, the
Company's Year 2000 compliance budget did not require the diversion of funds
from or the postponement of the implementation of other planned IT projects.
The Company believes it is not possible to estimate the potential lost revenue
due to the remaining potential Year 2000 problems discussed above as the
occurrence, extent and longevity of such potential problems cannot be predicted.
As of August 4, 2000 the Company believes that it has not experienced any lost
revenue related to the Year 2000 issue.
Forward-Looking Statements
--------------------------
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. When used in this discussion
and throughout this document, words, such as "intends," "plans," "estimates,"
"believes," "anticipates" and "expects" or similar expressions are intended to
identify forward-looking statements. These statements are based on the Company's
current plans and expectations and involve risks and uncertainties, over which
the Company has no control, that could cause actual future activities and
results of operations to be materially different from those set forth in the
forward-looking statements. Important factors that could cause actual future
activities and operating results to differ include the availability and cost of
certain raw materials, (including, among others, steel, copper, packaging
materials, plastics resins, glass, wood and aluminum) and purchased components,
the level of domestic and foreign construction and remodeling activity affecting
residential and commercial markets, interest rates, employment, inflation, Y2K
readiness, currency translation, consumer spending levels, operating in
international economies, the rate of sales growth, price, and product and
warranty 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 update publicly any forward-looking
35
<PAGE>
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 1, 2000
AND FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 3, 1999
(Continued)
statements, whether as a result of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements. Readers are also urged to carefully
review and consider the various disclosures made by the Company, in this
document, as well as the Company's periodic reports on Forms 10-K, 10-Q and 8-K,
filed with the Securities and Exchange Commission.
36
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 4, 2000 the following
actions were taken by the following votes:
Proposal 1: Election of Director
Director elected by the holders of Common Stock voting separately as
a class --
Withheld Broker
Name For Against Authority Non-Votes
---------- ---------- ---------- ----------
Class II (for a term
expiring at the 2003
Annual Meeting)
Richard J. Harris 9,462,529 -- 217,426 --
Proposal 2: Approval of the 2000 Equity and Cash Incentive Plan
Broker
For Against Abstain Non-Votes
----------- ----------- --------- ----------
10,864,001 3,374,007 36,287 ---
Proposal 3: Approval of the 2000 Stock Option Plan for Directors
Broker
For Against Abstain Non-Votes
----------- ----------- --------- ----------
12,181,778 2,054,533 37,984 ---
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Performance Award to Richard L. Bready dated as of May
12, 2000 under the Company's 2000 Equity and Cash
Incentive Plan (filed herewith).
10.2 Split Dollar Agreement dated as of December 20, 1996
between the Company and Douglass N. Ellis, Jr., as
trustee of The Richard L. Bready 1996 Irrevocable Trust,
together with appendix prepared by the Company (filed
herewith).
37
<PAGE>
10.3 Confirmatory Split Dollar Agreement No. 1 dated as of
December 31, 1996 between the Company and Richard L.
Bready, together with appendix prepared by the Company
(filed herewith).
10.4 Assignment dated as of September 15, 1997 relating to
interest of Richard L. Bready in Confirmatory Split
Dollar Agreement No. 1 dated as of December 31, 1996
between the Company and Richard L.Bready
(filed herewith).
10.5 Confirmatory Split Dollar Agreement No. 2 dated as of
December 31, 1996 between the Company and Richard L.
Bready, together with appendix prepared by the Company
(filed herewith).
10.6 First Amendment dated as of September 15, 1997 to
Confirmatory Split Dollar Agreement No. 2 dated as of
December 31, 1996 between the Company and Richard L.
Bready (filed herewith).
10.7 Split Dollar Agreement dated as of June 29, 1999 between
the Company and Douglass N. Ellis, Jr. as trustee of The
Richard L. Bready and Cheryl A. Bready 1998 Irrevocable
Trust, together with appendix prepared by the Company
(filed
herewith).
10.8 Split Dollar Agreement dated as of June 29, 1999 between
the Company and Almon C. Hall, together with appendix
prepared by the Company (filed herewith).
10.9 Split Dollar Agreement dated as of June 29, 1999 between
the Company and Mark Richard Harris and Pamela Jean
Harris as trustees of the Richard J. and Carole M. Harris
1999 Irrevocable Trust, together with appendix prepared
by the Company (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during period.
38
<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
August 11, 2000
-----------------
(Date)
39
<PAGE>
