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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 ______

1-6112
(Commission File Number)
__________


NORTEK HOLDINGS, 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 Capital Stock outstanding as of May 14, 2004 was 8,527,822.



PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NORTEK HOLDINGS, 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
  
$
157,245
 
$
194,120
 
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
   
625,439
   
1,103,335
 
   
 
 
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
   
16,246
   
12,589
 
Other
   
19,272
   
16,893
 
   
 
 
 
    
815,336
   
802,190
 
   
 
 
 
  
$
1,633,077
 
$
2,099,980
 
   
 
 
Liabilities and Stockholders' 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
   
112,772
 
Accrued expenses and taxes, net
   
195,674
   
151,048
 
Liabilities of discontinued operations
   
---
   
137,683
 
   
 
 
Total current liabilities
   
360,732
   
416,852
 
   
 
 
Other Liabilities:
    
 
    
 
  
Deferred income taxes
   
22,310
   
21,461
 
Other
   
154,284
   
136,833
 
   
 
 
 
    
176,594
   
158,294
 
   
 
 
 
    
 
    
 
  
Notes, Mortgage Notes and Obligations
    
 
    
 
  
Payable, Less Current Maturities
   
826,705
   
1,324,626
 
   
 
 
Stockholders' Investment:
    
 
    
 
  
Preference stock, $1.00 par value; authorized 7,000,000 shares;
    
 
    
 
  
none issued
   
---
   
---
 
Series B Preference Stock, $1.00 par value; authorized
    
 
    
 
  
19,000,000 shares; and 8,130,442 shares issued and outstanding
    
8,130
   
8,130
 
Class A Common Stock, $1.00 par value; authorized
   
 
    
 
  
19,000,000 shares; 397,380 shares issued and outstanding
    
397
   
397
 
Class B Common Stock, $1.00 par value; authorized
   
 
    
 
  
14,000,000 shares; none issued
   
---
   
---
 
Additional paid-in capital
   
173,217
   
172,244
 
Retained earnings
   
71,100
   
---
 
Accumulated other comprehensive income
    
16,202
   
19,437
 
   
 
 
Total stockholders' investment
   
269,046
   
200,208
 
   
 
 
 
  
$
1,633,077
 
$
2,099,980
 
   
 
 

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

 

NORTEK HOLDINGS, 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
   
73,985
   
60,073
   
5,014
 
Amortization of intangible assets
   
3,311
   
1,823
   
67
 
Expenses and charges arising from the Recapitalization
   
---
   
---
   
83,000
 
   
 
 
 
 
    
365,968
   
301,553
   
106,716
 
   
 
 
 
Operating earnings (loss)
   
41,475
   
34,524
   
(81,765
)
Interest expense
   
(25,561
)
  
(16,791
)
  
(1,054
)
Loss from debt retirement
    
(11,958
)
  
---
   
---
 
Investment income
   
944
   
367
   
119
 
   
 
 
 
Earnings (loss) from continuing operations
    
 
    
 
    
 
  
before provision (benefit) for income taxes
   
4,900
   
18,100
   
(82,700
)
Provision (benefit) for income taxes
   
2,000
   
7,100
   
(21,800
)
   
 
 
 
Earnings (loss) from continuing operations
   
2,900
   
11,000
   
(60,900
)
Earnings (loss) from discontinued operations
   
68,200
   
(5,500
)
  
(1,000
)
   
 
 
 
Net earnings (loss)
 
$
71,100
 
$
5,500
 
$
(61,900
)
   
 
 
 
 

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

 

NORTEK HOLDINGS, 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
 
$
2,900
 
$
11,000
 
$
(60,900
)
Earnings (loss) from discontinued operations
   
68,200
   
(5,500
)
  
(1,000
)
   
 
 
 
Net earnings (loss)
   
71,100
   
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
   
8,596
   
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
   
35,638
   
22,053
   
(777
)
Accrued expenses and taxes
   
11,552
   
(14,145
)
  
(19,766
)
Long-term assets, liabilities and other, net
   
(649
)
  
(11,398
)
  
5,837
 
   
 
 
 
Total adjustments to net earnings (loss)
   
(84,535
)
  
(36,083
)
  
56,195
 
   
 
 
 
Net cash used in operating activities
 
$
(13,435
)
$
(30,583
)
$
(5,705
)
   
 
 
 
Cash Flows from investing activities:
    
 
    
 
    
 
  
Capital expenditures
 
$
(4,904
)
$
(2,970
)
$
(207
)
Net cash paid for businesses acquired
   
(16,500
)
  
(17,237
)
  
---
 
Redemption of publicly held shares
    
---
   
(469,655
)
  
 
  
Purchase of investments and marketable securities
   
---
   
(20,018
)
  
---
 
Payment of fees & Recapitalization expenses
    
---
   
(27,900
)
  
 
  
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
   
(538,390
)
  
(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
)
  
---
   
---
 
Issuance of stock in connection with Recapitalization
    
---
   
359,185
   
 
  
Other, net
   
(24
)
  
(27
)
  
(4,039
)
   
 
 
 
Net cash (used in) provided by financing activities
   
(521,357
)
  
363,351
   
(5,352
)
   
 
 
 
Net decrease in unrestricted cash and
    
 
    
 
    
 
  
cash equivalents
   
(36,875
)
  
(205,622
)
  
(11,204
)
Unrestricted cash and cash equivalents at the
    
 
    
 
    
 
  
beginning of the period
   
194,120
   
283,600
   
294,804
 
   
 
 
 
Unrestricted cash and cash equivalents at the
    
 
    
 
    
 
  
end of the period
 
$
157,245
 
$
77,978 
  
$
283,600 
  
   
 
 
 
Supplemental disclosure of cash flow information:
 &n