SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the fiscal year-ended December 31, 2004
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 number: 333-119902
Nortek,
Inc.
(exact
name of Registrant as specified in its charter)
|
Delaware |
|
05-0314991 |
|
(State or other
jurisdiction |
|
(IRS Employer |
|
of incorporation or
organization) |
|
Identification Number) |
|
|
|
|
|
50 Kennedy
Plaza |
|
|
|
Providence, Rhode
Island |
|
02903-2360 |
|
(Address of principal executive
offices) |
|
(zip code) |
| |
|
|
REGISTRANT'S
TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 751-1600
SECURITIES
REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
Indicate
by check mark whether 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
__.
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes__
No X
The
aggregate market value of voting stock held by non-affiliates is
zero.
The
number of shares of Common Stock outstanding as of March 25, 2005 was
3,000.
PART
I ITEM 1. BUSINESS
Acquisition
and the 2003 Recapitalization Transactions
On
November 20, 2002, Nortek, Inc. (the “Company” or “Nortek”) reorganized into a
holding company structure and each outstanding share of capital stock of the
Company was converted into an identical share of capital stock of Nortek
Holdings, Inc. (the “former Nortek Holdings”), a Delaware corporation formed in
2002, with the former Nortek Holdings becoming the successor public company and
the Company becoming a wholly-owned subsidiary of the former Nortek Holdings
(the “Nortek Holdings Reorganization”). On January 9, 2003, the former Nortek
Holdings was acquired by certain affiliates and designees of Kelso & Company
L.P. (“Kelso”) and certain members of the Company’s management in a transaction
valued at approximately $1.6 billion including all of the Company’s indebtedness
(the “2003 Recapitalization”). As a result, the Company’s shares of capital
stock are no longer publicly traded, however, the Company continues to file
periodic reports with the Securities and Exchange Commission (“SEC”) as a
voluntary filer as required by the respective indentures of certain of the
Company’s outstanding notes payable. On July 15, 2004, THL Buildco Holdings,
Inc. (“THL Buildco Holdings”) and THL Buildco, Inc. (“THL Buildco”), newly
formed Delaware corporations affiliated with Thomas H. Lee Partners L.P.,
entered into a stock purchase agreement with the owners of the former Nortek
Holdings, including affiliates of Kelso, and certain members of the Company’s
management, pursuant to which THL Buildco agreed to purchase all the outstanding
capital stock of the former Nortek Holdings. Prior to the completion of the THL
Transactions, Nortek, Inc. was a wholly owned direct subsidiary of the former
Nortek Holdings and THL Buildco was a wholly owned direct subsidiary of THL
Buildco Holdings.
On August
27, 2004, THL Buildco purchased all of the outstanding capital stock of the
former Nortek Holdings pursuant to the stock purchase agreement in a transaction
valued at approximately $1.74 billion (the “Acquisition”). Immediately upon the
completion of this acquisition, THL Buildco was merged with and into the former
Nortek Holdings, with the former Nortek Holdings continuing as the surviving
corporation. The former Nortek Holdings was then merged with and into Nortek
with Nortek continuing as the surviving corporation and a wholly-owned
subsidiary of THL Buildco Holdings. THL Buildco Holdings was then renamed Nortek
Holdings, Inc. (“Nortek Holdings”). Nortek Holdings is wholly owned by NTK
Holdings, Inc., which is wholly owned by THL-Nortek Investors, LLC, a Delaware
limited liability company (“Investors LLC”). In connection with the Acquisition,
members of Nortek management reinvested a portion of their equity interest in
the former Nortek Holdings for an equity interest in Investors LLC and interests
in a deferred compensation plan established by Nortek Holdings (the Acquisition
and the above events are collectively referred to herein as the “THL
Transaction”). See Management’s Discussion and Analysis of Financial Condition
and Results of Operations, Item 7 of Part II of this report and Notes 1, 2 and 7
of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this
report, incorporated herein by reference.
General
The
Company is a diversified manufacturer of residential and commercial building
products, operating within two principal segments: the Residential Building
Products Segment and the Air Conditioning and Heating Products Segment. Through
these 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, the manufactured housing, the do-it-yourself, or
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
levels of residential replacement and remodeling, new residential construction
and non-residential construction significantly impact the Company’s performance.
Interest rates, seasonality, inflation, consumer spending habits and
unemployment are several factors that affect these levels.
Additional
information concerning the Company’s business is set forth in Management's
Discussion and Analysis of Financial Condition and Results of Operations, Item 7
of Part II of this report, incorporated herein by reference. Information on
foreign and domestic operations is set forth in Note 11 of the Notes to the
Consolidated Financial Statements, Item 8 of Part II of this report,
incorporated herein by reference.
Residential
Building Products Segment
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
are:
| · |
built-in
exhaust fans (such as bath fans and fan, heater and light combination
units), |
| · |
indoor
air quality products, |
| · |
central
vacuum systems, |
| · |
surround
sound systems, |
| · |
multi-room
audio and video distribution equipment, and |
| · |
architectural
loudspeakers |
The
Segment is the largest supplier in North America of range hoods, bath fans and
combination units, indoor air quality products (such as continuous-ventilation
systems and energy-recovery ventilators) and one of the leading suppliers in
Western Europe and South America of luxury "Eurostyle" range hoods. Products are
sold under the Broan®, NuTone®, Nautilus®, Venmar®, vanEE®, Best®, Channel
Plus®, Elan®, SpeakerCraft® and M&S Systems® brand names, among others. A key
component of the Company’s operating strategy for this Segment is to introduce
new products that capitalize on our strong brand names and on our extensive
distribution system. Other products sold by this Segment include, among others,
door chimes, trash compactors, attic and whole house ventilators, air quality
and HEPA whole-house filtration systems, ceiling fans, as well as, wireless
security products, access control products, garage door and gate operators and
infrared control equipment (marketed under the Linear®, Westinghouse®, Open
House® and Xantech® brand names). The Company’s sales of kitchen range hoods and
exhaust fans accounted for approximately 18.6% and 17.0%, respectively, of the
Company’s consolidated net sales in 2004, 18.6% and 17.4%, respectively, of the
Company’s consolidated net sales in 2003 and 18.6% and 17.7%, respectively, of
the Company’s consolidated net sales in 2002.
A key
component of the Segment's operating strategy is the introduction of new
products which capitalize on the strong Broan®, NuTone®, Nautilus®, Venmar®,
vanEE®, and Best® brand names and the extensive distribution system of the
Segment's businesses. Products sold under these brand names include the Broan
Allure® and Rangemaster® range hoods, Sensaire®, Solitaire® and Solitaire Ultra
Silent® fans and fan lights, LoSone Select® fans, Best by Broan® “Eurostyle”
luxury range hoods, the Venmar®, Guardian Plus™ Air Systems and vanEE® line of
indoor air quality systems, NuTone SenSonic™ stereo speakers, Whispaire® range
hoods and the Broan 12" wide trash compactor.
With
respect to certain product lines, private label customers accounted for
approximately 17.8% of the total sales of this Segment in 2004.
Production
generally consists of fabrication from coil and sheet steel and formed metal
utilizing stamping, pressing and welding methods, assembly with components and
subassemblies purchased from outside sources (principally motors, fan blades,
heating elements, wiring harnesses, controlling devices, glass, wood, mirrors,
lighting fixtures and polyethylene components, speakers, grilles and electronic
components) and painting, finishing and packaging. See the discussion on Raw
Materials under General Considerations below.
The
Segment offers a broad array of products with various features and styles across
a range of price points. The Company believes that the Segment's variety of
product offerings helps the Segment maintain and improve its market position for
its principal products. At the same time, the Company believes that the
Segment's status as a low-cost producer, in large part as a result of advanced
manufacturing processes, provides the Segment with a competitive
advantage.
The
Segment's primary products compete with many domestic and international
suppliers in their various markets. The Segment competes with suppliers of
competitive products primarily on the basis of quality, distribution, delivery
and price. Although the Segment believes it competes favorably among other
suppliers of the Segment's products, certain of these suppliers have greater
financial and marketing resources than the Segment.
The
Segment had 18 manufacturing plants and employed approximately 4,300 full-time
people as of December 31, 2004, of which approximately 210 were covered by a
collective bargaining agreement which expired in 2004 and is currently under
negotiation, approximately 440 are covered by a collective bargaining agreement
which expires in 2005 and approximately 202 are covered by collective bargaining
agreements which expire between 2007 and 2008. The Company believes that the
Segment’s relationships with its employees are satisfactory.
Air
Conditioning and Heating Products Segment
The Air
Conditioning and Heating Products Segment manufactures and sells heating,
ventilating and air conditioning systems and products (“HVAC”) for site-built
residential and manufactured housing structures, custom-designed commercial
applications and standard light commercial products.
Residential
Products
The
Segment manufactures air conditioners, heat pumps and furnaces for the
residential and light commercial markets. For site-built homes and light
commercial structures, the Segment markets its products under the licensed
names, Frigidaire®, Tappan®, Philco®, Kelvinator®, Gibson®, Westinghouse® and
Maytag® and certain private label names. Within the residential market, the
Segment is one of the largest suppliers of these products for manufactured homes
in the United States and Canada. In the manufactured housing market, the Segment
markets its products under the Intertherm® and Miller® brand names.
The
principal factors affecting the market for the Segment's residential HVAC
products are the demand for replacement and modernization of existing equipment,
housing starts and the level of manufactured housing shipments. The Company
anticipates that the replacement market will continue to expand as a large
number of previously installed heating and cooling products become outdated or
reach the end of their useful lives. This growth may be accelerated by a
tendency among consumers to replace older heating and cooling products with
higher efficiency models prior to the end of such equipment's useful life. The
market for residential cooling products, including those sold by the Segment, is
affected by spring and summer temperatures. The Segment does not sell window air
conditioners, a segment of the market which is highly seasonal and significantly
impacted by spring and summer temperatures. The Company believes that the
Segment's ability to offer both heating and cooling products helps offset the
effects of seasonality on the Segment's sales.
The
Segment sells its manufactured housing products to builders of manufactured
housing and, through distributors, to manufactured housing retailers and owners
of such housing. The majority of sales to builders of manufactured housing
consist of furnaces designed and engineered to meet or exceed certain standards
mandated by federal agencies, including HUD. These standards differ in several
important respects from the standards for furnaces used in site-built
residential homes. The aftermarket channel of distribution includes sales of
both new and replacement air conditioning units and heat pumps and replacement
furnaces. The Company believes that the Segment has one major competitor in the
furnace sector of this market, York International Corporation, which markets its
products primarily under the Coleman name. The Segment competes with most major
industry manufacturers for the air conditioning sector of this
market.
Residential
HVAC products for use in site-built homes are sold through independently-owned
distributors who sell to HVAC contractors. The site-built residential HVAC
market is very competitive. In this market, the Segment competes with, among
others, Carrier Corporation, Rheem Manufacturing Company, Lennox Industries, The
Trane Company, York International Corporation and Goodman Manufacturing. The
Company estimates that more than half of the Segment’s sales of residential HVAC
products in 2004 were attributable to the replacement market, which tends to be
less cyclical than the new construction market.
The
Segment competes in both the manufactured housing and site-built markets on the
basis of breadth and quality of its product line, distribution, product
availability and price. Although the Company believes that the Segment competes
favorably with respect to certain of these factors, most of the Segment’s
competitors have greater financial and marketing resources than the Segment and
certain competitors may enjoy greater brand awareness.
Commercial
Products
The
Segment's commercial products consist of HVAC systems which are custom-designed
to meet customer specifications for commercial offices, manufacturing and
educational facilities, hospitals, retail stores and governmental buildings.
Such systems are primarily designed to operate on building rooftops (including
large self-contained walk-in-units) or on individual floors within a building,
and range from 40 to 600 tons of cooling capacity. The Segment markets its
commercial products under the Governair®, Mammoth®, Temtrol®, Venmar®, Ventrol®
and Webco™ brand names. Also part of the Segment, the Company’s subsidiary
Eaton-Williams Group Limited (“Eaton-Williams”), manufactures and markets custom
and standard air conditioning and humidification equipment throughout Western
Europe under the Vapac®, Cubit®, Qualitair®, Edenaire®, Colman™ and Moducel™
brand names.
The
market for commercial HVAC equipment is segmented between standard and
custom-designed equipment. Standard equipment can be manufactured at a lower
cost and therefore offered at substantially lower initial prices than
custom-designed equipment. As a result, suppliers of standard equipment
generally have a larger share of the overall commercial HVAC market than
suppliers of custom-designed equipment, including the Segment. However, because
of certain building designs, shapes or other characteristics, the Company
believes there are many applications for which custom-designed equipment is
required or is more cost effective over the life of the building. Unlike
standard equipment, the Segment's custom-designed commercial HVAC equipment can
be designed to match the exact space, capacity and performance requirements of
the customer. The Segment's packaged rooftop and self-contained walk-in
equipment rooms maximize a building’s rentable floor space because they are
located outside the building. In addition, factors relating to the manner of
construction and timing of installation of commercial HVAC equipment can often
favor custom-designed rather than standard systems. As compared with site-built
and factory built HVAC systems, the Segment's systems are factory assembled
according to customer specifications and then installed by the customer or third
parties, rather than assembled on site, permitting extensive testing prior to
shipment. As a result, the Segment's commercial systems can be installed later
in the construction process than site-built systems, thereby saving the owner or
developer construction and labor costs. The Segment sells its commercial
products primarily to contractors, owners and developers of commercial office
buildings, manufacturing and educational facilities, hospitals, retail stores
and governmental buildings. The Segment seeks to maintain strong relationships
nationwide with design engineers, owners and developers, and the persons who are
most likely to value the benefits and long-term cost efficiencies of the
Segment's custom-designed equipment.
The
Company estimates that about 40% of the Segment’s commercial sales in 2004 were
attributable to replacement and retrofit activity, which typically is less
cyclical than new construction activity and generally commands higher margins.
The Segment continues to develop product and marketing programs to increase
penetration in the growing replacement and retrofit market.
The
Segment's commercial products are marketed through independently-owned
manufacturers' representatives and approximately 325 sales, marketing and
engineering professionals as of December 31, 2004. The independent
representatives are typically HVAC engineers, a factor which is significant in
marketing the Segment's commercial products because of the design intensive
nature of the market segment in which the Segment competes.
The
Company believes that the Segment is among the largest suppliers of
custom-designed commercial HVAC products in the United States. The Segment's
four largest competitors in the commercial HVAC market are Carrier Corporation
(a subsidiary of United Technologies Corporation), York International, McQuay
International (a subsidiary of OYL Corporation), and The Trane Company (a
subsidiary of American Standard Inc.). The Segment competes primarily on the
basis of engineering support, quality, flexibility in design and construction
and total installed system cost. Although the Company believes that the Segment
competes favorably with respect to certain of these factors, most of the
Segment's competitors have greater financial and marketing resources than the
Segment and enjoy greater brand awareness. However, the Company believes that
the Segment's ability to produce equipment that meets the performance
characteristics required by the particular product application provides it with
advantages not enjoyed by certain of these competitors.
The
Segment had 14 manufacturing plants and employed approximately 3,400 full-time
people as of December 31, 2004, of which approximately 163 are covered by a
collective bargaining agreement which expires in 2005. The Company believes that
the Segment's relationships with its employees are satisfactory.
GENERAL
CONSIDERATIONS
Employees
The
Company employed approximately 7,700 full time persons at December 31,
2004.
Backlog
Backlog
expected to be filled during 2005 was approximately $144,900,000 at December 31,
2004 ($137,400,000 at December 31, 2003). Backlog is not regarded as a
significant factor for operations where orders are generally for prompt
delivery. While backlog stated for December 31, 2004 is believed to be firm, the
possibility of cancellations makes it difficult to assess the firmness of
backlog with certainty.
Research
and Development
The
Company's research and development activities are principally new product
development and represent approximately 1.7%, 1.5% and 1.4% of the Company’s
consolidated net sales in 2004, 2003 and 2002, respectively.
Patents
and Trademarks
The
Company holds numerous design and process patents that it considers important,
but no single patent is material to the overall conduct of its business. It is
the Company's policy to obtain and protect patents whenever such action would be
beneficial to the Company. The Company owns or licenses numerous trademarks that
it considers material to the marketing of its products, including Broan®,
NuTone®, Nautilus®, Venmar®, Guardian Plus™ Air Systems, vanEE®, Best®,
Governair®, Mammoth®, Temtrol®, Miller®, Intertherm®, Frigidaire®, Tappan®,
Philco®, Kelvinator®, Gibson®, Westinghouse®, Maytag®, Ventrol®, Webco™, Vapac®,
Cubit®, Qualitair®, Edenaire®, Linear®, Channel Plus®, Open House®, Xantech®,
Elan®, Via!®, SpeakerCraft®, Proficient Audio Systems™, OSCO®, OmniMount®
and M&S Systems®. The Company believes
that its rights in these trademarks are adequately protected.
Raw
Materials
The
Company purchases raw materials and most components used in its various
manufacturing processes. The principal raw materials purchased by the Company
are rolled sheet steel, formed and galvanized steel, copper, aluminum, plate
mirror glass, polypropylene, wood, various chemicals, paints and plastics.
The
materials, molds and dies, subassemblies and components purchased from other
manufacturers, and other materials and supplies used in manufacturing processes
have generally been available from a variety of sources. From time to time
increases in raw material costs can affect future supply availability due in
part to raw material demands by other industries. Whenever practical, the
Company establishes multiple sources for the purchase of raw materials and
components to achieve competitive pricing, ensure flexibility and protect
against supply disruption. In 2001, the Company instituted a Company wide
material procurement strategy designed to reduce the purchase price of raw
materials and purchased components. The strategy focuses on adopting world-class
procurement practices and Company-wide negotiation leverage to reduce the costs
of purchased materials. As part of this program, the Company has invested in
strategic procurement software. The Company believes the use of strategic
sourcing software and systems development by its procurement personnel will
continue to enhance the Company’s competitive position by reducing costs from
its vendors and limiting cost increases for goods and services in sectors
experiencing rising prices.
The
Company is subject to significant market risk with respect to the pricing of its
principal raw materials. 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. See
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, Item 7 of Part II of this report, incorporated herein by reference
for further discussion.
Working
Capital
The
carrying of inventories to support customers and to permit prompt delivery of
finished goods requires substantial working capital. Substantial working capital
is also required to carry receivables. The demand for the Company's products is
seasonal, particularly in the Northeast and Midwest regions of the United States
and in Canada 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. Certain of the residential product businesses in the
HVAC Segment have in the past been more seasonal in nature than the Company's
other businesses’ product categories. As a result, the demand for working
capital of the Company's subsidiaries is greater from late in the first quarter
until early in the fourth quarter. See "Liquidity and Capital Resources" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, Item 7 of Part II of this report, incorporated herein by
reference.
Website
The
Company’s periodic and current reports are available on its website,
www.nortek-inc.com, free of
charge, as soon as reasonably practicable after such materials are filed with,
or furnished to the Securities and Exchange Commission (“SEC”).
ITEM
2. PROPERTIES
Set forth
below is a brief description of the location and general character of the
principal administrative and manufacturing facilities and other material real
properties of the Company’s continuing operations, all of which the Company
considers to be in satisfactory repair. All properties are owned, except for
those indicated by an asterisk, which are leased under operating leases and
those with a double asterisk, which are leased under capital
leases.
| |
|
Approximate |
|
Location
(1) |
Description |
Square
Feet |
| |
|
|
|
Residential
Building Products Segment: |
|
|
|
Union,
IL |
Manufacturing/Warehouse/Administrative |
197,000
(2) |
|
Hartford,
WI |
Manufacturing/Warehouse/Administrative |
498,000
(4) |
|
Mississauga,
ONT, Canada |
Manufacturing/Warehouse/Administrative |
110,000 |
|
Sylmar,
CA |
Manufacturing/Administrative |
18,000* |
|
Xixang,
Bao An County, Shenzhen, PRC |
Manufacturing/Warehouse/Administrative |
142,000* |
|
Chaiwan,
Hong Kong |
Administrative |
12,300* |
|
Fabriano,
Italy |
Manufacturing/Warehouse/Administrative |
166,000 |
|
Cerreto
D'Esi, Italy |
Manufacturing/Warehouse/Administrative |
140,000 |
|
Montefano,
Italy |
Manufacturing/Warehouse/Administrative |
93,000
(2) |
|
Cleburne,
TX |
Manufacturing/Warehouse/Administrative |
212,000
(4) |
|
Los
Angeles, CA |
Manufacturing/Administrative |
177,000* |
|
Drummondville,
QUE, Canada |
Manufacturing/Warehouse/Administrative |
76,000 |
|
Cincinnati,
OH |
Manufacturing/Warehouse/Administrative |
836,000 |
|
Lexington,
KY |
Manufacturing/Warehouse/Administrative |
40,000* |
|
Carlsbad,
CA |
Administrative |
30,000 (2) |
|
Riverside,
CA |
Manufacturing/Administrative |
82,000* |
|
Casnovia,
MI |
Manufacturing/Warehouse/Administrative |
23,000* |
|
Dallax,
TX |
Manufacturing/Warehouse/Administrative |
68,000 |
|
Phoenix,
AZ |
Manufacturing/Warehouse/Administrative |
45,000* |
| |
|
|
|
Air
Conditioning and Heating Products Segment: |
|
|
|
St.
Leonard d'Aston, QUE, Canada |
Manufacturing/Administrative |
95,000* |
|
O’Fallon,
MO |
Warehouse/Administrative |
70,000* |
|
St.
Peters, MO |
Warehouse/Administrative |
250,000* |
|
St.
Louis, MO |
Manufacturing |
214,000
(3) |
|
St.
Louis, MO |
Manufacturing/Warehouse |
103,000*
(3) |
|
Holland,
MI |
Manufacturing/Administrative |
45,000* |
|
Boonville,
MO |
Manufacturing |
250,000
(4) |
| Boonville,
MO |
Warehouse/Administrative |
150,000
(2) |
| Tipton,
MO |
Manufacturing |
50,000 (4) |
| Poplar
Bluff, MO |
Manufacturing/Warehouse |
445,000** |
| Dyersburg,
TN |
Manufacturing/Warehouse |
368,000** |
| Chaska,
MN |
Manufacturing/Administrative |
230,000* |
| Oklahoma
City, OK |
Manufacturing/Administrative |
127,000
(4) |
| Okarche,
OK |
Manufacturing/Warehouse/Administrative |
210,000
(4) |
| Saskatoon,
Saskatchewan, Canada |
Manufacturing/Administrative |
69,000* |
| Springfield,
MO |
Manufacturing/Warehouse/Administrative |
77,000* |
| Anjou,
QUE, Canada |
Manufacturing/Administrative |
122,000* |
| Edenbridge,
U.K. |
Manufacturing/Administrative |
92,000* |
| Fenton,
Stoke-on-Trent, U.K. |
Manufacturing/Administrative |
104,000* |
| Other: |
|
|
| Providence,
RI |
Administrative |
23,400* |
| |
(1) |
Certain
locations may represent more than one property and the square footage
includes all properties within that
location. |
| (2) |
These
facilities are pledged as security under various subsidiary debt
agreements. (See Note 6 of the Notes to the Consolidated Financial
Statements, Item 8 of Part II of this report, incorporated herein by
reference.) |
| |
(3) |
During
2003, the Company initiated restructuring activities related to the
closure of two facilities in St. Louis, Missouri, in order to relocate the
operations to other facilities. The relocation of operations was completed
in 2004 and the closing on the sale of one of the facilities is scheduled
for March 30, 2005. (See Note 13 of the Notes to the Consolidated
Financial Statements, Item 8 of Part II of this report, incorporated
herein by reference.) |
| |
(4) |
These
facilities are pledged as security under the Company’s Senior Secured
Credit Facility. |
ITEM
3. LEGAL PROCEEDINGS
The
Company and its subsidiaries are subject to numerous federal, state and local
laws and regulations, including environmental laws and regulations that impose
limitations on the discharge of pollutants into the air and water and establish
standards for the treatment, storage and disposal of solid and hazardous wastes.
The Company believes that it is in substantial compliance with the material laws
and regulations applicable to it. The Company is involved in current, and may
become involved in future, remedial actions under federal and state
environmental laws and regulations which impose liability on companies to clean
up, or contribute to the cost of cleaning up, sites at which their hazardous
wastes or materials were disposed of or released. Such claims may relate to
properties or business lines acquired by the Company after a release has
occurred. In other instances, the Company may be partially liable under law or
contract to other parties that have acquired businesses or assets from the
Company for past practices relating to hazardous substances management. The
Company believes that all such claims asserted against it, or such obligations
incurred by it, will not have a material adverse effect upon the Company’s
financial condition or results of operations. Expenditures in 2004, 2003 and
2002 to evaluate and remediate such sites were not material. However, the
Company is presently unable to estimate accurately its ultimate financial
exposure in connection with identified or yet to be identified remedial actions
due among other reasons to: (i) uncertainties surrounding the nature and
application of environmental regulations, (ii) the Company's lack of information
about additional sites to which it may be listed as a potentially responsible
party (“PRP”), (iii) the level of clean-up that may be required at specific
sites and choices concerning the technologies to be applied in corrective
actions and (iv) the time periods over which remediation may occur. Furthermore,
since liability for site remediation is joint and several, each PRP is
potentially wholly liable for other PRP’s that become insolvent or bankrupt.
Thus, the solvency of other PRP’s could directly affect the Company's ultimate
aggregate clean-up costs. In certain circumstances, the Company’s liability for
clean-up costs may be covered in whole or in part by insurance or
indemnification obligations of third parties.
In
addition to the legal matters described above, the Company and its subsidiaries
are named as defendants in a number of legal proceedings, including a number of
product liability lawsuits, incident to the conduct of their
businesses.
The
Company does not expect that any of the above described proceedings will have a
material adverse effect, either individually or in the aggregate, on the
Company’s financial position, results of operations, liquidity or competitive
position. (See Note 9 of the Notes to the Consolidated Financial Statements,
Item 8 of Part II of this report, incorporated herein by
reference.)
ITEM
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART
II
ITEM
5. MARKET
FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
On
November 20, 2002, the Company reorganized into a holding company structure and
each outstanding share of capital stock of the Company was converted into an
identical share of capital stock of the former Nortek Holdings. The former
Nortek Holdings became the successor public company, and the Company became a
wholly-owned subsidiary of the former Nortek Holdings. As of November 20, 2002,
there is no established public trading market for the Company’s capital stock.
As of March 25, 2005, there were 3,000 shares of common stock of the Company
authorized and 3,000 shares of common stock of the Company outstanding, all of
which are owned by Nortek Holdings. On January 9, 2003, the Company declared and
distributed to the former Nortek Holdings a cash dividend of approximately
$120,000,000 and distributed approximately $27,900,000 for reimbursement of fees
and expenses of Kelso as contemplated by the Recapitalization. No other
dividends have been declared or distributed by the Company through December 31,
2004. The Company’s Senior Secured Term Loan and the Indenture for its 8 1/2%
$625,000,000 senior subordinated notes due 2014 contain restrictions on the
Company’s ability to pay certain dividends. For more information see Note 6 of
the Notes to the Consolidated Financial Statements, Item 8 of Part II of this
report, incorporated herein by reference.
See Notes
1, 2 and 7 of the Notes to the Consolidated Financial Statements, Item 8 of Part
II of this report, incorporated herein by reference.
ITEM
6. CONSOLIDATED
SELECTED
FINANCIAL DATA
| |
|
For
the Periods |
|
| |
|
Post-
Acquisition |
|
Post-Recapitalization |
|
Pre-Recapitalization |
|
| |
|
Aug.
28, 2004 - |
|
Jan.
1, 2004 - |
|
Jan.
10, 2003 - |
|
Jan.
1, 2003 - |
|
Jan.
1, 2002 - |
|
Jan.
1, 2001 - |
|
Jan.
1, 2000 - |
|
| |
|
Dec.
31, 2004 |
|
Aug.
27, 2004 |
|
Dec.
31, 2003 |
|
Jan.
9, 2003 |
|
Dec.
31, 2002 |
|
Dec.
31, 2001 |
|
Dec.
31, 2000 |
|
| |
|
(In
millions except ratios) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Summary of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
561.0 |
|
$ |
1,117.9 |
|
$ |
1,480.6 |
|
$ |
24.8 |
|
$ |
1,376.5 |
|
$ |
|