sept2907_10qntk.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 29, 2007

[ ] 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 of incorporation or organization)	(IRS Employer 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 [_]No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer [_]

Accelerated Filer [_]

Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange 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 November 9, 2007 was 3,000.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(Dollar amounts in millions)

	September 29,		December 31,
	2007		2006
Assets
Current Assets:
Unrestricted cash and cash equivalents	$	66.6	$	57.4
Restricted cash		1.0		1.2
Accounts receivable, less allowances
of $12.5 and $9.4		356.5		328.9
Inventories:
Raw materials		97.2		83.1
Work in process		36.3		28.7
Finished goods		196.4		166.8
		329.9		278.6

Prepaid expenses		13.2		13.7
Other current assets		16.9		24.4
Prepaid income taxes		30.5		21.2
Total current assets		814.6		725.4

Property and Equipment, at Cost:
Land		10.2		9.5
Buildings and improvements		108.0		101.9
Machinery and equipment		208.5		177.2
		326.7		288.6
Less accumulated depreciation		94.3		66.1
Total property and equipment, net		232.4		222.5

Other Assets:
Goodwill		1,515.6		1,481.4
Intangible assets, less accumulated amortization
of $72.1 and $52.4		152.1		150.4
Deferred debt expense		28.8		33.1
Restricted investments and marketable securities		2.0		3.3
Other assets		9.8		11.2
		1,708.3		1,679.4
Total Assets	$	2,755.3	$	2,627.3

Liabilities and Stockholder’s Investment

Current Liabilities:
Notes payable and other short-term obligations	$	112.8	$	23.3
Current maturities of long-term debt		27.0		20.0
Accounts payable		216.4		188.2
Accrued expenses and taxes, net		233.7		282.8
Total current liabilities		589.9		514.3

Other Liabilities:
Deferred income taxes		31.5		33.9
Long-term payable to affiliate		35.0		24.9
Other		140.0		128.8
		206.5		187.6

Notes, Mortgage Notes and Obligations
Payable, Less Current Maturities		1,352.9		1,362.3

Stockholder’s Investment:
Common stock, $0.01 par value, authorized 3,000 shares;
3,000 issued and outstanding at September 29, 2007 and
December 31, 2006		---		---
Additional paid-in capital		412.4		412.1
Retained earnings		165.5		139.4
Accumulated other comprehensive income		28.1		11.6
Total stockholder's investment		606.0		563.1
Total Liabilities and Stockholder's Investment	$	2,755.3	$	2,627.3

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	For the third quarter ended
	Sept. 29, 2007			Sept. 30, 2006
	(Dollar amounts in millions)

Net Sales	$	602.2		$	579.0

Costs and Expenses:
Cost of products sold (see Note D)		433.0			404.2
Selling, general and administrative expense, net (see Note D)		125.1			100.9
Amortization of intangible assets		6.5			6.2
		564.6			511.3
Operating earnings		37.6			67.7
Interest expense		(31.3	)		(29.9	)
Investment income		0.6			0.4
Earnings before provision for income taxes		6.9			38.2
Provision for income taxes		5.5			15.1
Net earnings	$	1.4		$	23.1

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	For the first nine months ended
	Sept. 29, 2007			Sept. 30, 2006
	(Dollar amounts in millions)

Net Sales	$	1,799.0		$	1,677.3

Costs and Expenses:
Cost of products sold (see Note D)		1,269.7			1,168.4
Selling, general and administrative expense, net (see Note D)		363.2			263.3
Amortization of intangible assets		18.9			16.2
		1,651.8			1,447.9
Operating earnings		147.2			229.4
Interest expense		(91.3	)		(85.9	)
Investment income		1.5			1.6
Earnings before provision for income taxes		57.4			145.1
Provision for income taxes		28.1			55.7
Net earnings	$	29.3		$	89.4

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	For the first nine months ended
	Sept. 29, 2007			Sept. 30, 2006
	(Dollar amounts in millions)
Cash Flows from operating activities:
Net earnings	$	29.3		$	89.4

Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization expense		46.9			44.2
Non-cash interest expense, net		4.2			3.9
Non-cash stock-based compensation expense		0.3			0.3
Gain from curtailment of post-retirement medical benefits		---			(35.9	)
Loss on property and equipment		1.0			1.4
Deferred federal income tax (benefit) provision		(8.6	)		10.0
Changes in certain assets and liabilities, net of
effects from acquisitions and dispositions:
Accounts receivable, net		(12.6	)		(43.4	)
Inventories		(36.7	)		(37.9	)
Prepaids and other current assets		1.4			5.1
Accounts payable		16.3			9.2
Accrued expenses and taxes		12.4			31.7
Long-term assets, liabilities and other, net		4.1			(4.7	)
Total adjustments to net earnings		28.7			(16.1	)
Net cash provided by operating activities		58.0			73.3
Cash Flows from investing activities:
Capital expenditures		(24.1	)		(33.0	)
Net cash paid for businesses acquired		(93.5	)		(67.0	)
Payment in connection with NTK Holdings senior unsecured loan facility rollover		(4.5	)		---
Payment of IPO expenses for NTK Holdings		---			(2.4	)
Proceeds from the sale of property and equipment		0.6			3.4
Change in restricted cash and marketable securities		1.5			0.4
Other, net		(1.4	)		(3.1	)
Net cash used in investing activities		(121.4	)		(101.7	)
Cash Flows from financing activities:
Increase in borrowings		112.8			83.9
Payment of borrowings		(40.2	)		(46.8	)
Dividends		---			(28.1	)
Other, net		---			(1.6	)
Net cash provided by financing activities		72.6			7.4
Net change in unrestricted cash and cash equivalents		9.2			(21.0	)
Unrestricted cash and cash equivalents at the beginning of the period		57.4			77.2
Unrestricted cash and cash equivalents at the end of the period	$	66.6		$	56.2

Supplemental disclosure of cash flow information:

Interest paid	$	95.4		$	90.9

Income taxes paid, net	$	4.7		$	17.1

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S INVESTMENT

FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2006

(Dollar amounts in millions)

					Accumulated
	Additional				Other
	Paid-in		Retained		Comprehensive			Comprehensive
	Capital		Earnings		Income (Loss)			Income (Loss)


Balance, July 1, 2006	$	412.0	$	116.0	$	14.4		$	---
Net earnings		---		23.1		---			23.1
Other comprehensive income (loss):
Currency translation adjustment		---		---		(0.2	)		(0.2	)
Comprehensive income								$	22.9
Stock-based compensation		0.1		---		---
Balance, September 30, 2006	$	412.1	$	139.1	$	14.2

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S INVESTMENT

FOR THE FIRST NINE MONTHS ENDED SEPTEMBER 30, 2006

(Dollar amounts in millions)

							Accumulated
	Additional						Other
	Paid-in			Retained			Comprehensive		Comprehensive
	Capital			Earnings			Income		Income


Balance, December 31, 2005	$	415.0		$	77.8		$	7.5	$	---
Net earnings		---			89.4			---		89.4
Other comprehensive income:
Currency translation adjustment		---			---			6.7		6.7
Comprehensive income									$	96.1
Capital contribution from (dividend to) parent		1.7			(28.1	)		---
Adjustment of carryover basis of continuing
management investors in the THL Transaction		(4.9	)		---			---
Stock-based compensation		0.3			---			---
Balance, September 30, 2006	$	412.1		$	139.1		$	14.2

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S INVESTMENT

FOR THE THIRD QUARTER ENDED SEPTEMBER 29, 2007

(Dollar amounts in millions)

					Accumulated
	Additional				Other
	Paid-in		Retained		Comprehensive			Comprehensive
	Capital		Earnings		Income (Loss)			Income (Loss)


Balance, June 30, 2007	$	412.3	$	164.1	$	20.1		$	---
Net earnings		---		1.4		---			1.4
Other comprehensive income (loss):
Currency translation adjustment		---		---		8.1			8.1
Pension liability adjustment		---		---		(0.1	)		(0.1	)
Comprehensive income								$	9.4
Stock-based compensation		0.1		---		---
Balance, September 29, 2007	$	412.4	$	165.5	$	28.1

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

NORTEK, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S INVESTMENT

FOR THE FIRST NINE MONTHS ENDED SEPTEMBER 29, 2007

(Dollar amounts in millions)

						Accumulated
	Additional					Other
	Paid-in		Retained			Comprehensive			Comprehensive
	Capital		Earnings			Income (Loss)			Income (Loss)


Balance, December 31, 2006	$	412.1	$	139.4		$	11.6		$	---
Net earnings		---		29.3			---			29.3
Other comprehensive income (loss):
Currency translation adjustment		---		---			16.7			16.7
Pension liability adjustment		---		---			(0.2	)		(0.2	)
Comprehensive income									$	45.8
Adoption of FIN 48 (see Note F)		---		(3.2	)		---
Stock-based compensation		0.3		---			---
Balance, September 29, 2007	$	412.4	$	165.5		$	28.1

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

NORTEK, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 29, 2007 AND SEPTEMBER 30, 2006

(A)

The unaudited condensed consolidated financial statements presented herein (the “Unaudited Financial Statements”) reflect the financial position, results of operations and cash flows of Nortek, Inc. (the “Company” or “Nortek”) and all of its wholly-owned subsidiaries. The Unaudited Financial Statements include the accounts of Nortek, as appropriate, and all of its wholly-owned subsidiaries, 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 financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted, the Company believes that the disclosures included are adequate to make the information presented not misleading. Certain amounts in the prior year’s Unaudited Financial Statements have been reclassified to conform to the current year presentation. It is suggested that these Unaudited Financial Statements be read in conjunction with the consolidated financial statements and the notes included in the Company’s latest annual report on Form 10-K and its latest Current Reports on Form 8-K as filed with the Securities and Exchange Commission (“SEC”).

On May 5, 2006, NTK Holdings, Inc. (“NTK Holdings”), the ultimate parent of Nortek, filed a registration statement on Form S-1 (most recently amended on September 15, 2006) with the SEC for an initial public offering of shares of its common stock. NTK Holdings requested the withdrawal of its registration statement on Form S-1 in a filing with the SEC on November 13, 2007 due to the unsettled market conditions.

Stock-Based Compensation of Employees, Officers and Directors

The Company follows the modified-prospective transition method of accounting for stock-based compensation in accordance with SFAS No. 123R. Under the modified-prospective transition method, the Company is required to recognize compensation cost for share-based payments to employees based on their grant-date fair value. Measurement and attribution of compensation cost for awards that were granted prior to, but not vested as of the date SFAS No. 123R was adopted, are based on the same estimate of the grant-date fair value and the same attribution method used previously under SFAS No. 123.

At September 29, 2007, certain employees and consultants held approximately 23,383 C-1 units and approximately 44,778 C-2 units, which represent equity interests in THL-Nortek Investors, LLC (“Investors LLC”), the parent of NTK Holdings, that function similar to stock awards. The C-1 units vest pro rata on a quarterly basis over a three-year period and approximately 22,409 and 16,720 were vested at September 29, 2007 and December 31, 2006, respectively. The total fair value of the C-1 units is approximately $1.1 million and approximately $0.1 million remains to be amortized at September 29, 2007. The C-2 units only vest in the event that certain performance-based criteria, as defined, are met. At September 29, 2007 and December 31, 2006, there was approximately $1.6 million of unamortized stock-based employee compensation with respect to the C-2 units, which will be recognized in the event that it becomes probable that the C-2 units or any portion thereof will vest. The C-1 and C-2 units were valued using the Black-Scholes option pricing model to determine the freely-traded call option value based upon information from comparable public companies, which was then adjusted to reflect the discount period, the minority interest factor and the lack of marketability factor to arrive at the final valuations.

The Company recorded stock-based compensation charges in selling, general and administrative expense, net of approximately $0.1 million for each of the third quarters ended September 29, 2007 and September 30, 2006, respectively, and approximately $0.3 million for each of the first nine months ended September 29, 2007 and September 30, 2006, respectively, in accordance with SFAS No. 123R.

Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (an interpretation of FASB Statement No. 109)”, (“FIN 48”). FIN 48 clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s financial statements. FIN 48 prescribes a recognition threshold of “more-likely-than-not” and a measurement attribute for all tax positions taken or expected to be taken on a tax return in order for those tax positions to be recognized in the financial statements. The Company adopted FIN 48 on January 1, 2007 (see Note F).

Goodwill

The following table presents a summary of the activity in goodwill for the first nine months ended September 29, 2007:

	(Amounts in millions)

Balance at December 31, 2006		$	1,481.4
Acquisitions during the first nine months ended September 29, 2007			37.2
Adoption of FIN 48 (see Note F)			3.8
Realization of FIN 48 reserves			(1.4	)
Purchase accounting adjustments			(7.4	)
Impact of foreign currency translation			2.0
Balance at September 29, 2007		$	1,515.6

At September 29, 2007, the Company had an approximate carrying value of Goodwill as follows:

	(Amounts in millions)
Segment:
Residential Ventilation Products		$	801.2
Home Technology Products			398.2
Air Conditioning and Heating Products *			316.2
		$	1,515.6

Mostly relates to residential HVAC products.

The Company has classified as goodwill the cost in excess of fair value of the net assets (including tax attributes) of companies acquired in purchase transactions (see Note C). Approximately $18.1 million and $62.3 million of goodwill associated with certain companies acquired during the first nine months ended September 29, 2007 and the year ended December 31, 2006, respectively, will be deductible for income tax purposes. Purchase accounting adjustments relate principally to final revisions resulting from the completion of fair value adjustments and adjustments to deferred income taxes that impact goodwill.

The Company accounts for acquired goodwill in accordance with Statement of Financial Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS No. 141”) and SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) which involves judgment with respect to the determination of the purchase price and the valuation of the acquired assets and liabilities in order to determine the final amount of goodwill.

Under SFAS No. 142, goodwill determined to have an indefinite useful life are not amortized, instead these assets are evaluated for impairment on an annual basis or more frequently if events or business conditions warrant it. The Company has set the annual evaluation date as of the first day of its fiscal fourth quarter. The Company primarily utilizes a discounted cash flow approach in order to value the Company’s reporting units required to be tested for impairment by SFAS No. 142, which requires that the Company forecast future cash flows of the reporting units and discount the cash flow stream based upon a weighted average cost of capital that is derived from comparable companies within similar industries. The discounted cash flow calculations also include a terminal value calculation that is based upon an expected long-term growth rate for the applicable reporting unit. The Company believes that its procedures for estimating gross future cash flows, including the terminal valuation, are reasonable and consistent with market conditions at the time of estimation.

The Company’s businesses are experiencing a difficult market environment, in part due to weak residential new construction and residential air conditioning markets, and increased commodity costs, and expects these trends to continue into 2008.

As of September 29, 2007, the Company and its subsidiaries have not completed the Company wide planning process of future projected cash flows used to perform its annual evaluation under SFAS No. 142.

The Company believes that despite the current difficult market environment, that once it completes its annual evaluation for the potential impairment of goodwill as of the first day of its fiscal fourth quarter, it is more likely than not that there will not be a need to reduce the fair value of goodwill of its reporting segments below its carrying value as of September 29, 2007. However, there can be no assurances that the results of the Company’s evaluation as of the first day of its fiscal fourth quarter will not result in an impairment of goodwill.

Other Long-Lived Assets

The Company performs the evaluation as of the first day of its fiscal fourth quarter and more frequently if impairment indicators are identified, for the impairment of long-lived assets, other than goodwill, based on expectations of non-discounted future cash flows compared to the carrying value of the subsidiary in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”). The Company’s cash flow estimates are based upon historical cash flows, as well as future projected cash flows received from subsidiary management in connection with the annual Company wide planning process, and include a terminal valuation for the applicable subsidiary based upon a multiple of EBITDA. The Company estimates the EBITDA multiple by reviewing comparable company information and other industry data. The Company has not identified any impairment indicators during the third quarter of 2007.

The Company believes that despite the current difficult market environment, that once it completes its annual evaluation for the potential impairment of other long- lived assets as of the first day of its fiscal fourth quarter, it is more likely than not that there will not be a need to reduce the fair value of other long-lived assets of its reporting segments below its carrying value as of September 29, 2007. However, there can be no assurances that the results of the Company’s evaluation as of the first day of its fiscal fourth quarter will not result in an impairment of other long-lived assets.

Long-term payable to affiliate

At September 29, 2007 and December 31, 2006, the Company had approximately $35.0 million and $24.9 million, respectively, recorded on the accompanying unaudited condensed consolidated balance sheet related to a long-term payable to affiliate. This payable primarily relates to deferred taxes related to NTK Holdings which have been transferred to Nortek.

The following table presents a summary of the activity in the long-term payable to affiliate for the first nine months ended September 29, 2007:

	(Amounts in millions)

Balance at December 31, 2006		$	24.9
Deferred taxes transferred to Nortek			14.7
Payment in connection with NTK Holdings Bridge Loan Rollover			(4.5	)
Payment of miscellaneous expenses for NTK Holdings			(0.1	)
Balance at September 29, 2007		$	35.0

New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for the Company beginning January 1, 2008, including interim periods within the year ending December 31, 2008. Earlier adoption is encouraged. The Company is currently evaluating the impact of adopting SFAS No. 157 on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value and is effective for fiscal years beginning after November 15, 2007, or January 1, 2008 for the Company. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157. The Company is currently evaluating the impact of adopting SFAS No. 159 on its consolidated financial statements.

(B)

At September 29, 2007, the Company had approximately $89.0 million outstanding and approximately $79.5 million of available borrowing capacity under the U.S. revolving portion of its senior secured credit facility, with approximately $21.5 million in outstanding letters of credit. Borrowings under the revolving portion of the senior secured credit facility are used for general working capital purposes. Under the Canadian revolving portion of its senior secured credit facility, the Company had no outstanding borrowings and approximately $10.0 million of available borrowing capacity. Letters of credit have been issued under the Company’s revolving credit facility as additional security for (1) approximately $17.2 million relating to certain of the Company’s insurance programs, (2) approximately $3.6 million relating to leases outstanding for certain of the Company’s manufacturing facilities and (3) approximately $0.7 million relating to certain of the subsidiaries’ purchases and other requirements. Letters of credit reduce borrowing availability under the Company’s revolving credit facility on a dollar for dollar basis. Subsequent to September 29, 2007, the Company repaid approximately $29.0 million of outstanding borrowings under the U.S. revolving portion of its senior secured credit facility.

At September 29, 2007, approximately $172.4 million was available for the payment of cash dividends, stock purchases or other restricted payments by the Company as defined under the terms of the Company’s most restrictive loan agreement, the Company’s senior secured credit facility.

(C)

On September 18, 2007, the Company acquired all the capital stock of Stilpol SP. Zo.O. (“Stilpol”) and certain assets and liabilities of Metaltecnica S.r.l. (“Metaltecnica”) for approximately $7.9 million in cash and the assumption of indebtedness (estimated to be approximately $4.5 million at September 29, 2007) through its kitchen range hood subsidiaries, based in Italy and Poland (“Best Subsidiaries”). The Company’s Best subsidiaries borrowed the cash portion of the purchase price from banks in Italy. These acquisitions supply various fabricated material components and sub-assemblies used by the Company’s Best subsidiaries in the manufacture of kitchen range hoods.

On August 1, 2007, the Company, through its wholly-owned subsidiary Jensen, Inc., acquired certain assets of Solar of Michigan, Inc. (“Triangle”) for approximately $1.7 million of cash. Triangle is located in Coopersville, MI and manufactures, markets and distributes bath cabinets and related products.

On July 27, 2007, the Company acquired all of the ownership units of HomeLogic LLC (“HomeLogic”) for approximately $5.1 million (utilizing approximately $3.1 million of cash and issuing unsecured 6% subordinated notes totaling approximately $2.0 million due July 2011) plus contingent consideration, which may be payable in future years. HomeLogic is located in Marblehead, MA and designs and sells software and hardware that facilitates the control of third party residential subsystems such as home theatre, whole-house audio, climate control, lighting, security and irrigation.

On July 23, 2007, the Company, through Linear, acquired the assets and certain liabilities of Aigis Mechtronics LLC (“Aigis”) for approximately $2.2 million of cash. Aigis is located in Winston-Salem, NC and manufactures and sells equipment, such as camera housings, into the close-circuit television portion of the global security market.

On June 25, 2007, the Company, through its wholly-owned subsidiary, Linear LLC (“Linear”), acquired International Electronics, Inc. (“IEI”) through a cash tender offer to purchase all of the outstanding shares of common stock of IEI at a price of $6.65 per share. The total purchase price was approximately $13.8 million. IEI is located in Canton, MA and designs and sells security and access control components and systems for use in residential and light commercial applications.

On April 10, 2007, the Company, through Linear, acquired the assets and certain liabilities of c.p. All Star Corporation (“All Star”) for approximately $2.8 million (utilizing approximately $2.3 million of cash and issuing unsecured 6% subordinated notes totaling $0.5 million due April 2009). All Star is located in Downington, PA and is a leading manufacturer and distributor of residential, commercial and industrial gate operators, garage door openers, radio controls and accessory products for the garage door and perimeter security industry.

On March 2, 2007, the Company, through Linear, acquired the stock of LiteTouch, Inc. (“LiteTouch”) for approximately $10.5 million (utilizing approximately $8.0 million of cash and issuing unsecured 6% subordinated notes totaling $2.5 million due March 2009) plus contingent consideration, which may be payable in future years. LiteTouch is located in Salt Lake City, UT and designs, manufactures and sells automated lighting controls for a variety of uses including residential, commercial, new construction and retro-fit applications.

On December 12, 2006, the Company, through Linear, acquired the stock of Gefen, Inc. (“Gefen”) for approximately $24.0 million (utilizing approximately $21.5 million of cash and issuing unsecured 6% subordinated notes totaling $2.5 million due December 2008) plus contingent consideration, which may be payable in future years. Gefen is located in Chatsworth, CA and designs and sells audio and video products which extend, switch, distribute and convert signals in a variety of formats, including high definition, for both the residential and commercial markets.

On November 17, 2006, the Company, through its wholly-owned subsidiary, Broan-NuTone LLC (“Broan”), acquired the stock of Zephyr Corporation (“Zephyr”) and Pacific Zephyr Range Hood, Inc. (“Pacific”) for approximately $26.5 million (utilizing approximately $22.5 million of cash and issuing unsecured 6% subordinated notes totaling $4.0 million due November 2009). Zephyr and Pacific are both located in San Francisco, CA. Zephyr designs and sells upscale range hoods, while Pacific designs, sells and installs range hoods and other kitchen products for Asian cooking markets in the United States.

On July 18, 2006, the Company, through Linear, acquired the stock of Magenta Research, Ltd. (“Magenta”) for approximately $14.4 million (utilizing approximately $11.9 million of cash, of which approximately $10.0 million was borrowed under Nortek’s revolving credit facility and was repaid in the second quarter of 2007, and issuing unsecured 6% subordinated notes totaling $2.5 million due July 2008) plus contingent consideration, which may be payable in future years. Magenta is located in New Milford, CT and designs and sells products that distribute audio and video signals over Category 5 and fiber optic cable to multiple display screens.

On June 26, 2006, the Company, through Linear, acquired the stock of Secure Wireless, Inc. (“Secure Wireless”) and Advanced Bridging Technologies, Inc. (“ABT”) through two mergers for approximately $10.5 million, plus contingent consideration of approximately $18.1 million that was earned by Secure Wireless in 2006 and was paid in April 2007. Additional contingent consideration may be payable in future years. Secure Wireless designs and sells wireless security products for the residential and commercial markets while ABT designs and sells innovative radio frequency control products and accessories. Both Secure Wireless and ABT are located in Carlsbad, CA.

On April 14, 2006, the Company, through two newly formed subsidiaries of its HVAC segment, acquired the assets and certain liabilities of Huntair, Inc. (“Huntair”) and Cleanpak International, LLC (“Cleanpak”), for approximately $48.4 million (utilizing approximately $38.4 million of cash and issuing unsecured 6% subordinated notes totaling $10.0 million due April 2008) plus contingent consideration of approximately $30.0 million which was earned in 2006 and was paid in April 2007. Both Huntair and Cleanpak are located near Portland, OR and manufacture, market and distribute custom air handlers and related products for commercial and cleanroom applications.

On February 22, 2006, the Company, through Linear, acquired the assets and certain liabilities of Furman Sound, Inc. (“Furman”) for approximately $3.3 million. Furman is located in Petaluma, CA and designs and sells audio and video signal processors and innovative power conditioning and surge protection products.

On January 25, 2006, the Company, through its wholly-owned subsidiary, Mammoth China Ltd. (“Mammoth China”), increased its ownership interests in Mammoth (Zhejiang) EG Air Conditioning Ltd. (“MEG”) and Shanghai Mammoth Air Conditioning Co., Ltd. (“MSH”) to sixty-percent for approximately $2.4 million. The majority ownership transaction relating to MSH was finalized with the Chinese authorities in May 2006. Prior to January 25, 2006, Mammoth China had a forty-percent minority interest in MEG and a fifty-percent interest in MSH. On June 15, 2007, the Company further increased its ownership in MEG and MSH to seventy-five percent.

Acquisitions contributed approximately $30.9 million, $2.2 million and $1.0 million to net sales, operating earnings and depreciation and amortization expense, respectively, for the third quarter ended September 29, 2007 and contributed approximately $119.8 million, $17.3 million and $5.3 million to net sales, operating earnings and depreciation and amortization expense, respectively, for the first nine months ended September 29, 2007. With the exception of Stilpol, Metaltecnica, Triangle, Zephyr and Pacific, which are included in the Residential Ventilation Products segment, and Huntair, Cleanpak, MEG and MSH, which are included in the Air Conditioning and Heating Products segment, all acquisitions are included in the Home Technology Products segment in the Company’s segment reporting (see Note E).

Acquisitions are accounted for as purchases and accordingly have been included in the Company’s consolidated results of operations since the acquisition date. For recent acquisitions, the Company has made preliminary estimates of the fair value of the assets and liabilities of the acquired companies, including intangible assets and property and equipment, as of the date of acquisition, utilizing information available at the time that the Company’s Unaudited Financial Statements were prepared and these estimates are subject to refinement until all pertinent information has been obtained. The Company is in the process of obtaining appraisals of intangible assets and property and equipment and finalizing the integration plans for certain of the acquired companies, which are expected to be completed by the first half of 2008.

Approximately $55.6 million of contingent consideration was paid in the first nine months of 2007 related to the Secure Wireless, Huntair, Cleanpak and OmniMount acquisitions. The remaining estimated total maximum potential amount of contingent consideration that may be paid in the future for all completed acquisitions is approximately $95.2 million.

Pro forma results related to these acquisitions have not been presented, as the effect is not significant to the Company’s consolidated operating results.

(D)

During the third quarter ended September 29, 2007 and September 30, 2006, the Company’s results of operations include the following (income) and expense items recorded in cost of products sold and selling, general and administrative expense, net in the accompanying unaudited condensed consolidated statement of operations:

	For the third quarter ended *
	Sept. 29, 2007		Sept. 30, 2006
	(Amounts in millions)

Charges related to the closure of the Company’s NuTone, Inc. Cincinnati, OH facility (1)	$	0.4	$	0.3
Charges related to the closure of the Company’s Mammoth, Inc. Chaska, MN facility		2.3		---
Charges related to the closure of the Company’s Jensen, Inc. Vernon, CA facility		0.2		---
Legal and other professional fees and expenses incurred in connection with matters related to certain subsidiaries
based in Italy and Poland		0.9