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 July 3, 2004

OR

[  ] 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 [ ]

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

The number of shares of Common Stock outstanding as of July 30, 2004 was 104.


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
 

 
  
July 3,
December 31,
 
  
2004
2003
   
Assets
  
(Unaudited)
Current Assets:
  
(Amounts in thousands)
Unrestricted:
  
 
 
Cash and cash equivalents
  
$
123,295
 
$
182,349
 
Marketable securities available for sale
    
5,011
   
-
 
Restricted:
    
 
    
 
  
Cash, investments and marketable securities at cost,
    
 
    
 
  
   which approximates market
   
8,523
   
1,223
 
Accounts receivable, less allowances
    
 
    
 
  
   of $6,334 and $5,880
   
263,156
   
214,267
 
Inventories:
    
 
    
 
  
Raw materials
   
67,716
   
54,144
 
Work in process
   
22,239
   
19,229
 
Finished goods
   
112,033
   
86,042
 
   
 
 
 
    
201,988
   
159,415
 
   
 
 
Prepaid expenses
   
11,463
   
6,765
 
Other current assets
   
16,750
   
14,868
 
Prepaid income taxes
   
20,700
   
17,826
 
Assets of discontinued operations
   
---
   
494,851
 
   
 
 
Total current assets
   
650,886
   
1,091,564
 
   
 
 
Property and Equipment, at Cost:
    
 
    
 
  
Land
   
12,475
   
12,578
 
Buildings and improvements
   
78,299
   
79,007
 
Machinery and equipment
   
127,711
   
120,589
 
   
 
 
 
    
218,485
   
212,174
 
Less accumulated depreciation
   
28,291
   
17,719
 
   
 
 
Total property and equipment, net
   
190,194
   
194,455
 
   
 
 
Other Assets:
    
 
    
 
  
Goodwill
   
686,897
   
678,063
 
Intangible assets, less accumulated amortization
    
 
    
 
  
   of $16,074 and $9,122
   
89,043
   
94,645
 
Deferred debt expense
   
6,221
   
2,788
 
Other
   
17,239
   
16,893
 
   
 
 
 
    
799,400
   
792,389
 
   
 
 
Total Assets
  
$
1,640,480
 
$
2,078,408
 
   
 
 
 
    
 
    
 
  
Liabilities and Stockholder’s Investment
    
 
    
 
  
 
    
 
    
 
  
Current Liabilities:
    
 
    
 
  
Notes payable and other short-term obligations
 
$
6,239
 
$
8,120
 
Current maturities of long-term debt
   
7,171
   
7,229
 
Accounts payable
   
159,678
   
112,764
 
Accrued expenses and taxes, net
   
172,397
   
142,135
 
Liabilities of discontinued operations
   
---
   
137,683
 
   
 
 
Total current liabilities
   
345,485
   
407,931
 
   
 
 
Other Liabilities:
    
 
    
 
  
Deferred income taxes
   
32,600
   
21,449
 
Other
   
150,313
   
136,833
 
   
 
 
 
    
182,913
   
158,282
 
   
 
 
Notes, Mortgage Notes and Obligations
    
 
    
 
  
Payable, Less Current Maturities
   
471,402
   
971,710
 
   
 
 
Stockholder’s Investment:
    
 
    
 
  
Common stock, $.01 par value; authorized 1,000 shares,
   
 
    
 
  
104 shares issued and outstanding
    
---
   
---
 
Additional paid-in capital
   
449,789
   
444,548
 
Retained earnings
   
175,200
   
76,500
 
Accumulated other comprehensive income
    
15,691
   
19,437
 
   
 
 
Total stockholder’s investment
   
640,680
   
540,485
 
   
 
 
Total Liabilities and Stockholder’s Investment
  
$
1,640,480
 
$
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 Three Months Ended
 
  
July 3, 2004
July 5, 2003
 
  
(Amounts in thousands)
 
  
(Unaudited)
 
  
 
 
Net Sales
 
$
448,393
 
$
390,029
 
   
 
 
Costs and Expenses:
    
 
    
 
  
Cost of products sold
   
316,409
   
280,737
 
Selling, general and administrative expense
   
81,884
   
63,425
 
Amortization of intangible assets
   
3,538
   
2,020
 
   
 
 
 
    
401,831
   
346,182
 
   
 
 
Operating earnings
    
46,562
   
43,847
 
Interest expense
   
(9,293
)
  
(12,636
)
Investment income
   
331
   
289
 
   
 
 
Earnings from continuing operations
    
 
    
 
  
   before provision for income taxes
   
37,600
   
31,500
 
Provision for income taxes
   
14,700
   
13,000
 
   
 
 
Earnings from continuing operations
   
22,900
   
18,500
 
Earnings (loss) from discontinued operations
   
(800
)
  
7,400
 
   
 
 
Net earnings
  
$
22,100
 
$
25,900
 
   
 
 
 
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 -
 
  
July 3, 2004
July 5, 2003
Jan. 9, 2003
 
  
(Amounts in thousands)
 
  
(Unaudited)
 
  
 
 
 
Net Sales
 
$
855,836
 
$
726,106
 
$
24,951
 
   
 
 
 
Costs and Expenses:
    
 
    
 
    
 
  
Cost of products sold
   
605,081
   
520,394
   
18,635
 
Selling, general and administrative expense
   
155,831
   
123,498
   
5,014
 
Amortization of intangible assets
   
6,849
   
3,843
   
67
 
Expenses and charges arising from the Recapitalization
   
---
   
---
   
83,000
 
   
 
 
 
 
    
767,761
   
647,735
   
106,716
 
   
 
 
 
Operating earnings (loss)
   
88,075
   
78,371
   
(81,765
)
Interest expense
   
(25,870
)
  
(29,427
)
  
(1,054
)
Loss from debt retirement
    
(11,958
)
  
---
   
---
 
Investment income
   
1,253
   
656
   
119
 
   
 
 
 
Earnings (loss) from continuing operations
    
 
    
 
    
 
  
   before provision (benefit) for income taxes
   
51,500
   
49,600
   
(82,700
)
Provision (benefit) for income taxes
   
20,200
   
20,100
   
(21,800
)
   
 
 
 
Earnings (loss) from continuing operations
   
31,300
   
29,500
   
(60,900
)
Earnings (loss) from discontinued operations
   
67,400
   
1,900
   
(1,000
)
   
 
 
 
Net earnings (loss)
 
$
98,700
 
$
31,400
 
$
(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 -
 
  
July 3, 2004
July 5, 2003
Jan. 9, 2003
 
  
(Amounts in thousands)
 
  
(Unaudited)
 
  
 
 
 
Cash Flows from operating activities:
  
 
 
 
Net earnings (loss) from continuing operations
 
$
31,300
 
$
29,500
 
$
(60,900
)
Earnings (loss) from discontinued operations
   
67,400
   
1,900
   
(1,000
)
   
 
 
 
Net earnings (loss)
   
98,700
   
31,400
   
(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
   
19,908
   
16,521
   
653
 
Non-cash interest expense, net
   
217
   
3,438
   
125
 
Non-cash stock-based compensation
    
5,241
   
952
   
---
 
Loss from debt retirement
    
11,958
   
---
   
---
 
Gain on the sale of discontinued operations
   
(122,700
)
  
---
   
---
 
Deferred federal income tax provision (benefit) from
    
 
    
 
    
 
  
   continuing operations
   
9,800
   
(12,000
)
  
5,900
 
Deferred federal income tax benefit from
    
 
    
 
    
 
  
   discontinued operations
   
(18,500
)
  
---
   
---
 
Effect of the Recapitalization, net
   
---
   
---
   
62,397
 
Changes in certain assets and liabilities, net of
   
 
    
 
    
 
  
   effects from acquisitions and dispositions:
    
 
    
 
    
 
  
Accounts receivable, net
   
(48,250
)
  
(33,784
)
  
4,298
 
Inventories
   
(38,165
)
  
(15,275
)
  
(4,457
)
Prepaids and other current assets
   
4,878
   
(726
)
  
268
 
Net assets of discontinued operations
   
(3,134
)
  
(28,769
)
  
1,717
 
Accounts payable
   
45,830
   
6,367
   
(777
)
Accrued expenses and taxes
   
13,016
   
37,903
   
(19,766
)
Long-term assets, liabilities and other, net
   
(1,936
)
  
(12,284
)
  
5,837
 
   
 
 
 
Total adjustments to net earnings (loss)
   
(121,837
)
  
(37,657
)
  
56,195
 
   
 
 
 
Net cash used in operating activities
 
$
(23,137
)
$
(6,257
)
$
(5,705
)
   
 
 
 
Cash Flows from investing activities:
    
 
    
 
    
 
  
Capital expenditures
 
$
(9,648
)
$
(7,246
)
$
(207
)
Net cash paid for businesses acquired
   
(16,500
)
  
(17,237
)
  
---
 
Purchase of investments and marketable securities
   
(5,000
)
  
(30,015
)
  
---
 
Proceeds from the sale of investments and
   
 
    
 
    
 
  
   marketable securities
    
---
   
9,947
   
 
  
Proceeds from the sale of discontinued businesses
   
520,138
   
---
   
---
 
Change in restricted cash and investments
   
(111
)
  
(7
)
  
(49
)
Other, net
   
(141
)
  
(548
)
  
109
 
   
 
 
 
Net cash provided by (used in) investing activities
   
488,738
   
(45,106
)
  
(147
)
   
 
 
 
Cash Flows from financing activities:
    
 
    
 
    
 
  
Change in borrowings, net
 
$
(4,011
)
$
835
 
$
(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
   
56
   
(5
)
  
(4,039
)
   
 
 
 
Net cash (used in) provided by financing activities
   
(524,655
)
  
830
   
(148,649
)
   
 
 
 
Net decrease in unrestricted cash and
    
 
    
 
    
 
  
   cash equivalents
   
(59,054
)
  
(50,533
)
  
(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
 
$
123,295
 
$
89,770
 
$
140,303
 
   
 
 
 
Supplemental disclosure of cash flow information:
    
 
    
 
    
 
  
 
    
 
    
 
    
 
  
Interest paid
 
$
47,816
 
$
46,130
 
$
---
 
   
 
 
 
Income taxes paid, net
 
$
41,634
 
$
4,557
 
$
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