UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________

FORM 10-Q
__________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2004

OR

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

For the transition period from ______ to ______

333-25505
(Commission File Number)
__________


NORTEK, INC.
(Exact name of registrant as specified in its charter)
__________

 Delaware

  05-0314991

 (State or other jurisdiction of

  (I.R.S. Employer

 incorporation or organization)

 Identification No.)

 

 

 50 Kennedy Plaza, Providence, RI

 02903-2360

 (Address of principal executive offices)

  (Zip Code)

 
 
 
(401) 751-1600
(Registrant's telephone number, including area code)
__________

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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes­­­ ­­ o No x

The number of shares of Common Stock outstanding as of May 14, 2004 was 104.



 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
 

 
  
April 3,
December 31,
 
  
2004
2003
   
Assets
  
(Amounts in thousands)
Current Assets:
  
(Unaudited)
Unrestricted:
  
 
 
Cash and cash equivalents
  
$
150,742
 
$
182,349
 
Restricted:
    
 
    
 
  
Cash, investments and marketable securities at cost,
    
 
    
 
  
which approximates market
   
1,223
   
1,223
 
Accounts receivable, less allowances
    
 
    
 
  
of $6,514,000 and $5,880,000
   
244,609
   
214,267
 
Inventories:
    
 
    
 
  
Raw materials
   
59,988
   
54,144
 
Work in process
   
18,042
   
19,229
 
Finished goods
   
103,519
   
86,042
 
   
 
 
 
    
181,549
   
159,415
 
   
 
 
Prepaid expenses
   
8,604
   
6,765
 
Other current assets
   
12,379
   
14,868
 
Prepaid income taxes
   
19,830
   
17,826
 
Assets of discontinued operations
   
---
   
494,851
 
   
 
 
Total current assets
   
618,936
   
1,091,564
 
   
 
 
Property and Equipment, at Cost:
    
 
    
 
  
Land
   
12,451
   
12,578
 
Buildings and improvements
   
78,567
   
79,007
 
Machinery and equipment
   
122,465
   
120,589
 
   
 
 
 
    
213,483
   
212,174
 
Less accumulated depreciation
   
21,181
   
17,719
 
   
 
 
Total property and equipment, net
   
192,302
   
194,455
 
   
 
 
Other Assets:
    
 
    
 
  
Goodwill
   
687,653
   
678,063
 
Intangible assets, less accumulated amortization
    
 
    
 
  
of $12,513,000 and $9,122,000
   
92,165
   
94,645
 
Deferred debt expense
   
6,498
   
2,788
 
Other
   
19,272
   
16,893
 
   
 
 
 
    
805,588
   
792,389
 
   
 
 
 
  
$
1,616,826
 
$
2,078,408
 
   
 
 
Liabilities and Stockholder’s Investment
    
 
    
 
  
 
    
 
    
 
  
Current Liabilities:
    
 
    
 
  
Notes payable and other short-term obligations
 
$
8,580
 
$
8,120
 
Current maturities of long-term debt
   
7,146
   
7,229
 
Accounts payable
   
149,332
   
112,764
 
Accrued expenses and taxes, net
   
195,299
   
142,135
 
Liabilities of discontinued operations
   
---
   
137,683
 
   
 
 
Total current liabilities
   
360,357
   
407,931
 
   
 
 
Other Liabilities:
    
 
    
 
  
Deferred income taxes
   
22,310
   
21,449
 
Other
   
154,284
   
136,833
 
   
 
 
 
    
176,594
   
158,282
 
   
 
 
Notes, Mortgage Notes and Obligations
    
 
    
 
  
Payable, Less Current Maturities
   
465,053
   
971,710
 
   
 
 
 
    
 
    
 
  
Stockholder’s Investment:
    
 
    
 
  
Common stock, $.01 par value; authorized 1,000 shares,
   
 
    
 
  
104 shares issued and outstanding
    
---
   
---
 
Additional paid-in capital
   
445,520
   
444,548
 
Retained earnings
   
153,100
   
76,500
 
Accumulated other comprehensive income
    
16,202
   
19,437
 
   
 
 
Total stockholder’s investment
   
614,822
   
540,485
 
   
 
 
 
  
$
1,616,826
 
$
2,078,408
 
   
 
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 
  
For the Periods
   
 
  
Post-Recapitalization
Pre-Recapitalization
   
 
  
Jan. 1, 2004 -
Jan. 10, 2003 -
Jan. 1, 2003 -
 
  
April 3, 2004
April 5, 2003
Jan. 9, 2003
   
 
  
(Amounts in thousands)
 
  
(Unaudited)
 
  
 
 
 
Net Sales
 
$
407,443
 
$
336,077
 
$
24,951
 
   
 
 
 
Costs and Expenses:
    
 
    
 
    
 
  
Cost of products sold
   
288,672
   
239,657
   
18,635
 
Selling, general and administrative expense
   
73,947
   
60,073
   
5,014
 
Amortization of intangible assets
   
3,311
   
1,823
   
67
 
Expenses and charges arising from the Recapitalization
   
---
   
---
   
83,000
 
   
 
 
 
 
    
365,930
   
301,553
   
106,716
 
   
 
 
 
Operating earnings (loss)
   
41,513
   
34,524
   
(81,765
)
Interest expense
   
(16,577
)
  
(16,791
)
  
(1,054
)
Loss from debt retirement
    
(11,958
)
  
---
   
---
 
Investment income
   
922
   
367
   
119
 
   
 
 
 
Earnings (loss) from continuing operations
    
 
    
 
    
 
  
before provision (benefit) for income taxes
   
13,900
   
18,100
   
(82,700
)
Provision (benefit) for income taxes
   
5,500
   
7,100
   
(21,800
)
   
 
 
 
Earnings (loss) from continuing operations
   
8,400
   
11,000
   
(60,900
)
Earnings (loss) from discontinued operations
   
68,200
   
(5,500
)
  
(1,000
)
   
 
 
 
Net earnings (loss)
 
$
76,600
 
$
5,500
 
$
(61,900
)
   
 
 
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 
  
For the Periods
   
 
  
Post-Recapitalization
Pre-Recapitalization
   
 
  
Jan. 1, 2004 -
Jan. 10, 2003 -
Jan. 1, 2003 -
 
  
April 3, 2004
April 5, 2003
Jan. 9, 2003
   
 
  
(Amounts in thousands)
 
  
(Unaudited)
 
  
 
 
 
Cash Flows from operating activities:
  
 
 
 
Net earnings (loss) from continuing operations
 
$
8,400
 
$
11,000
 
$
(60,900
)
Earnings (loss) from discontinued operations
   
68,200
   
(5,500
)
  
(1,000
)
   
 
 
 
Net earnings (loss)
   
76,600
   
5,500
   
(61,900
)
   
 
 
 
Adjustments to reconcile net earnings (loss)
   
 
    
 
    
 
  
to net cash used in operating activities:
    
 
    
 
    
 
  
Depreciation and amortization expense, including
   
 
    
 
    
 
  
amortization of purchase price allocated to inventory
   
9,282
   
9,618
   
653
 
Non-cash interest expense, net
   
(193
)
  
3,832
   
125
 
Loss from debt retirement
    
11,958
   
---
   
---
 
Gain on the sale of discontinued operations
   
(122,700
)
  
---
   
---
 
Deferred federal income tax provision from
    
 
    
 
    
 
  
continuing operations
   
19,900
   
3,800
   
5,900
 
Deferred federal income tax credit from
    
 
    
 
    
 
  
discontinued operations
   
(18,100
)
  
---
   
---
 
Effect of the Recapitalization, net
   
---
   
---
   
62,397
 
Changes in certain assets and liabilities, net of
   
 
    
 
    
 
  
effects from acquisitions and dispositions:
    
 
    
 
    
 
  
Accounts receivable, net
   
(29,877
)
  
(24,233
)
  
4,298
 
Inventories
   
(17,591
)
  
(21,070
)
  
(4,457
)
Prepaids and other current assets
   
9,890
   
860
   
268
 
Net assets of discontinued operations
   
(2,434
)
  
(5,400
)
  
1,717
 
Accounts payable
   
35,646
   
22,053
   
(777
)
Accrued expenses and taxes
   
20,099
   
(16,999
)
  
(19,766
)
Long-term assets, liabilities and other, net
   
(649
)
  
(11,425
)
  
5,837
 
   
 
 
 
Total adjustments to net earnings (loss)
   
(84,769
)
  
(38,964
)
  
56,195
 
   
 
 
 
Net cash used in operating activities
 
$
(8,169
)
$
(33,464
)
$
(5,705
)
   
 
 
 
Cash Flows from investing activities:
    
 
    
 
    
 
  
Capital expenditures
 
$
(4,904
)
$
(2,970
)
$
(207
)
Net cash paid for businesses acquired
   
(16,500
)
  
(17,237
)
  
---
 
Purchase of investments and marketable securities
   
---
   
(20,018
)
  
---
 
Proceeds from the sale of discontinued businesses
   
519,153
   
---
   
---
 
Change in restricted cash and investments
   
(2
)
  
(5
)
  
(49
)
Other, net
   
170
   
(605
)
  
109
 
   
 
 
 
Net cash provided by (used in) investing activities
   
497,917
   
(40,835
)
  
(147
)
   
 
 
 
Cash Flows from financing activities:
    
 
    
 
    
 
  
Change in borrowings, net
   
(633
)
  
4,193
   
(1,313
)
Sale of Floating Rate Notes
    
196,000
   
---
   
---
 
Redemption of Senior Notes
    
(716,700
)
  
---
   
---
 
Dividend and distributions paid to Nortek Holdings, Inc.
   
---
   
---
   
(147,900
)
Contribution of capital from Nortek Holdings, Inc.
   
---
   
---
   
4,603
 
Other, net
   
(22
)
  
(32
)
  
(4,039
)
   
 
 
 
Net cash (used in) provided by financing activities
   
(521,355
)
  
4,161
   
(148,649
)
   
 
 
 
Net decrease in unrestricted cash and
    
 
    
 
    
 
  
cash equivalents
   
(31,607
)
  
(70,138
)
  
(154,501
)
Unrestricted cash and cash equivalents at the
    
 
    
 
    
 
  
beginning of the period
   
182,349
   
140,303
   
294,804
 
   
 
 
 
Unrestricted cash and cash equivalents at the
    
 
    
 
    
 
  
end of the period
 
$
150,742
  
$
70,165
  
$
140,303 
  
   
 
 
 
 
    
 
    
 
    
 
  
Supplemental disclosure of cash flow information:
    
 
    
 
    
 
  
 
    
 
    
 
    
 
  
Interest paid
 
$
31,867
 
$
32,836
 
$
---
 
   
 
 
 
 
    
 
    
 
    
 
  
Income taxes paid, net
 
$
4,741
 
$
2,478
 
$
281
 
   
 
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 
 
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S INVESTMENT
FOR THE PERIOD FROM JANUARY 1, 2003 TO JANUARY 9, 2003
(Dollar amounts in thousands)