-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ODCa19JPtGQ2luk92xUNNq2uvtB9+78SJfnB/YSgb+SPsYtXjAYbC44aPUEmsByU aGG7QUmSFKHQmJEtTx0puQ== 0000072423-96-000017.txt : 19961106 0000072423-96-000017.hdr.sgml : 19961106 ACCESSION NUMBER: 0000072423-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961105 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTEK INC CENTRAL INDEX KEY: 0000072423 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 050314991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06112 FILM NUMBER: 96654200 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLZ CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4017511600 MAIL ADDRESS: STREET 1: 50 KENNEDY PLAZA CITY: PROVIDENCE STATE: RI ZIP: 02903 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 1996 ------------------------------ 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 No. 1-6112 ----------------------------------------- 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) N/A - ------------------------------------------------------------ (Former name, former address and former fiscal year if changed since last year) 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 ---------- ----------- The number of shares of Common Stock outstanding as of November 1, 1996 was 9,523,304. The number of shares of Special Common Stock outstanding as of November 1, 1996 was 475,528.
NORTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Dollar Amounts in Thousands) Sept. 28, Dec. 31, 1996 1995 ---- ---- (Unaudited) ASSETS Current Assets: Unrestricted-- Investments and marketable securities at cost which approximates market $ 36,848 $ 60,079 Marketable securities available for sale 50,828 43,234 Restricted-- Investments and marketable securities at cost which approximates market 9,377 9,411 Accounts receivable, less allowances of $5,214 and $4,546 140,634 118,017 Inventories: Raw materials 41,880 42,601 Work in process 12,528 14,319 Finished goods 52,837 53,132 ------- ------- 107,245 110,052 ------- ------- Prepaid expenses and other current assets 18,272 16,927 U. S. Federal prepaid income taxes 19,400 19,100 ------- ------- Total Current Assets 382,604 376,820 ------- ------- Property and Equipment, at cost: Land 6,681 6,508 Buildings and improvements 70,109 69,125 Machinery and equipment 169,142 157,884 ------- ------- 245,932 233,517 Less--Accumulated depreciation 107,653 97,255 ------- ------- Total Property and Equipment, net 138,279 136,262 ------- ------- Other Assets: Goodwill, less accumulated amortiza- tion of $26,195 and $23,978 90,033 91,347 Deferred debt expense 6,879 7,574 Other 14,941 13,476 ------- ------- 111,853 112,397 ------- ------- $632,736 $625,479 ======= =======
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Continued) (Dollar Amounts in Thousands) Sept. 28, Dec. 31, 1996 1995 ---- ---- (Unaudited) LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- Current Liabilities: Notes payable and other short- term obligations $ 30,855 $ 30,226 Current maturities of long-term debt 10,818 11,824 Accounts payable 93,419 73,047 Accrued expenses and taxes, net 101,814 100,970 ------- ------- Total Current Liabilities 236,906 216,067 ------- ------- Other Liabilities: Deferred income taxes 25,196 27,780 Other 12,385 9,945 ------- ------- 37,581 37,725 ------- ------- Notes, Mortgage Notes and Other Notes Payable 243,578 240,396 ------- ------- Stockholders' Investment: Preference stock, $1 par value; authorized 7,000,000 shares, none issued --- --- Common Stock, $1 par value; authorized 40,000,000 shares, 15,921,295 shares and 15,883,427 shares issued 15,921 15,883 Special Common Stock, $1 par value; authorized 5,000,000 shares, 753,341 and 774,366 shares issued 753 774 Additional paid-in capital 134,746 134,690 Retained earnings 30,466 15,766 Cumulative translation, pension and other adjustments (2,761) (2,742) Less - treasury common stock at cost, 6,423,935 shares and 4,306,706 shares (62,723) (31,351) - treasury special common stock at cost, 276,869 shares and 276,784 shares (1,731) (1,729) ------- ------- Total Stockholders' Investment 114,671 131,291 ------- ------- $632,736 $625,479 ======= =======
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In Thousands Except Per Share Amounts) For The Three Months Ended ------------------ Sept. 28, Sept. 30, 1996 1995 ---- ---- (Unaudited) Net Sales $248,227 $193,567 ------- ------- Costs and Expenses: Cost of products sold 181,808 143,891 Selling, general and administrative expense 49,414 39,596 ------- ------- 231,222 183,487 ------- ------- Operating earnings 17,005 10,080 Interest expense (7,261) (5,945) Interest income 1,256 1,565 Gain on sale of investment securities --- 2,200 ------- ------- Earnings before provision for income taxes 11,000 7,900 Provision for income taxes 4,500 2,700 ------- ------- Net Earnings $ 6,500 $ 5,200 ======= ======= Net Earnings Per Share: Primary $ .64 $ .41 ======= ======= Fully diluted $ .64 $ .41 ======= ======= Weighted Average Number of Shares: Primary 10,162 12,579 ====== ====== Fully diluted 10,169 12,582 ====== ======
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In Thousands Except Per Share Amounts) For The Nine Months Ended ----------------- Sept. 28, Sept. 30, 1996 1995 ---- ---- (Unaudited) Net Sales $729,447 $572,582 ------- ------- Costs and Expenses: Cost of products sold 539,018 424,032 Selling, general and administrative expense 147,657 119,248 ------- ------- 686,675 543,280 ------- ------- Operating earnings 42,772 29,302 Interest expense (22,747) (17,784) Interest income 4,075 4,782 Net gain on investment and marketable securities --- 2,000 ------- ------- Earnings before provision for income taxes 24,100 18,300 Provision for income taxes 9,400 7,400 ------- ------- ------- ------- Net Earnings $ 14,700 $ 10,900 ======= ======= Net Earnings Per Share: Primary $ 1.35 $ .86 ======= ======= Fully diluted $ 1.35 $ .86 ======= ======= Weighted Average Number of Shares: Primary 10,845 12,663 ====== ====== Fully diluted 10,859 12,664 ====== ======
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in Thousands) For the Nine Months Ended ------------------ Sept. 28, Sept. 30, 1996 1995 ---- ---- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $14,700 $10,900 ------ ------ Adjustments to reconcile net earnings to cash: Depreciation and amortization 17,558 14,384 Net gain on investment and marketable securities --- (2,000) Deferred federal income tax (credit) provision from continuing operations (875) 1,100 Changes in certain assets and liabilities, net of effects from acquisitions and dispositions: Accounts receivable, net (22,084) (15,970) Prepaids and other current assets 1,322 (989) Inventories 3,702 (2,309) Accounts payable 19,051 3,954 Accrued expenses and taxes (914) (5,402) Long-term assets, liabilities and other, net (1,945) 1,377 ------ ------- Total adjustments to net earnings 15,815 (5,855) ------ ------- Net Cash Provided by Operating Activities 30,515 5,045 ------ ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (13,576) (11,120) Purchase of investments and marketable securities (45,903) (10,085) Proceeds from sale of investments and marketable securities 37,905 20,772 Proceeds relating to businesses sold, net --- 1,129 Other, net 146 (196) ------ ------- Net Cash (Used in) Provided by Investing Activities (21,428) 500 ------- -------
NORTEK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in Thousands) (Continued) For the Nine Months Ended ------------------ Sept. 28, Sept. 30, 1996 1995 ---- ---- (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 11,488 --- Payment of borrowings (12,143) (633) Purchase of Nortek Common and Special Common Stock (31,738) (2,850) Other, net 75 12 ------- ------- Net Cash Used in Financing Activities (32,318) (3,471) ------- ------- Net (decrease) increase in unrestricted cash and investments (23,231) 2,074 Unrestricted cash and investments at the beginning of the period 60,079 77,106 ------- ------- Unrestricted cash and investments at the end of the period $ 36,848 $ 79,180 ======= ======= Interest paid $ 27,670 $ 22,530 ======= ======= Income taxes paid, net $ 13,490 $ 3,508 ======= =======
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Nortek, Inc. and Subsidiaries Condensed Consolidated Statement of Stockholders' Investment For the Three Months Ended September 28, 1996 and September 30, 1995 (Dollar Amounts in Thousands) Cumulative Translation, Addi- Pension Special tional and Other Common Common Paid-in Retained Adjust- Treasury Stock Stock Capital Earnings ments Stock ----- ----- ------- -------- --------- ----- (Unaudited) Balance, July 1, 1995 $15,829 $790 $134,631 $ 6,466 $(3,185) $(28,051) 5,056 shares of special common stock converted into 5,056 shares of common stock 5 (5) --- --- --- --- 299,851 shares of treasury stock acquired --- --- --- --- --- (2,850) Translation adjust- ment --- --- --- --- (18) --- Unrealized appreci- ation in marketable securities --- --- --- --- 38 --- Net earnings --- --- --- 5,200 --- --- ------ --- ------- ------ ----- ------- Balance, September 30, 1995 $15,834 $785 $134,631 $11,666 $(3,165) $(30,901) ====== === ======= ====== ====== ======= Balance, June 29, 1996 $15,916 $758 $134,746 $23,966 $(3,193) $(64,454) 5,319 shares of special common stock converted into 5,319 shares of common stock 5 (5) --- --- --- --- Translation adjustment --- --- --- --- 335 --- Unrealized appreciation in marketable securities --- --- --- --- 97 --- Net earnings --- --- --- 6,500 --- --- ------ --- ------- ------ ------ ------- Balance, September 28, 1996 $15,921 $753 $134,746 $30,466 $(2,761) $(64,454) ====== === ======= ====== ====== =======
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Nortek, Inc. and Subsidiaries Condensed Consolidated Statement of Stockholders' Investment For the Nine Months Ended September 28, 1996 and September 30, 1995 (Dollar Amounts in Thousands) Cumulative Translation, Addi- Pension Special tional and Other Common Common Paid-in Retained Adjust- Treasury Stock Stock Capital Earnings ments Stock Balance, December 31, ----- ----- ------- ----------- -------- ----- ` (Unaudited) 1994 $15,814 $802 $134,627 $ 766 $(6,168) $(28,051) 16,920 shares of special common stock converted into 16,920 shares of common stock 17 (17) --- --- --- --- 3,600 shares of common stock issued upon exercise of stock options 3 --- 4 --- --- --- 300,055 shares of treasury stock acquired --- --- --- --- --- (2,850) Translation adjust- ment --- --- --- --- 481 --- Unrealized appreci- ation in marketable securities --- --- --- --- 2,522 --- Net earnings --- --- --- 10,900 --- --- ------- ----- -------- ------- -------- --------- Balance, September 30, 1995 $15,834 $785 $134,631 $11,666 $(3,165) $(30,901) ======= ===== ======== ======= ======== ========= Balance, December 31, 1995 $15,883 $774 $134,690 $15,766 $(2,742) $(33,080) 21,025 shares of special common stock converted into 21,025 shares of common stock 21 (21) --- --- --- --- 16,843 shares of common stock issued upon exercise of stock options 17 --- 56 --- --- --- 2,117,314 shares of treasury stock acquired --- --- --- --- --- (31,374) Translation adjust- ment --- --- --- --- 396 --- Unrealized decline in marketable securities --- --- --- --- (415) --- Net earnings --- --- --- 14,700 --- --- ------ --- ------- ------ ------ ------ Balance, September 28, 1996 $15,921 $753 $134,746 $30,466 $(2,761) $(64,454) ======= ===== ======== ======= ======== =========
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 28, 1996 AND September 30, 1995 (A) The unaudited condensed consolidated financial statements presented ("Unaudited Financial Statements") have been prepared by Nortek, Inc. and include all of its wholly-owned subsidiaries (the "Company") 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. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted, although, the Company believes that the disclosures included are adequate to make the information presented not misleading. Certain amounts in the Unaudited Financial Statements for the prior periods have been reclassified to conform to the presentation at September 28, 1996. It is suggested that these Unaudited Financial Statements be read in conjunction with the financial statements and the notes included in the Company's latest Annual Report on Form 10-K. (B) Acquisitions are accounted for as purchases and, accordingly, have been included in the Company's consolidated results of operations since the acquisition date. Purchase price allocations are subject to refinement until all pertinent information regarding the acquisitions is obtained. In the fourth quarter of 1995, several of the Company's wholly owned subsidiaries completed the acquisition of the assets, subject to certain liabilities, of Rangaire Company ("Rangaire"), all the capital stock of Best S.p.A. and related entities ("Best") and all the capital stock of Venmar Ventilation inc. ("Venmar") and accounted for these acquisitions under the purchase method of accounting.
The following table presents the approximate unaudited pro forma operating results of the Company for the third quarter and first nine months of 1995 and the year ended December 31, 1995, as adjusted for the pro forma effect of the acquisitions discussed above, assuming that these transactions occurred at January 1, 1995: Three Months Nine Months Ended Ended Year Ended Sept. 30, Sept. 30, Dec. 31, 1995 1995 1995 ------------ ---------- ---------- (Amounts in Thousands except per share amounts) Net sales $225,292 $669,269 $886,210 Operating earnings 11,715 34,136 47,355 Net earnings 5,400 10,800 15,100 Fully diluted net earnings per share $ .43 $ .85 $ 1.20
NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 1996 AND September 30, 1995 (Continued) In computing the pro forma results, net earnings have been reduced by net interest income on the aggregate cash portion of the purchase price of such acquisitions at the historical rates earned by the Company and by interest expense on indebtedness incurred in connection with the acquisitions, net of the tax effect. Earnings have also been reduced by amortization of goodwill and reflect net adjustments to depreciation expense, as a result of an increase to estimated fair market value of property and equipment. The pro forma information presented does not purport to be indicative of the results which would have been reported if these transactions had occurred on January 1, 1995, or which may be reported in the future. (C) On January 1, 1996, the Company adopted the accounting requirements of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The statement also requires that certain long-lived assets and identifiable intangibles that are to be disposed, be reported at the lower of the carrying amount or fair value less cost to sell. The application of SFAS No. 121 did not have a significant impact on the Company's results of operations or financial condition. (D) In December 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Stock-Based Compensation," which became effective for fiscal years beginning after December 15, 1995. SFAS No. 123 requires that employee stock-based compensation be either recorded or disclosed at its fair value. Management will continue to account for stock-based compensation under Accounting Principles Board No. 25 and will not adopt the new accounting provisions for stock-based compensation under SFAS No. 123, but will include the additional required disclosures, as necessary, in the Company's consolidated financial statements for the year ended December 31, 1996. (E) At September 28, 1996 and December 31, 1995, the reduction in the Company's stockholders' investment for gross unrealized losses was approximately $825,000 and $410,000, respectively. At September 28, 1996, there were no gross unrealized gains on the Company's marketable securities. NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 1996 AND September 30, 1995 (Continued) In the second quarter of 1995, the Company recorded a pre-tax loss of approximately $200,000 ($.02 per share, net of tax) on the sale of marketable securities. In the third quarter of 1995, the Company sold its investment in the preferred stock of a subsidiary previously sold, which resulted in a pre-tax gain of approximately $2,200,000 ($.17 per share, net of tax).
(F) The tax effect of temporary differences which gave rise to significant portions of deferred income tax assets and liabilities as of September 28, 1996 and December 31, 1995 is as follows: Sept. 28, Dec. 31, 1996 1995 ---- ---- (Amounts in Thousands) U. S. Federal Prepaid (Deferred) Income Tax Assets Arising From: Accounts receivable $ 1,579 $ 1,425 Inventory (397) (577) Insurance reserves 5,990 6,036 Other reserves, liabilities and assets, net 12,228 12,216 ------ ------ $19,400 $19,100 ====== ====== Deferred (Prepaid) Income Tax Liabilities Arising From: Property and equipment, net $15,522 $15,233 Prepaid pension assets 1,049 1,323 Insurance reserves (273) (273) Other reserves, liabilities and assets, net 7,373 8,797 Capital loss carryforward (7,313) (7,260) Other, net (1,741) (1,658) Valuation allowances 10,579 11,618 ------ ------ $25,196 $27,780 ====== ======
At September 28, 1996, the Company has a capital loss carryforward of approximately $20,893,000, of which approximately $17,500,000 expires in the year 1997. The Company has provided a valuation allowance equal to the tax effect of capital loss carryforwards and certain other tax assets, since realization of these tax assets cannot be reasonably assured. At September 28, 1996, the Company has approximately $1,271,000 of net U. S. Federal prepaid income tax assets which are expected to be realized through future operating earnings. NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 1996 AND September 30, 1995 (Continued)
The table below reconciles the federal statutory income tax rate to the effective tax rate from continuing operations of approximately 40.9% and 34.2% in the third quarter of 1996 and 1995, respectively and 39% and 40.4% in the first nine months of 1996 and 1995, respectively. Three Nine Months Ended Months Ended ------------ ------------ Sept. 28, Sept. 30, Sept. 28, Sept. 30, 1996 1995 1996 1995 ---- ---- ---- ---- (Amounts in Thousands) Provision for income taxes at the federal statutory rate $3,850 $2,765 $8,435 $6,405 Net change from statutory rate: State taxes, net of federal tax effect 293 195 780 585 Non-deductible amortization for tax purposes 278 184 800 553 Other non-deductible items 81 163 200 243 Change in valuation reserve 199 (730) (549) (660) Product development tax credit from foreign operations (90) --- (314) --- Tax effect on foreign income (111) 73 48 224 Other, net --- 50 --- 50 ----- ----- ----- ----- Provision for income taxes from continuing operations $4,500 $2,700 $9,400 $7,400 ===== ===== ===== =====
(G) On April 26, 1996, the Company purchased 1,189,809 shares of its common stock, or approximately 10.6% of its outstanding shares, from three of its directors, who also resigned from the Company's Board of Directors, for approximately $20,200,000. The Company accounted for such share purchases as Treasury Stock. From the date the Company authorized a stock purchase program on November 16, 1995, through September 28, 1996 the Company purchased 2,301,009 shares of its Common Stock for approximately $33,238,197 in cash, in negotiated and open market transactions. Had these shares been purchased as of January 1, 1995, unaudited pro forma net earnings and fully diluted net earnings per share would have been: NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 1996 AND September 30, 1995 (Continued) Year Three Months Ended Nine Months Ended Ended Sept. 28, Sept. 30, Sept. 28, Sept. 30, Dec. 31, 1996 1995 1996 1995 1995 ---- ---- ---- ---- ---- (Amounts in Thousands except per share amounts) Net Earnings $6,500 $4,900 $14,400 $10,100 $13,900 ===== ===== ====== ====== ====== Fully diluted net earnings per share $ .64 $ .48 $ 1.41 $ .96 $ 1.36 ===== ===== ====== ====== ======
On October 25, 1996, the Board of Directors of Nortek, Inc. authorized the repurchase of up to 500,000 shares of the Company's Common Stock in open-market or negotiated transactions subject to market conditions and cash availability. (H) At September 28, 1996, approximately $6,021,270 was available for the payment of cash dividends or stock payments under the terms of the Company's Indenture governing the 9 7/8% Notes. (I) Net earnings per share amounts have been computed using the weighted average number of common and common equivalent shares outstanding during each period. (J) On April 1, 1996, the Company extended and amended its shareholder rights plan to March 31, 2006. Under the amended plan, each right previously issued under the plan in effect to date, or subsequently issued under the amended and restated plan, entitles shareholders to buy 1/100 of a share of a new series of preferred stock of Nortek at an exercise price of $72 per share, subject to adjustments for stock dividends, splits and similar events. The rights, that are not currently exercisable, are attached to each share of Common Stock and may be redeemed by the Directors at $.01 per share at any time. After a shareholder acquires beneficial ownership of 17% or more of the Company's Common Stock and Special Common Stock, the rights will trade separately and become exercisable entitling a rights holder to acquire additional shares of the Company's Common Stock having a market value equal to twice the amount of the exercise price of the right. In addition, after a person or group ("Acquiring Company") commences a tender offer or announces an intention to acquire 30% or more of the Company's Common Stock and Special Common Stock, the rights will trade separately and, under certain circumstances, will permit each rights holder to acquire common stock of the Acquiring Company, having a market value equal to twice the amount of the exercise price of the right. NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 1996 AND September 30, 1995 (Continued) (K) The accompanying unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 1995 includes approximately $2,874,000 of cash proceeds from the sale of the preferred stock of a subsidiary previously sold (see Note E) and approximately $1,745,000 of cash paid relating to a business sold. Significant unaudited non-cash financing and investing activities excluded from the accompanying unaudited condensed consolidated statement of cash flows include a decrease of approximately $415,000 in the nine months ended September 28, 1996 and an increase of approximately $2,522,000 in the first nine months of 1995 in the approximate market price of marketable securities available for sale. Depreciation and amortization expense included in the Company's unaudited condensed consolidated statement of cash flows for the nine months ended September 28, 1996 and September 30, 1995, includes approximately $1,000,000 and approximately $800,000, respectively, and approximately $350,000 and approximately $300,000 for the third quarter of 1996 and 1995, respectively, of amortization of deferred debt expense and debt discount, which is recorded as interest expense in the accompanying unaudited condensed consolidated statement of operations. NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 The Company is a diversified manufacturer of residential and commercial building products, operating within three principal product groups: the Residential Building Products Group; the Air Conditioning and Heating Products Group; and the Plumbing Products Group. Through these product groups, the Company manufactures and sells, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction, manufactured housing, and the do-it-yourself and professional remodeling and renovation markets. During the fourth quarter of 1995, the Company acquired three businesses, which are included in the Residential Building Products Group, and accounted for these acquisitions under the purchase method of accounting. Accordingly, the results of such acquisitions are included in the Company's consolidated results since the date of acquisition. (See Liquidity and Capital Resources and Note B of the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere herein.) Results of Operations
The tables below and on the next page set forth, for the periods presented, (a) certain unaudited consolidated operating results, (b) the change in the amount and the percentage change of such results as compared to the prior comparable period, (c) the percentage which such results bears to net sales and (d) the change of such percentages as compared to the prior comparable period. The results of operations for the third quarter ended September 28, 1996 are not necessarily indicative of the results of operations to be expected for any other interim period or the full year. Change in the Third Quarter Ended Third Quarter 1996 ------------------- Sept. 28, Sept. 30, as Compared to 1995 1996 1995 $ % ---- ---- ----- ----- (Dollar amounts in millions) Net sales $248.2 $193.6 54.6 28.2% Cost of products sold 181.8 143.9 (37.9) (26.3) Selling, general and administrative expense 49.4 39.6 (9.8) (24.7) Operating earnings 17.0 10.1 6.9 68.3 Interest expense (7.3) (5.9) (1.4) (23.7) Interest income 1.3 1.5 (.2) (13.3) Gain on sale of investment securities --- 2.2 (2.2) (100.0) Earnings before provision for income taxes 11.0 7.9 3.1 39.2 Provision for income taxes 4.5 2.7 (1.8) (66.7) ----- ----- --- ----- Net earnings $ 6.5 $ 5.2 1.3 25.0% ===== ===== ==== =====
NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued)
Change in Percentage of Net Sales Percentage Third Quarter Ended for the Third Sept. 28, Sept. 30, Quarter 1996 1996 1995 as compared to 1995 ---- ---- ------------------- Net sales 100.0% 100.0% --- Cost of products sold 73.3 74.3 1.0 Selling, general and administrative expense 19.9 20.5 .6 Operating earnings 6.8 5.2 1.6 Interest expense (2.9) (3.0) .1 Interest income .5 .8 (.3) Gain on sale of investment securities --- 1.1 (1.1) Earnings before provision for income taxes 4.4 4.1 .3 Provision for income taxes 1.8 1.4 (.4) ---- ---- --- Net earnings 2.6 2.7 (.1) ==== ==== ===
The tables below and on the next page set forth, for the periods presented, (a) certain unaudited consolidated operating results, (b) the change in the amount and the percentage change of such results as compared to the prior comparable period, (c) the percentage which such results bears to net sales and (d) the change of such percentages as compared to the prior comparable period. The results of operations for the nine months ended September 28, 1996 are not necessarily indicative of the results of operations to be expected for any other interim period or the full year. Change in the Nine Months Ended Nine Months 1996 Sept. 28, Sept. 30, as Compared to 1995 1996 1995 $ % ---- ---- ----- ---- (Dollar amounts in millions) Net sales $729.4 $572.5 156.9 27.4% Cost of products sold 539.0 424.0 (115.0) (27.1) Selling, general and administrative expense 147.6 119.2 (28.4) (23.8) Operating earnings 42.8 29.3 13.5 46.1 Interest expense (22.8) (17.8) (5.0) (28.1) Interest income 4.1 4.8 (.7) (14.6) Net gain on investment and marketable securities --- 2.0 (2.0) (100.0) Earnings before provision for income taxes 24.1 18.3 5.8 31.7 Provision for income taxes 9.4 7.4 (2.0) (27.0) ----- ----- ---- ----- Net earnings $ 14.7 $ 10.9 $ 3.8 34.9% ===== ===== ==== =====
NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued)
Change in Percentage of Net Sales Percentage Nine Months Ended for the Nine Sept. 28, Sept. 30, Months 1996 as 1996 1995 Compared to 1995 ---- ---- ---------------- Net sales 100.0% 100.0% --- Cost of products sold 73.9 74.1 .2 Selling, general and administrative expense 20.2 20.8 .6 Operating earnings 5.9 5.1 .8 Interest expense (3.1) (3.1) --- Interest income .6 .8 (.2) Net gain on investment and marketable securities --- .4 (.4) Earnings before provision for income taxes 3.4 3.2 .2 Provision for income taxes 1.0 1.3 .3 ---- ----- --- Net earnings 2.4% 1.9 .5 ==== ===== ===
The following table presents the net sales for the Company's principal product groups for the third quarter and nine months ended September 28, 1996 as compared to the third quarter and nine months ended September 30, 1995 and the amount and the percentage change of such results as compared to the prior comparable period. The results of operations for the third quarter and first nine months are not necessarily indicative of the results of operations to be expected for any other interim period or the full year. Third Quarter Ended --------------------------------------- Sept. 28, Sept. 30, Increase ---------------- 1996 1995 $ % ---- ---- ----- ------ (000's omitted) Net Sales: Residential Building Products $102,900 $ 64,518 $38,382 59.5% Air Conditioning and Heating Products 110,042 95,707 14,335 15.0 Plumbing Products 35,285 33,342 1,943 5.8 ------- ------- ----- ---- Total $248,227 $193,567 $54,660 28.2% ======= ======= ====== ====
NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued)
Nine Months Ended --------------------------------------- Sept. 28, Sept. 30, Increase ----------------- 1996 1995 $ % Net Sales: ---- ---- ----- ----- (000's omitted) Residential Building Products $310,404 $194,597 $115,807 59.5% Air Conditioning and Heating Products 313,369 277,848 35,521 12.8 Plumbing Products 105,674 100,137 5,537 5.5 ------- ------- ------- ---- Total $729,447 $572,582 $156,865 27.4% ======= ======= ======= ====
Operating Results Net sales increased approximately $54,600,000, or approximately 28.2%, and increased approximately $156,900,000, or approximately 27.4%, for the third quarter and the first nine months of 1996, respectively, as compared to 1995. The Residential Building Products Group net sales increased principally as a result of acquisitions in the fourth quarter of 1995, which contributed approximately $31,900,000 and $103,600,000 in the third quarter and first nine months, respectively. Shipments of new and replacement air conditioning and heating ("HVAC") products to manufactured housing customers and increased sales levels of commercial and industrial HVAC products were the primary reasons for increased sales in the Air Conditioning and Heating Products Group. Modest sales price increases in certain product lines of the Residential Building Products Group, were also a factor, and were partially offset by lower sales prices of certain products in the Plumbing Products Group and certain residential HVAC products in the Air Conditioning and Heating Products Group. Sales levels in the third quarter of 1996 were lower than the second quarter of 1996, in part, as a result of an extended shutdown period for vacations by the Company's European subsidiaries, which is common practice in Europe, during which time there was limited sales or manufacturing activity. Cost of products sold as a percentage of net sales decreased from approximately 74.3% in the third quarter of 1995 to approximately 73.3% in the third quarter of 1996, and decreased from approximately 74.1% in the first nine months of 1995 to approximately 73.9% in the first nine months of 1996. These decreases in the percentages principally resulted from a reduction in cost in the third quarter and the first nine months of 1996 of certain raw materials and components compared to costs in effect in 1995 and decreased overhead costs as a percentage of sales in the Residential Building Products and Air Conditioning and Heating Products Groups due to increased volume and improved efficiency. A reduction in unit costs of certain residential HVAC products in the Air Conditioning and Heating Products Group was also a factor in the decreases in the percentages. These decreases were partially offset by the 1995 acquisitions, which have a higher level of NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued) cost of sales to net sales than the overall group of businesses owned prior to the acquisitions, the effect of development and introduction of new products in Europe and by increased direct labor and overhead costs in the Plumbing Products Group. Overall, changes in cost of products sold as a percentage of net sales for one period as compared to another period may reflect the effect of a number of factors, including changes in the relative mix of products sold, the effect of changes in sales prices, the unit cost of products sold and changes in productivity levels. Selling, general and administrative expense as a percentage of net sales decreased from approximately 20.5% in the third quarter of 1995 to approximately 19.9% in the third quarter of 1996 and from approximately 20.8% in the first nine months of 1995 to approximately 20.2% in the first nine months of 1996. The decrease in the third quarter and first nine months is due principally to the 1995 acquisitions which have a lower level of selling, general and administrative expense to net sales than the overall group of businesses owned prior to the acquisitions and increased sales levels without a proportionate increase in expense in all three of the Company's product groups, partially offset by the effect of limited sales activity during an extended shutdown period in the third quarter by the Company's European subsidiaries without a proportionate reduction in expense. Segment earnings were approximately $18,800,000 for the third quarter of 1996, as compared to approximately $11,700,000 for the third quarter of 1995, and approximately $51,700,000 for the first nine months of 1996 as compared to approximately $35,800,000 for the first nine months of 1995. Fourth quarter 1995 acquisitions contributed approximately $600,000 to segment earnings in the third quarter of 1996 and approximately $5,600,000 for the first nine months of 1996. Segment earnings have been reduced by depreciation and amortization expense of approximately $5,400,000 and approximately $4,400,000 for the third quarter of 1996 and 1995, respectively, and by approximately $16,500,000 and approximately $13,400,000 for the first nine months of 1996 and 1995, respectively. Acquisitions contributed approximately $1,100,000 and approximately $3,500,000 of the increase in depreciation and amortization expense in the third quarter and first nine months of 1996, respectively. NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued) Foreign segment earnings, consisting primarily of the results of operations of the Company's Canadian and European subsidiaries, which manufacture built-in ventilating products, decreased to approximately 3.7% of segment earnings in the third quarter of 1996 from approximately 7.0% of such earnings in the third quarter of 1995 and increased to approximately 10.2% of segment earnings in the first nine months of 1996 from approximately 6.0% of such earnings in the first nine months of 1995. The decline in the third quarter 1996 was primarily attributable to an approximate 67% increase in domestic segment earnings in 1996, as compared to a 15% decrease in foreign earnings and a decline in the segment earnings of the Company's European subsidiaries due to the extended shutdown period previously discussed. This decrease was partially offset by an improvement in the third quarter earnings in Canada due, in part, to a 1995 acquisition. The increase in the first nine months was primarily attributable to earnings of the Company's 1995 European and Canadian acquisitions. Sales and earnings derived from the international market are subject to the risks of currency fluctuations. Operating earnings in the third quarter of 1996 increased approximately $6,900,000, or approximately 68.3%, as compared to the third quarter of 1995 and increased approximately $13,500,000, or approximately 46.1%, for the first nine months of 1996 as compared to 1995, primarily due to the factors previously discussed. Interest expense in the third quarter of 1996 increased approximately $1,400,000, or approximately 23.7%, as compared to the third quarter of 1995, and increased approximately $5,000,000, or approximately 28.1%, as compared to the first nine months of 1995, primarily as a result of higher borrowings resulting from the 1995 acquisitions including existing short- term working capital borrowings of the acquired subsidiaries. Interest income in the third quarter of 1996 decreased approximately $200,000, or approximately 13.3%, as compared to the third quarter of 1995, and decreased approximately $700,000, or approximately 14.6%, as compared to the first nine months of 1995, principally due to lower average invested balances of short-term investments and marketable securities and slightly lower yields. NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued) The provision for income taxes was approximately $4,500,000 for the third quarter of 1996, as compared to approximately $2,700,000 for the third quarter of 1995 and was approximately $9,400,000 for the first nine months of 1996, as compared to approximately $7,400,000 for the first nine months of 1995. The provision in all periods except the third quarter of 1996 reflects the reversal of tax valuation reserves no longer required, including $670,000 in the third quarter of 1995 relating to the $2,200,000 gain on investment securities. The income tax rates principally differed from the United States Federal statutory rate of 35%, as a result of state income tax provisions, nondeductible amortization expense (for tax purposes), the change in tax valuation reserves, the effect of foreign income tax on foreign source income, in all periods and in 1996 from the effect of product development tax credits from foreign operations. (See Note F of the Notes to the Unaudited Financial Statements included elsewhere herein.) Liquidity and Capital Resources - ------------------------------- The Company's primary sources of liquidity in 1996 and 1995 have been funds provided by subsidiary operations and unrestricted short-term investments and marketable securities. Unrestricted cash, investments and marketable securities were approximately $87,676,000 at September 28, 1996 as compared to $103,313,000 at December 31, 1995. The Company's investment in marketable securities at September 28, 1996 consisted primarily of investments in United States Treasury securities, certificates of deposit and bank notes and at September 28, 1996, approximately $9,377,000 of the Company's cash and investments were pledged as collateral for insurance and other requirements and were classified as restricted in current assets in the Company's accompanying unaudited condensed consolidated balance sheet. On November 16, 1995, the Company's Board of Directors authorized a program to purchase shares of the Company's Common Stock, subject to market conditions and cash availability. On April 26, 1996, the Company announced the purchase of 1,189,809 shares of its common stock, or approximately 10.6% of its outstanding shares, from three of its directors, who also resigned from the Company's Board of Directors, for approximately $20,200,000. From November 16, 1995 to September 28, 1996, the Company purchased 2,301,009 shares of its Common Stock for approximately $33,238,197. On October 25, 1996, the Board of Directors of Nortek, Inc. authorized the repurchase of up to 500,000 shares of the Company's Common Stock in open-market or negotiated transactions subject to market conditions and cash availability. (See below and Note G of the Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere herein.) NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued) At September 28, 1996, approximately $6,021,270 was available for the payment of cash dividends or stock payments under the terms of the Company's indenture governing the 9 7/8% Notes. The Company's working capital and current ratio decreased from approximately $160,753,000 and 1.7:1, respectively, to approximately $145,698,000 and 1.6:1, respectively, between December 31, 1995 and September 28, 1996, principally as a result of purchases of the Company's common stock described above and the factors described below. Working capital included approximately $103,313,000 at December 31, 1995 and approximately $87,676,000 at September 28, 1996 of unrestricted cash, investments and marketable securities. Accounts receivable increased approximately $22,617,000, or approximately 19.2%, between December 31, 1995 and September 28, 1996, while net sales increased approximately 21.9% in the third quarter of 1996 as compared to the fourth quarter of 1995. The increase in accounts receivable is principally as a result of increased net sales. The rate of change in accounts receivable in certain periods may be different than the rate of change in sales in such periods principally due to the timing of net sales. Significant increases or decreases in net sales near the end of any period generally result in significant changes in the amount of accounts receivable on the date of the balance sheet at the end of such period, as was the situation on September 28, 1996 as compared to December 31, 1995. The Company has not experienced any significant changes in credit terms, collection efforts, credit utilization or delinquency in accounts receivable in 1995 or 1996. Inventories decreased approximately $2,807,000 or approximately 2.6%, between December 31, 1995 and September 28, 1996. Accounts payable increased approximately $20,372,000 or approximately 27.9% between December 31, 1995 and September 28, 1996. NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued)
Unrestricted cash and investments decreased approximately $23,231,000 from December 31, 1995 to September 28, 1996, principally as a result of the following: Condensed Consolidated Cash Flows ---------- Operating Activities-- Cash flow from operations, net $ 31,383,000 Increase in accounts receivable, net (22,084,000) Decrease in inventories 3,702,000 Increase in trade accounts payable 19,051,000 Decrease in accrued expenses and taxes (914,000) Investing Activities-- Purchase of marketable securities (45,903,000) Proceeds from the sale of marketable securities 37,905,000 Capital expenditures (13,576,000) Financing Activities-- Increase in borrowings 11,488,000 Payment of borrowings (12,143,000) Purchase of Nortek Common and Special Common Stock (31,738,000) Other, net (402,000) ----------- $(23,231,000) ===========
The Company's debt-to-equity ratio increased from approximately 2.2:1 at December 31, 1995 to 2.5:1 at September 28, 1996, primarily as a result of the effect of the purchase of the Company's Common and Special Common Stock (see Note G of the Notes to the Unaudited Condensed Consolidated Financial Statements) and a slight net increase in borrowings, partially offset by net earnings for the first nine months of 1996. (See the Company's Unaudited Condensed Consolidated Statement of Stockholders' Investment included elsewhere herein.) At September 28, 1996, the Company has approximately $1,271,000 of net U. S. Federal prepaid income tax assets which are expected to be realized through future operating earnings. (See Note F of Notes to the Unaudited Condensed Consolidated Financial Statements.) On April 1, 1996, the Company extended and amended its shareholder rights plan to March 31, 2006. Under the amended plan, each right previously issued under the plan in effect to date, or subsequently issued under the amended and restated plan, entitles shareholders to buy 1/100 of a share of a new series of preferred stock of Nortek at an exercise price of $72 per share, subject to adjustments for stock dividends, splits and similar events. (See Note J of the Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere herein.) NORTEK, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (Continued) The Company believes that its growth will be generated largely by internal growth in each of its product groups, augmented by strategic acquisitions. The Company regularly evaluates potential acquisitions which would increase or expand the market penetration of, or otherwise complement, its current product lines. When used in this discussion, the words "believes," "anticipates," and "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, over which the Company has no control, which could cause actual results to differ materially from those projected. These risks and uncertainties include increases in raw material costs (including, among others, steel, copper, packaging material, plastics, resins and aluminum) and purchased component costs, the level of domestic and foreign construction and remodeling activity affecting residential and commercial markets, interest rates, inflation, consumer spending levels, operating in international economies, the rate of sales growth, price and product competition, new product introduction, material shortages and product liability claims. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date thereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company, in this report, as well as the Company's periodic reports on Forms 10-K, 10- Q and 8-K filed with the Securities and Exchange Commission. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 3.3 By-laws of Nortek, Inc. (as amended through September 19, 1996) (filed herewith). 11.1 Calculation of shares used in determining earnings per share (filed herewith). 27. Financial Data Schedule (filed herewith). (b) No reports on Form 8-K were filed by the Registrant during the period. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTEK, INC. (Registrant) /s/ Almon C. Hall --------------------------------- Almon C. Hall, Vice President and Controller and Chief Accounting Officer November 5, 1996 - ------------------------------ (Date) EX-11 2
EXHIBIT 11.1 (Page 1 of 2) NORTEK, INC. AND SUBSIDIARIES CALCULATION OF SHARES USED IN DETERMINING EARNINGS PER SHARE For the Three Months Ended -------------------------- Sept. 28, Sept. 30, 1996 1995 ---- ---- Calculation of the number of shares to be used in computing primary earnings per share: Weighted average common and special common shares issued during the period 16,674,636 16,844,777 Less average common and special common shares held in the Treasury (6,700,804) (4,366,666) ---------- ---------- Weighted average number of common and special common shares outstanding during the period 9,973,832 12,478,111 Dilutive effect of stock options considered common stock equivalents computed under the treasury stock method using the average price during the period 188,061 100,658 ---------- ---------- Weighted average number of common and common equivalent shares outstanding during the period 10,161,893 12,578,769 ========== ========== Calculation of the number of shares to be used in computing fully diluted earnings per share: Weighted average number of common and special common shares outstanding during the period 9,973,832 12,478,111 Dilutive effect of stock options considered common stock equivalents computed under the treasury stock method using the greater of the price at the end of the period or the average price during the period 195,067 103,421 ---------- ---------- 10,168,899 12,581,532 ========== ==========
EXHIBIT 11.1 (Page 2 of 2) NORTEK, INC. AND SUBSIDIARIES CALCULATION OF SHARES USED IN DETERMINING EARNINGS PER SHARE For the Nine Months Ended -------------------------- Sept. 28, Sept. 30, 1996 1995 ---- ---- Calculation of the number of shares to be used in computing primary earnings per share: Weighted average common and special common shares issued during the period 17,362,207 16,893,214 Less average common and special common shares held in the Treasury (6,700,804) (4,366,666) ---------- ---------- Weighted average number of common and special common shares outstanding during the period 10,661,403 12,526,548 Dilutive effect of stock options considered common stock equivalents computed under the treasury stock method using the average price during the period 183,172 136,733 ---------- ---------- Weighted average number of common and common equivalent shares outstanding during the period 10,844,575 12,663,281 ========== ========== Calculation of the number of shares to be used in computing fully diluted earnings per share: Weighted average number of common and special common shares outstanding during the period 10,661,403 12,526,548 Dilutive effect of stock options considered common stock equivalents computed under the treasury stock method using the greater of the price at the end of the period or the average price during the period 198,046 137,654 ---------- ---------- 10,859,448 12,664,202 ========== ==========
EX-27 3
5 1000 9-MOS DEC-31-1996 SEP-28-1996 42,424 54,629 145,848 5,214 107,245 382,604 245,932 107,653 632,736 236,906 243,578 0 0 16,674 97,997 632,736 729,447 729,447 539,018 539,018 0 0 22,747 24,100 9,400 14,700 0 0 0 14,700 1.35 1.35
EX-3 4 As Amended through EXHIBIT 3.3 September 19, 1996 BY-LAWS of NORTEK, INC. SECTION 1. LAW, CERTIFICATE OF INCORPORATION AND BY- LAWS 1.1. These by-laws are subject to the certificate of incorporation of the corporation. In these by-laws, references to law, the certificate of incorporation and by-laws mean the law, the provisions of the certificate of incorporation and the by-laws as from time to time in effect. SECTION 2. STOCKHOLDERS 2.1. Annual Meeting. The annual meeting of stockholders shall be held at 11:00 A.M. on the third Wednesday in July in each year, unless that day be a legal holiday at the place where the meeting is to be held, in which case the meeting shall be held at the same hour on the next succeeding day not a legal holiday, or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect a board of directors and transact such other business as may be required by law or these by-laws or as may properly come before the meeting. 2.2 Special Meeting in Place of Annual Meeting. If the election for directors shall not be held on the day designated by these by-laws, the directors shall cause the election to be held as soon thereafter as convenient, and to that end, if the annual meeting is omitted on the day herein provided therefor or if the election of directors shall not be held thereat, a special meeting of the stockholders may be held in place of such omitted meeting or election, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting, and in such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called, and the purposes thereof shall be specified in the call, as provided in Section 2.3. 2.3. Special Meetings. A special meeting of the stockholders may be called at any time by the chairman of the board, if any, the president or by the board of directors. 2.4. Place of Meeting. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such place within or without the State of Delaware as may be determined from time to time by the chairman of the board, if any, the president or the board of directors. Any adjourned session of any meeting of the stockholders shall be held at the place designated in the vote of adjournment. 2.5. Notice of Meetings. Except as otherwise provided by law, a written notice of each meeting of stockholders stating the place, day and hour thereof and, in the case of a special meeting, the purposes for which the meeting is called, shall be given not less then ten nor more than sixty days before the meeting, to each stockholder entitled to vote thereat, and to each stockholder who, by law, by the certificate of incorporation or by these by-laws, is entitled to notice, by leaving such notice with him or at his residence or usual place of business, or by depositing it in the United States mail, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the corporation. Such notice shall be given by the secretary, or by an officer or person designated by the board of directors, or in the case of a special meeting by the officer calling the meeting. As to any adjourned session of any meeting of stockholders, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment was taken except that if the adjournment is for more than thirty days or if after the adjournment a new record date is set for the adjourned session, notice of any such adjourned session of the meeting shall be given in the manner heretofore described. No notice of any meeting of stockholders or any adjourned session thereof need be given to a stockholder if a written waiver of notice, executed before or after the meeting or such adjourned session by such stockholder, is filed with the records of the meeting or if the stockholder attends such meeting without objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders or any adjourned session thereof need be specified in any written waiver of notice. 2.6. Quorum of Stockholders. At any meeting of the stockholders, whether the same be an original or an adjourned session, a quorum shall consist of a majority in interest of all stock issued and outstanding and entitled to vote at the meeting, provided that, except as may otherwise be provided in the certificate of incorporation, when a specified item of business is required to be voted on by a class or series, voting as a class, the holders of one-third of the shares of such class or series shall constitute a quorum for the transaction of such specified item of business. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present. 2.7. Action by Vote. When a quorum is present at any meeting, whether the same be an original or an adjourned session, a plurality of the votes properly cast for election to any office shall elect to such office and a majority of the votes properly cast upon any question other than an election to an office shall decide the question, except when a larger vote is required by law, by the certificate of incorporation or by these by-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. Every reference in these by-laws or in the certificate of incorporation to a majority or other proportion of the stock or the shares of the corporation shall refer to such majority or other proportion of the votes of such stock or shares. 2.8. Action without Meetings. Unless otherwise provided in the certificate of incorporation, any action required or permitted to be taken by stockholders for or in connection with any corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of all of the shares of outstanding stock of the corporation having power to vote. If action is taken by unanimous consent of stockholders, the writing or writings comprising such unanimous consent shall be filed with the records of the meetings of stockholders. In the event that the action which is consented to is such as would have required the filing of a certificate under any of the provisions of the General Corporation Law of Delaware, if such action had been voted upon by the stockholders at a meeting thereof, the certificate filed under such provision shall state that written consent has been given under Section 228 of said General Corporation Law, in lieu of stating that the stockholders have voted upon the corporate action in question, if such last mentioned statement is required thereby. 2.9. Proxy Representation. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. The authorization of a proxy may but need not be limited to specified action, provided, however, that if a proxy limits its authorization to a meeting or meetings of stockholders, unless otherwise specifically provided such proxy shall entitle the holder thereof to vote at any adjourned session but shall not be valid after the final adjournment thereof. 2.10. Inspectors. The directors or the person presiding at the meeting may, but need not, appoint one or more inspectors of election and any substitute inspectors to act at the meeting or any adjournment thereof. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. 2.11. List of Stockholders. The secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in his name. The stock ledger shall be the only evidence as to who are stockholders entitled to examine such list or to vote in person or by proxy at such meeting. SECTION 3. BOARD OF DIRECTORS 3.1. Number. The number of directors which shall constitute the whole board shall not be less than three. The number of directors of the corporation at any time shall be the number of directors fixed by resolution adopted by the board of directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. 3.2. Classification, Election and Tenure. The directors, other than those who may be elected by the holders of any class or series of preference stock voting separately by class or series, shall be classified, with respect to the duration of the term for which they severally hold office, into three classes, designated Class I, Class II, and Class III, which shall be as nearly equal in number as possible and as provided by resolution of the board of directors in connection with such election. Each initial director in Class I shall hold office for a term expiring at the 1990 annual meeting of stockholders; each initial director of Class II shall hold office for a term expiring at the 1991 annual meeting of stockholders; and each initial director of Class III shall hold office for a term expiring at the 1992 annual meeting of stockholders. Each director shall serve until his successor is duly elected and qualified or until his earlier death, resignation, removal or disqualification. At each annual meeting of stockholders following the 1989 annual meeting, the stockholders shall elect the successors to the class of directors whose term expires at that meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors have been duly elected and qualified or until their earlier death, resignation, removal or disqualification. The board of directors shall increase or decrease the number of directors in one or more classes as may be appropriate whenever it increases or decreases the number of directors pursuant to Section 3.1, in order to ensure that the three classes shall be as nearly equal in number as possible. 3.3. Powers and Qualifications. The business of the corporation shall be managed by or under the direction of the board of directors who shall have and may exercise all the powers of the corporation and do all such lawful acts and things as are not by law, the certificate of incorporation or these by-laws directed or required to be exercised or done by the stockholders. Directors need not be residents of the State of Delaware or stockholders of the corporation. No person shall be qualified for election as a director who has not reached the age of twenty-one years. 3.4. Nominations. Nominations of persons to be elected directors of the corporation, other than nominations submitted on behalf of the incumbent board of directors, must (a) be submitted in writing to the secretary or chief executive officer of the corporation not less than 30 days before the meeting of the stockholders at which such election is to be held; (b) be accompanied by a written statement, as to each such nominee, of his residence and business (if any) address, occupation (if any), date of birth, and record and beneficial holdings of the shares of the corporation; and (c) accompanied by a petition in support of such nomination signed by at least 100 record holders of share of capital stock of the corporation entitled to vote in elections of directors, holding in the aggregate not less than 1% of the shares of capital stock of the corporation entitled to vote in elections of directors outstanding as of the date such petition is submitted. 3.5. Vacancies. Vacancies and any newly created directorships resulting from any increase in the number of directors may be filled by vote of a majority of the directors then in office, although less than a quorum. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have resigned, shall have power to fill such vacancy or vacancies, the vote or action in writing thereon to take effect when such resignation or resignations shall become effective. The directors shall have and may exercise all their powers notwithstanding the existence of one or more vacancies in their number, subject to any requirements of law or of the certificate of incorporation or of these by-laws as to the number of directors required for a quorum or for any vote or other actions. 3.6. Executive and Other Committees of Directors. The board of directors, by resolution adopted by a majority of the full board of directors, may designate from among its members an executive committee and one or more other committees each of which, to the extent provided in the resolution or these by- laws, shall have and may exercise all the authority of the board of directors, but no such committee shall have the authority of the board of directors in reference to amending the certificate of incorporation, adopting a plan of merger or consolidation, recommending to the shareholders the sale, lease, exchange or other disposition of all or substantially all the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the stockholders a voluntary dissolution of the corporation or a revocation thereof, or amending these by-laws. Except as the board of directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the board of directors or such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these by-laws for the conduct of business of the board of directors. Each such committee shall serve at the pleasure of the board of directors. Such committees shall keep regular minutes or other records of their proceedings and report the same to the board of directors upon request. 3.7. Regular Meetings. Regular meetings of the board of directors may be held without call or notice at such places within or without the State of Delaware and at such times as the board may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent directors. A regular meeting of the directors may be held without call or notice immediately after and at the same place as the annual meeting of stockholders. 3.8. Special Meetings. Special meetings of the board of directors may be held at any time and at any place within or without the State of Delaware designated in the notice of the meeting, when called by the chairman of the board, if the meeting, when called by the chairman of the board, if any, the president, or by one-third or more in number of the directors, reasonable notice thereof being given to each director by the secretary or by the chairman of the board, if any, the president or any one of the directors calling the meeting. 3.9. Notice. It shall be reasonable and sufficient notice to a director to send notice by mail at least forty- eight hours or by telegram at least twenty-four hours before the meeting addressed to him at his usual or last known business or residence address or to give notice to him in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 3.10. Quorum. Except as may be otherwise provided by law, by the certificate of incorporation or by these by-laws, at any meeting of the directors a majority of the directors then in office shall constitute a quorum; a quorum shall not in any case be less than one-third of the total number of directors constituting the whole board. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. 3.11. Action by Vote. Except as may be otherwise provided by law, by the certificate of incorporation or by these by-laws, when a quorum is present at any meeting the vote of a majority of the directors present shall be the act of the board of directors. 3.12. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the board of directors or a committee thereof may be taken without a meeting if all the members of the board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the records of the meetings of the board or of such committee. Such consent shall be treated for all purposes as the act of the board or of such committee, as the case may be. 3.13. Participation in Meetings by Conference Telephone. Members of the board of directors, or any committee designated by such board, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other or by any other means permitted by law. Such participation shall constitute presence in person at such meeting. 3.14. Compensation. In the discretion of the board of directors, each director may be paid such fees for his services as director and be reimbursed for his reasonable expenses incurred in the performance of his duties as a director as the board of directors from time to time may determine. Nothing contained in this section shall be construed to preclude any director from serving the corporation in any other capacity and receiving reasonable compensation therefor. 3.15. Interested Directors and Officers. (a) No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the corporation's directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders. (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction. SECTION 4. OFFICERS AND AGENTS 4.1. Enumeration, Qualification. The officers of the corporation shall be a president, a treasurer, a secretary and such other officers, if any, as the board of directors from time to time may in its discretion elect or appoint including without limitation a chairman of the board, a vice chairman of the board, one or more vice presidents and a controller. The corporation may also have such agents, if any, as the board of directors from time to time may in its discretion choose. Any officer may be but none need be a director or stockholder. Any two or more offices may be held by the same person. Any officer may be required by the board of directors to secure the faithful performance of his duties to the corporation by giving bond in such amount and with sureties or otherwise as the board of directors may determine. 4.2. Powers. Subject to law, to the certificate of incorporation and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. 4.3. Election. The officers may be elected by the board of directors at the first meeting following the annual meeting of the stockholders or at any other time. At any time or from time to time the directors may delegate to any officer their power to elect or appoint any other officer or any agents. 4.4. Tenure. Each officer shall hold office until the first meeting of the board of directors following the next annual meeting of the stockholders and until his respective successor is chosen and qualified unless a shorter period shall have been specified by the terms of his election or appointment, or in each case until he sooner dies, resigns, is removed or becomes disqualified. Each agent shall retain his authority at the pleasure of the directors, or the officer by whom he was appointed or by the officer who then holds agent appointive power. 4.5. Chairman and Vice Chairman of the Board of Directors, President and Vice President. The chairman of the board, if any, and the vice chairman if any, shall have such duties and powers as shall be designated from time to time by the board of directors. If there is a chairman of the board, he shall preside at all meetings of the stockholders and of the board of directors at which he is present, except as otherwise voted by the board of directors. If there is no chairman of the board or in the absence of the chairman of the board, the president shall preside at all meetings of the stockholders and of the board of directors at which he is present, except as otherwise voted by the board of directors. The vice chairman, if any, shall upon the death or resignation of the chairman as a director or in the event the chairman becomes totally and permanently incapacitated and is unable to serve as a director, succeed to the office of the chairman of the board. If such chairman was also chief executive officer of the corporation, the vice chairman shall succeed to the office of chief executive officer as well. Unless the board of directors otherwise specifies, the chairman of the board, if any, shall be the chief executive officer and shall have direct charge of all business operations of the corporation, and subject to the control of the directors, shall have general supervision over the entire business of the corporation. If a chairman of the board is not elected, the president shall be the chief executive officer. The president shall have the duties and powers specified in these by-laws, shall be the chief operating officer if a chairman of the board is elected and is the chief executive officer, and shall have such other duties and powers as may be determined by the board of directors or by the chief executive officer. Any vice presidents shall have such duties and powers as shall be set forth in these by-laws or as shall be designated from time to time by the board of directors or by the chief executive officer. 4.6. Treasurer and Assistant Treasurers. Except as the board of directors shall otherwise determine, the treasurer shall be the chief financial officer of the corporation and shall be in charge of its funds and valuable papers, and shall have such other duties and powers as may be designated from time to time by the board of directors or by the president. If no controller is elected, the treasurer shall also have the duties and powers of the controller. Any assistant treasurers shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the treasurer. 4.7. Secretary and Assistant Secretaries. The secretary shall record all proceedings of the stockholders, of the board of directors and of committees of the board of directors in a book or series of books to be kept therefor and shall file therein all actions by written consent of stockholders or directors. In the absence of the secretary from any meeting, an assistant secretary, or if there be none or he is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed the secretary shall keep or cause to be kept the stock and transfer records of the corporation, which shall contain the names and record addresses of all stockholders and the number of shares registered in the name of each stockholder. He shall have such other duties and powers as may from time to time be designated by the board of directors or the president. Any assistant secretaries shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the secretary. 4.8. Compensation. The officers of the corporation shall receive such compensation as shall be affixed from time to time by the board of directors, except that the board of directors may delegate to any officer or officers the power to fix the compensation of any officer, except the chief executive officer of the corporation. No officer shall be prohibited from receiving such salary by reason of the fact that he is also a director of the corporation. SECTION 5. RESIGNATIONS AND REMOVALS 5.1. Any director or officer may resign at any time by delivering his resignation in writing to the chairman of the board, if any, the president, or the secretary or to a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time, and without in either case the necessity of its being accepted unless the resignation shall so state. Except as otherwise provided in the certificate of incorporation or these by-laws relating to the rights of the holders of any class or series of preference stock, voting separately by class or series, to elect directors under specified circumstances, any director or directors may be removed from office at any time, but only for cause and only by the affirmative vote, at any regular meeting or special meeting of the stockholders, of not less than two-thirds of the total number of votes of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, but only if notice of such proposal was contained in the notice of such meeting. Any vacancy in the board of directors resulting from any such removal may be filled by vote of a majority of the directors then in office, although less than a quorum, and any director or directors so chosen, shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified or until their earlier death, resignation or removal. The board of directors may at any time remove any officer either with or without cause. The board of directors may at any time terminate or modify the authority of any agent. No director or officer resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the corporation) no director or officer removed shall have any right to any compensation as such director or officer (but not excluding rights to indemnification provided in the certificate of incorporation or these by-laws) for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise; unless, in the case of a resignation, the directors, or, in the case of removal, the body acting on the removal, shall in their or its discretion provide for compensation. SECTION 6. VACANCIES If the office of the president or the treasurer or the secretary becomes vacant, the directors may elect a successor by vote of a majority of the directors then in office. If the office of any other officer becomes vacant, any person or body empowered to elect or appoint that officer may choose a successor. Each such successor shall hold office for the unexpired term, and in the case of the president, the treasurer and the secretary until his successor is chosen and qualified or in each case until he sooner dies, resigns, is removed or becomes disqualified. Any vacancy of a directorship shall be filled as specified in Section 3.5 of these by-laws. SECTION 7. CAPITAL STOCK 7.1. Stock Certificates. Each stockholder shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by him, in such form as shall, in conformity to law, the certificate of incorporation and the by-laws, be prescribed from time to time by the board of directors. Such certificate shall be signed by the chairman or vice chairman of the board, if any, or the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary. Any of or all the signatures on the certificate may be a facsimile. In case an officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the time of its issue. 7.2. Loss of Certificates. In the case of the alleged theft, loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms, including receipt of a bond sufficient to indemnify the corporation and its agents against any claim on account thereof, as the board of directors may prescribe. SECTION 8. TRANSFER OF SHARES OF STOCK 8.1. Transfer on Books. Subject to the restrictions, if any, stated or noted on the stock certificate, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the board of directors or the transfer agent of the corporation may reasonably require. Except as may be otherwise required by law, by the certificate of incorporation or by these by-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the Right to receive notice and to vote or to give any consent with respect thereto and to be held liable for such calls and assessments, if any, as may lawfully be made thereon, regardless of any transfer, pledge or other disposition of such stock until the shares have been properly transferred on the books of the corporation. It shall be the duty of each stockholder to notify the corporation of his post office address. 8.2. Record Date and Closings Transfer Books. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days (or such longer period as may be required by law) before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (a) The record date for determining stockholders entitled to notice of or to vote it a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. SECTION 9. INDEMNIFICATION 9.1. The corporation shall, to the maximum extent permitted from time to time under the law of the State of Delaware, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of this corporation or while a director or officer is or was serving at the request of this corporation as a director, officer, partner, trustee, fiduciary, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with the investigation, preparation in connection with such action, suit, proceeding or claim; provided, however, that the foregoing shall not require this corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person, other than an action to enforce indemnification rights. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any such person seeking indemnification under this Section 9.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. The corporation shall have the power to provide indemnification and advance expenses to any other person, including employees and agents of the corporation and stockholders purporting to act on behalf of the corporation, to the extent permitted by the law of the State of Delaware. SECTION 10. CORPORATE SEAL 10.1. Subject to alteration by the directors, the seal of the corporation shall consist of a flat-faced circular die with the word "Delaware" and the name of the corporation cut or engraved thereon, together with such other words, dates or images as may be approved from time to time by the directors. SECTION 11. EXECUTION OF PAPERS 11.1. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made, accepted or endorsed by the corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. SECTION 12. FISCAL YEAR 12.1. The fiscal year of the corporation shall end on the 31st day of December of each year, or such other date as may be fixed by the board of directors. SECTION 13. AMENDMENTS 13.1. Except as otherwise provided in the certificate of incorporation, and other than Section 3.4 hereof, these by- laws may be amended by the favorable vote of the holders of three-fourths of the shares of the corporation entitled to vote generally in the election of directors or by a majority of a quorum of the board of directors, in either case at any regular or special meeting; any such amendment by the board of directors may be changed by the favorable vote of the holders of three-fourths of the shares of the corporation entitled to vote generally in the election of directors. Section 3.4 hereof may not be amended or rescinded except by the affirmative vote of the holders of not less than two-thirds of the outstanding shares of the corporation entitled to vote generally in the election of directors, at any regular or special meeting, but only if notice of the proposed alteration or amendment was contained in the notice of such meeting. SECTION 14. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS 14.1 The provisions of Section 203 of the Delaware General Corporation Law shall not apply to the corporation. -----END PRIVACY-ENHANCED MESSAGE-----