-----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, I+WvVhOzzfYRNovYQTVAGJ3TjP1HcdIW53zAnHNbRhfGZCxBk1kbxKpXya43TAxr YB3Qu6XiAO8YJuCW9cBZ3w== 0000950135-98-004666.txt : 19980813 0000950135-98-004666.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950135-98-004666 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980731 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980812 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: 8-K SEC ACT: SEC FILE NUMBER: 001-06112 FILM NUMBER: 98684066 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 8-K 1 NORTEK, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K --------------- Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 31, 1998 ------------------ NORTEK, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-6112 05-0314991 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 50 Kennedy Plaza, Providence, RI 02903-2360 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number: (401) 751-1600 ----------------------------- N/A (Former name or former address, if changed since last report) 2 Item 2. Acquisition or Disposition of Assets On July 31, 1998, Nortek, Inc. (the "Company") through a wholly owned subsidiary ("Acquisition Sub"), purchased all of the issued and outstanding capital stock of NuTone, Inc. ("NuTone"), a wholly owned subsidiary of Williams plc for an aggregate purchase price of $242.5 million. In connection with the acquisition, the Company assumed NuTone's operating liabilities (other than intercompany borrowings), including certain liabilities of NuTone concerning post retirement and other benefit obligations. The purchase price is subject to adjustment based on NuTone's net asset value determined as of August 1, 1998. If the final closing net asset value, as determined in accordance with the NuTone purchase agreement, is within the range of $65,100,000 to $67,100,000 (inclusive), then there will be no adjustment to the purchase price. If the final closing net asset value, as determined in accordance with the NuTone purchase agreement, exceeds $67,100,000, then the Company is obligated to pay Williams plc an amount equal to the difference between the final closing net asset value and $67,100,000. If the final closing net asset value is less than $65,100,000, then Williams plc is obligated to pay the Company an amount equal to the difference between $65,100,000 and the final closing net asset value. The purchase price was funded, and any adjustments will be funded, through the use of proceeds from the sale of $210,000,000 8 7/8% Senior Notes which occurred on July 31, 1998, together with a portion of the cash proceeds from the sale of 2,182,500 shares of the Company's common stock which occurred in the second quarter of 1998. The $210,000,000 8 7/8% Senior Notes were sold in a Rule 144A private offering to institutional investors. Consummation of the acquisition was subject to expiration or termination of the applicable waiting period under the HSR Act. On or about June 29, 1998, after a review of the acquisition by the Federal Trade Commission ("FTC"), and in response to the FTC's concerns about the potential adverse competitive effects the acquisition might have on the market for certain hard-wired intercom systems, Nortek executed an Agreement Containing Consent Order ("FTC Order") providing for the divestiture of the Company's M&S System LP ("M&S") subsidiary, which manufacturers hard-wired 3 intercom systems. The FTC Order was provisionally accepted by the FTC commissioners on July 27, 1998. The FTC Order was placed on the public record on July 27, 1998, and is subject to public comment for a period of 60 days. Upon the expiration of the comment period, the FTC will decide whether to withdraw, modify or make final its acceptance of the Order. Under the terms of the FTC Order, the Company must divest, at no minimum price, within six months of the execution of the FTC Order, all of the assets, properties, business and goodwill of M&S (the "M&S Assets"). Any acquirer must be approved by the FTC. If the Company has not divested the M&S assets within the prescribed time, the FTC may appoint a trustee to divest the M&S assets. The Company will be responsible for any costs and expenses incurred by the trustee that are necessary to carry out the trustee's duties. The Company is required to file compliance reports showing that it has fully complied with the order. Violations of the final consent order may result in substantial monetary penalties, which could have a material adverse effect on the Company's business. Notwithstanding the FTC Order, at any time after the consummation of the acquisition, the FTC or the Department of Justice ("DOJ") could take such actions under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the acquisition or seeking divestiture of certain assets of the acquisition. Furthermore, at any time after the consummation of the acquisition, any state could take such action under the antitrust laws as it deems necessary or desirable to the public interest. While the Company does not expect the FTC, the DOJ or any state to challenge the acquisition on antitrust grounds, there is no assurance that such a challenge will not be made or, if made and successful, would not have a material adverse effect on the Company. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a). Financial Statements of Business Acquired The consolidated financial statements of Nutone, Inc., and subsidiary as of December 31, 1997 and April 4, 1998 and for the year ended December 31, 1997 and the three months 4 ended March 29, 1997, and April 4, 1998, together with the notes thereto. (b) Pro Forma Information Unaudited As Adjusted and Pro Forma Adjusted Consolidated Balance Sheet as of April 4, 1998, together with Pro Forma and Pro Forma Adjusted Condensed Consolidated Statement of Operations for the year ended December 31, 1997, and the three and twelve months ended April 4, 1998. (c) Exhibits 2.1 Stock Purchase and Sale Agreement dated March 9, 1998, between Williams Y&N Holdings, Inc., and NTK Sub, Inc. (incorporated by reference to Exhibit 2 to Form 8-K/A filed March 18, 1998, File No. 1-6112). 2.2 Amendments No. 1 through No. 9 to Stock Purchase and Sale Agreement dated March 9, 1998, between Williams Y&N Holdings, Inc., and NTK Sub, Inc. 23.1 Consent of Independent Accountants. 5 Item 7(a) Financial Statements of Business Acquired NUTONE INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET
DECEMBER 31, APRIL 4, 1997 1998 ------------ ----------- (UNAUDITED) (AMOUNTS IN THOUSANDS) ASSETS Current assets: Cash................................................... $ 840 $ 1,393 Accounts receivable, less allowance for doubtful accounts of $1,373 and $1,269......................... 30,304 35,065 Inventories............................................ 4,804 4,706 Deferred tax asset, current............................ 4,880 4,900 Prepaid expenses and other current assets.............. 4,688 5,183 --------- --------- Total current assets.............................. 45,516 51,247 Property, plant and equipment, net.......................... 18,212 18,107 Deferred tax asset, noncurrent.............................. 14,123 14,398 Other noncurrent assets..................................... 289 -- --------- --------- Total assets...................................... $ 78,140 $ 83,752 ========= ========= LIABILITIES Current liabilities: Accounts payable....................................... $ 23,134 $ 15,619 Payable to Parent and related entities................. 11,508 24,211 Accrued expenses and other............................. 15,635 14,491 --------- --------- Total current liabilities......................... 50,277 54,321 Pension liability........................................... 12,883 12,673 Post-retirement medical benefits liability.................. 27,820 28,068 Accrued warranty............................................ 4,990 5,209 Long-term debt to Parent and related entities............... 131,000 131,000 --------- --------- Total liabilities................................. 226,970 231,271 --------- --------- Contingencies SHAREHOLDER'S NET INVESTMENT (DEFICIT) Shareholder's net investment (deficit)...................... (148,830) (147,519) --------- --------- Total liabilities and shareholder's net investment (deficit)....................................... $ 78,140 $ 83,752 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 6 NUTONE INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS THREE MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, MARCH 29, APRIL 4, 1997 1997 1998 --------------- ------------ ------------ (UNAUDITED) (UNAUDITED) (IN THOUSANDS) Net sales............................................... $199,072 $46,561 $49,564 Cost of goods sold...................................... (122,897) (28,874) (31,811) -------- ------- ------- Gross profit.................................. 76,175 17,687 17,753 Selling, general and administrative expenses............ (51,387) (14,322) (13,561) -------- ------- ------- Income from operations........................ 24,788 3,365 4,192 Other income (expense): Interest expense................................... (11,852) (3,020) (3,060) Other income, net.................................. 42 10 18 -------- ------- ------- Income before income taxes.................... 12,978 355 1,150 Provision for income taxes.............................. (5,043) (142) (460) -------- ------- ------- Net income............................... $ 7,935 $ 213 $ 690 ======== ======= ======= Other comprehensive income, net of tax: Pension liability adjustment....................... 503 251 -- Foreign currency translation adjustment............ (49) -- -- -------- ------- ------- Total other comprehensive income.............. 454 251 -- -------- ------- ------- Comprehensive Income.......................... $ 8,389 $ 464 $ 690 ======== ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 7 NUTONE INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF SHAREHOLDER'S NET INVESTMENT FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE THREE MONTHS ENDED MARCH 29, 1997 AND APRIL 4, 1998
SHAREHOLDER'S NET INVESTMENT (DEFICIT) -------------- (IN THOUSANDS) Balance, December 31, 1996.................................. $(147,062) Net Income (unaudited)...................................... 213 Pension liability adjustment (unaudited).................... 251 Capital contribution from Parent (unaudited)................ 304 --------- Balance, March 29, 1997 (unaudited)......................... $(146,294) ========= Balance, December 31, 1996.................................. $(147,062) Net income.................................................. 7,935 Foreign currency translation adjustment..................... (49) Pension liability adjustment................................ 503 Capital contribution from Parent............................ 2,243 Dividend to Parent.......................................... (12,400) --------- Balance, December 31, 1997.................................. (148,830) Net Income (unaudited)...................................... 690 Capital Contribution from Parent (unaudited)................ 621 --------- Balance, April 4, 1998 (unaudited).......................... $(147,519) =========
The accompanying notes are an integral part of the consolidated financial statements. 8 NUTONE INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS THREE MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, MARCH 29, APRIL 4, 1997 1997 1998 ---------------- ------------ ------------ (UNAUDITED) (UNAUDITED) (IN THOUSANDS) Cash flows from operating activities: Net income.................................... $ 7,935 $ 213 $ 690 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense.......................... 3,416 863 835 Deferred tax provision........................ (555) (439) (295) Loss on sale of fixed assets.................. 16 (2) 6 (Increase) Decrease in accounts receivable.... 3,604 2,886 (4,761) (Increase) Decrease in inventories............ (1,065) (1,035) 98 (Increase) Decrease in prepaid expenses and other current assets........................ 339 103 (495) Increase (Decrease) in accounts payable....... 3,784 (3,617) (7,515) Increase in accrued expenses.................. 583 (579) (925) Increase (Decrease) in pension liability...... (1,119) 158 79 Increase (Decrease) in post-retirement medical benefit liability........................... 1,018 259 248 --------- -------- -------- Net cash provided by operating activities............................. 17,956 (1,190) (12,035) --------- -------- -------- Cash flows from investment activities: Proceeds from sale of fixed assets............ 11 7 5 Capital expenditures.......................... ( 3,663) (895) (741) --------- -------- -------- Net cash used in investing activities.... ( 3,652) (888) (736) --------- -------- -------- Cash flows from financing activities: Dividends paid to Parent...................... (12,400) -- -- Contributions from Parent and related entities.................................... 2,243 304 621 Change in amount due to/from Parent and related entities............................ (4,250) 2,135 12,703 Foreign currency translation adjustment....... (49) -- -- --------- -------- -------- Net cash used in financing activities.... (14,456) 2,439 13,324 --------- -------- -------- Net increase (decrease) in cash.................... (152) 361 553 Cash at beginning of year.......................... 992 992 840 --------- -------- -------- Cash at end of year................................ $ 840 $ 1,353 $ 1,393 ========= ======== ======== Supplemental cash flow information: Cash paid for interest........................ $ 12,141 $ 323 $ 34 ========= ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 9 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. PURPOSE OF FINANCIAL STATEMENTS: The financial statements of NuTone Inc. and Subsidiary (the "Company") have been prepared in connection with the proposed sale of the capital stock of the Company by its ultimate parent company, Williams plc ("Williams" or the "Parent"), a U.K. Company, to Nortek, Inc., pursuant to an agreement dated March 9, 1998. The consolidated financial statements include the accounts of NuTone Inc. (U.S.) and its wholly owned subsidiary, NuTone Canada Inc. Certain properties, while historically part of the Company, have been excluded from these financial statements, as the related assets, liabilities and costs will not be a part of the proposed transaction. These properties, at December 31, 1997, are non-operating and are not material to the Company's financial position or 1997 results of operations. 2. NATURE OF BUSINESS: The Company is principally engaged in the manufacturing and sale of household fixtures, such as ventilation fans and heaters, range hoods, door chimes, bathroom cabinets, and intercom systems. The Company's primary manufacturing operations are located in Cincinnati, Ohio and the Company also has a manufacturing facility in Coppell, Texas. Approximately 99% of its 1997 sales were to customers in the United States and Canada. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed in the preparation of these consolidated financial statements. a. Basis of Presentation: The Company's consolidated financial statements, which have been prepared on the basis of U.S. generally accepted accounting principles, reflect the actual results of operations, financial position, changes in shareholder's net investment, and cash flows as if it were a separate stand-alone entity for all periods presented. The financial statements do not reflect the goodwill resulting from the acquisition of the Company by Williams in 1991, as "push down accounting" has not been utilized. General corporate overhead expenses related to Williams' corporate headquarters and common support functions have been allocated to the Company, to the extent such amounts are applicable to the Company, based on the ratio of the Company's budgeted sales to budgeted sales of all companies within the Williams U.S. consolidated group. Management believes these allocations are reasonable. However, the costs of these services charged to the Company are not necessarily indicative of the costs that would have been incurred if the Company had performed these functions as a stand-alone entity. As a result of the proposed sale described in Note 1, the Company, or the acquirer, will be required to perform certain of these functions using its own resources, or purchased services, and will be responsible for the costs and expenses associated with the management of the Company. The financial information included herein may not necessarily reflect the consolidated results of operations, financial position and cash flows of the Company which would have resulted had the Company been a separate, stand-alone entity during the period presented. b. Basis of Consolidation: The consolidated financial statements include the accounts of NuTone Inc. and its wholly-owned subsidiary, NuTone Canada Inc. All significant intercompany transactions and accounts have been eliminated. c. Foreign Currency Translation: For international operations, assets and liabilities are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at average exchange rates 10 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) prevailing during the year. Translation adjustments, resulting from fluctuations in exchange rates, are included in shareholder's net investment. d. Use of Estimates: The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. e. Research and Development Expenses: Research and development expenses are charged to operations as incurred. Research and development expense was approximately $1,377,000 for the year ended December 31, 1997. f. Inventories: Inventories are stated at the lower of cost or market, with cost being determined on the last in, first out (LIFO) method. g. Property, Plant and Equipment: Property, plant and equipment, including the cost of certain tooling, is recorded at cost and depreciated on the straight-line basis over the following useful lives: Buildings................................................... 40 years Building improvements....................................... 10 years Machinery and equipment..................................... 4 to 10 years Furniture, fixtures and computer equipment.................. 5 to 10 years Tools and dies.............................................. 5 years
Repairs and maintenance expenditures are charged to income as incurred, whereas replacements, betterments and improvements are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in operations. h. Product Warranty Expense: The estimated amount of product warranty costs is accrued in the period in which the related sale is made. i. Advertising Costs: The Company expenses advertising costs the first time the advertising takes place. Advertising expense was $4,942,000 for the year ended December 31, 1997. j. Income Taxes: The Company's operations have historically been included in the income tax returns filed by a subsidiary of Williams. However, income tax expense in the Company's consolidated financial statements has been calculated as if the Company had filed separate tax returns for all periods presented. The Company is a member of a consolidated U.S. tax group. Under a tax sharing agreement with intermediate and ultimate parent companies, the Company is not charged for taxes on its operations. The Company's current tax provision has been accounted for as a capital contribution. k. Statement of Cash Flows: The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 11 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. INVENTORIES: At December 31, 1997, inventories were as follows:
(IN THOUSANDS) Raw materials and work-in-process........................... $13,738 Finished goods.............................................. 14,665 ------- 28,403 Less reserve for LIFO valuation............................. 23,599 ------- Total inventories................................. $ 4,804 =======
5. PROPERTY, PLANT AND EQUIPMENT: At December 31, 1997, property, plant and equipment consisted of:
(IN THOUSANDS) Land, building and improvements............................. $13,828 Machinery and equipment..................................... 20,697 Furniture, fixtures and computer equipment.................. 5,997 Tools and dies.............................................. 13,999 Construction in progress.................................... 3,150 ------- 57,671 Less accumulated depreciation............................... 39,459 ------- $18,212 =======
6. LONG-TERM DEBT TO SUBSIDIARY OF PARENT COMPANY: The Company has a promissory note payable to a wholly-owned subsidiary of the Parent of $131,000,000, due on September 7, 2001. Interest is paid in semi-annual installments in June and December at a rate of 8.5%. 7. EMPLOYEE BENEFIT PLANS: The Company has a defined contribution plan covering predominantly non-union employees of NuTone Inc. (U.S.). Under the Plan, participants can elect to defer up to 10% of their eligible earnings on a pre-tax basis, with the Company matching 50% of the first 5% of deferred earnings. During 1997, the Company's contribution to the plan was $347,000. The Company has six noncontributory defined benefit pension plans (the "Plans") covering substantially all employees, with benefits for salaried employees based on years of service and the employee's career compensation, and benefits for hourly paid employees based on years of service. The Company accrues expense for the Plans in accordance with generally accepted accounting principles and makes contributions to the Plans in accordance with an agreed funding policy, which are deductible for federal income tax purposes. At December 31, 1997, substantially all of the assets of the defined benefit plans were included with those of other Williams subsidiaries in the United States and held as part of a master trust. Plan assets, as stated below, represent the Company's proportionate share of the net assets of the master trust. 12 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the principal Plans' funded status and amounts recognized in the Company's balance sheet, utilizing information from the latest actuarial valuation date, December 31, 1997:
NUTONE NUTONE (U.S.) (U.S.) SALARIED HOURLY -------- ------- (IN THOUSANDS) Actuarial present value of benefit obligations: Accumulated benefit obligation, primarily vested....... $42,851 $25,383 ======= ======= Projected benefit obligation for services rendered to date...................................................... $46,816 $25,383 Plan assets at fair value, primarily cash equivalents and marketable securities..................................... 37,350 23,086 ------- ------- Projected benefit obligation in excess of plan assets....... 9,466 2,297 Unrecognized net gain (loss) from past experience different from that assumed and effects of changes in assumptions... 3,920 723 Unrecognized prior service cost............................. -- (1,012) Additional minimum liability................................ -- 289 ------- ------- Accrued pension liability................................... $13,386 $ 2,297 ======= =======
The deferred tax asset associated with employee pensions and other benefits is disclosed in Note 9. Net pension expense, reflected in both cost of sales and general and administrative expenses, for the year ended December 31, 1997, included the following components:
NUTONE NUTONE (U.S.) (U.S.) SALARIED HOURLY -------- ------- (IN THOUSANDS) Service cost................................................ $ 910 $ 363 Interest cost............................................... 3,335 1,851 Actual return on plan assets................................ (4,424) (2,637) Net amortization and deferral............................... 1,374 906 ------- ------- Net pension expense......................................... $ 1,195 $ 483 ======= =======
For 1997, the discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation was 7.5% and 4.5%, respectively. The expected long-term rate of return on assets was 9%. 8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The Company provides certain medical and life insurance benefits to eligible retired employees. Hourly employees at the Cincinnati, Ohio location covered by a collective bargaining agreement, hired before June 12, 1992, and non-union employees, hired before January 1, 1994, generally become eligible for retiree medical and life insurance benefits on retirement. Pre-age 65 retirees are paid covered medical expenses, including drugs, less deductibles or co-payments. Post-age 65 retiree medical expenses are offset by Medicare benefits. 13 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the funded status and amounts recognized in the Company's balance sheet at December 31, 1997:
(IN THOUSANDS) Accumulated postretirement benefit obligation: Retirees.................................................. $17,234 Fully eligible active participants........................ 5,347 Other active participants................................. 5,084 ------- Total unfunded accumulated postretirement benefit obligation...................................... 27,665 Unrecognized net gain....................................... 1,555 ------- Accrued postretirement benefit obligation................. $29,220 =======
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 8% in 1997, declining by 1% in 1998 and declining by 0.5% thereafter through 2004 to an ultimate rate of 4.0%. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefit obligation, as of December 31, 1997, would have increased by $3,570,000. The effect of this change on the sum of the service cost and interest cost components of net periodic postretirement benefit cost for 1997 would have been an increase of $381,000. The deferred tax asset associated with employee pensions and other benefits is disclosed in Note 9. The components of net periodic postretirement benefit cost for the year ended December 31, 1997 were as follows:
(IN THOUSANDS) Service cost................................................ $ 431 Interest cost on accumulated post retirement benefit obligation................................................ 2,064 Net amortization............................................ (26) ------ Total expense..................................... $2,469 ======
The discount rate used in determining the accumulated postretirement benefit obligation and net periodic postretirement benefit cost was 7.5% as of December 31, 1997. 9. INCOME TAXES: The following table presents the principal components of the difference between the U.S. federal statutory income tax rate and the effective tax rate for the year ended December 31, 1997: Federal income tax rate..................................... 35% Tax effect of foreign losses................................ (1)% Effect of state and local taxes, net of federal tax......... 5% --- Effective tax rate.......................................... 39% ===
The Company's tax provision includes a provision for income taxes in foreign tax jurisdictions. 14 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the U.S. and foreign components of income tax expense for the year ended December 31, 1997:
(IN THOUSANDS) Income tax expense (benefit): Current: Federal........................................... $ 4,327 State and local................................... 1,256 Foreign........................................... 15 Deferred: Federal........................................... (443) State and local................................... (112) ------- Total income tax expense..................... $ 5,043 =======
Deferred income tax liabilities are taxes that the Company expects to pay in future periods. Conversely, deferred income tax assets are tax benefits recognized for expected reductions in future taxes payable. Deferred income taxes arise because of differences in the financial reporting and tax bases of certain assets and liabilities. Deferred income tax assets and liabilities included in the balance sheet at December 31, 1997 were as follows:
(IN THOUSANDS) Deferred income tax assets: Employee pensions and other benefits................... $17,804 Accrued warranty....................................... 2,996 Balance sheet reserves and allowances..................... 3,258 ------- Total deferred income tax assets.................. 24,058 ------- Deferred income tax liabilities: Property, plant, and equipment......................... 3,997 Accounts receivable.................................... 1,058 ------- Total deferred income tax liabilities............. 5,055 ------- Total net deferred income tax assets.............. $19,003 =======
10. LEASES: The Company leases manufacturing and warehouse facilities and other equipment under various operating leases. Total rent expense for the year ended December 31, 1997 was approximately $1,309,000. Future minimum rental payments required under all leases that have remaining noncancelable lease terms in excess of one year, as of December 31, 1997, are as follows:
(IN THOUSANDS) 1998........................................................ $ 995 1999........................................................ 1,053 2000........................................................ 616 2001........................................................ 424 Thereafter.................................................. -- ------- Total minimum payments required........................ $ 3,088 =======
15 NUTONE INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. RELATED PARTY TRANSACTIONS: Management fees charged to the Company by its Parent in 1997 were $1,676,000. The Company maintains a revolving loan with a fellow wholly-owned subsidiary of the Parent. The loan has no stated due date and is due and payable upon demand by this subsidiary. The Company is charged interest on outstanding balances, based on the prime rate (8.5% at December 31, 1997), which is payable monthly. In situations where the Company has advanced funds to this subsidiary, it receives interest at the prime rate less 1%. Interest expense, net of interest income, on this revolving loan and on the long-term debt discussed in Note 6, was $11,852,000 in 1997. 12. MAJOR CUSTOMER: The Company derived approximately 22% of its consolidated net sales from one customer in 1997. 13. CONTINGENCIES: The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of amounts provided will not have a material adverse effect on the financial position or results of operations of the Company. 14. INTERIM FINANCIAL STATEMENTS (UNAUDITED): The consolidated financial statements of NuTone Inc. and Subsidiary, in the opinion of Management, include all adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for each period shown. All adjustments are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. It is suggested that these financial statements be read in conjunction with the consolidated year end financial statements and notes thereto included in the Company's Report on Audit of Consolidated Financial Statements as of December 31, 1997 and for the year then ended. The Company has adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), in the first quarter of 1998. SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of financial statements. The objective of SFAS 130 is to report a measure of all changes in the equity of an enterprise that result from transactions and other economic events of the period other than transactions with shareowners. The Financial Accounting Standards Board issued Statements of Financial Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information", and No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". The Company has not yet determined what effect, if any, these statements will have. 16 COOPERS & LYBRAND LETTERHEAD REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Williams Y&N Holdings, Inc. Parent of NuTone Inc. and Subsidiary We have audited the accompanying consolidated balance sheet of NuTone Inc. and Subsidiary (the "Company") as of December 31, 1997, and the related consolidated statements of operations, shareholder's net investment and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NuTone Inc. and Subsidiary as of December 31, 1997 and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Cincinnati, Ohio February 20, 1998 17 Item 7(b) ProForma Information UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED CONDENSED CONSOLIDATED FINANCIAL DATA OVERVIEW The Unaudited Pro Forma and Pro Forma Adjusted Condensed Consolidated Financial Data for the year ended December 31, 1997 and the three and twelve months ended April 4, 1998 presented herein gives pro forma effect to certain transactions. Transactions for which pro forma information is provided include the sale of $175,000,000 principal amount of 9 1/4% Senior Notes, due March 15, 2007 by the Company (the "9 1/4% Notes"), the sale of $310,000,000 principal amount of 9 1/8% Senior Notes, due September 1, 2007 by the Company (the "9 1/8% Notes"), the acquisition of Ply Gem Industries, Inc. ("Ply Gem") in a tender offer for a share price of $19.50 per outstanding share of common stock by the Company (the "Ply Gem Acquisition"), the sale of 2,182,500 shares of Company common stock for net proceeds of approximately $64,300,000 (the "Common Stock Offering"), the sale of $210,000,000 principal amount of 8 7/8% Senior Notes, due August 1, 2008 by the Company (the "8 7/8% Notes") and the purchase of all of the issued and outstanding capital stock of NuTone, Inc. ("NuTone"), a wholly owned subsidiary of Williams plc for an aggregate purchase price of $242,500,000, subject to adjustment based on NuTone's net asset value on August 1, 1998 as defined in the NuTone purchase agreement (the "NuTone Acquisition"). The Ply Gem Acquisition and the NuTone Acquisition are accounted for under the purchase method of accounting. With respect to these acquisitions, the information contained herein has been prepared utilizing preliminary purchase price allocations which are subject to refinement until all pertinent information regarding the acquisitions has been obtained. In addition, any cost reductions reflected herein are estimates. The ability to implement such cost reductions could be beyond the control of Nortek, and no assurance can be given that such cost reductions will be achieved. Consequently, actual results could differ materially from those presented. Accordingly, the financial information presented herein is subject to change. The financial information entitled "Unaudited Pro Forma" and "Unaudited Pro Forma Adjusted" is not necessarily indicative of the actual results of operations that would have been reported if the events described above had occurred during the applicable period, nor does such information purport to be indicative of the results of future operations. Furthermore, such information may not give effect to all cost savings or incremental costs that may occur as a result of the integration and consolidation of the acquisitions of Ply Gem and NuTone. In the opinion of management, all adjustments necessary to present fairly, in all material respects, such "Unaudited Pro Forma" and "Unaudited Pro Forma Adjusted" financial information have been made. During the second quarter of 1998, the Company sold several nonstrategic assets of Ply Gem including Studley, Sagebrush and Goldenberg. In addition, Nortek has entered into a letter of intent for the sale of the Electronics Group subject to the completion of satisfactory due diligence by the purchaser, expiration or termination of the applicable waiting period under the HSR Act and the negotiation of definitive documentation, which is expected to contain customary terms and conditions. In addition, under the Proposed FTC Order, the disposition of M&S, which is included in the Electronics Group, is subject to the prior approval of the FTC. The following Pro Forma and Pro Forma Adjusted Condensed Consolidated Financial Data does not give effect to the dispositions of businesses that have occurred in 1998 or may occur in the future. It is suggested that the Unaudited Pro Forma and Pro Forma Adjusted Condensed Consolidated Financial Data be read in conjunction with the Financial Statements and the Notes included in the Company's latest Annual Report on Form 10-K/A and latest quarterly Financial Statements on Form 10-Q and the audited and unaudited NuTone Consolidated Financial Statements and the Notes thereto included elsewhere herein. UNAUDITED AS ADJUSTED AND PRO FORMA ADJUSTED CONSOLIDATED BALANCE SHEET The Unaudited As Adjusted Consolidated Balance Sheet as of April 4, 1998 has been prepared based upon the unaudited Consolidated Balance Sheet of Nortek as of April 4, 1998 and gives effect to the Common Stock Offering, as if such transaction had occurred on April 4, 1998. The Unaudited Pro Forma Adjusted Consolidated Balance Sheet as of April 4, 1998 has been prepared based upon the unaudited Consolidated Balance Sheets of Nortek and of NuTone as of April 4, 1998 and gives pro forma effect to the Common Stock Offering, the 8 7/8% Notes and the NuTone Acquisition, in each case as if such transactions had occurred on April 4, 1998. 18 UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PLY GEM ACQUISITION The Unaudited Pro Forma (for Ply Gem) Condensed Consolidated Statement of Operations for the year ended December 31, 1997 and twelve months ended April 4, 1998 have been prepared using Nortek's Audited Consolidated Statement of Operations for the year ended December 31, 1997 (which includes the operations of Ply Gem since August 26, 1997), and Nortek's Unaudited Condensed Consolidated Statements of Operations for the three months ended April 4, 1998 and March 29, 1997, as applicable, and Ply Gem's results of operations for the period from January 1, 1997 through August 25, 1997, as applicable. The Unaudited Pro Forma (for Ply Gem) Condensed Consolidated Statement of Operations for the year ended December 31, 1997 and the twelve months ended April 4, 1998 give pro forma effect to, as applicable: (i) the 9 1/4% Notes; (ii) the 9 1/8% Notes; (iii) the Ply Gem Acquisition; (iv) cost savings that are directly attributable to the Ply Gem Acquisition (the "Ply Gem Acquisition Related Cost Savings"); (v) the Common Stock Offering; and (vi) approximately $22.2 million of charges recorded by Ply Gem prior to the Ply Gem Acquisition, to provide certain valuation reserves and to conform accounting policies to Nortek's, in each case as if such events occurred on January 1, 1997 (collectively, the "Pro Forma Ply Gem Adjustments"). The information entitled "Pro Forma Adjusted Nortek and Ply Gem" gives pro forma effect to the Pro Forma Ply Gem Adjustments and additional estimated cost savings related to the Ply Gem Acquisition which were achieved through actions taken by Nortek since the completion of the Ply Gem Acquisition (the "Ply Gem Acquisition Additional Cost Savings") and excludes the effect of approximately $22.2 million of charges recorded by Ply Gem prior to the Ply Gem Acquisition as described above. UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED STATEMENT OF OPERATIONS FOR THE PLY GEM ACQUISITION AND THE NUTONE ACQUISITION The Unaudited Pro Forma (for Ply Gem and NuTone) Condensed Consolidated Statement of Operations for the year ended December 31, 1997 and the three and twelve months ended April 4, 1998 have been prepared using, as applicable: (i) Nortek's Audited Consolidated Statement of Operations for the year ended December 31, 1997 (which includes the operations of Ply Gem from August 26, 1997 to December 31, 1997); (ii) Ply Gem's Unaudited Results of Operations for the period January 1, 1997 through August 25, 1997; (iii) NuTone's Audited Consolidated Statement of Operations for the year ended December 31, 1997; (iv) Nortek's Unaudited Condensed Consolidated Statements of Operations for the three months ended April 4, 1998 and March 29, 1997; and (v) NuTone's Unaudited Condensed Consolidated Statements of Operations for the three months ended April 4, 1998 and March 29, 1997. The information entitled "Pro Forma Company" gives effect to: (i) the Pro Forma Ply Gem Adjustments; (ii) the NuTone Acquisition; (iii) net savings expected to be achieved from the elimination of fees and charges paid by NuTone to Williams plc and related entities; and (iv) the 8 7/8% Notes. The information entitled "Pro Forma Adjusted Company" for the year ended December 31, 1997 and twelve months ended April 4, 1998 gives pro forma effect to items (i) through (iv) of the immediately preceding paragraph, the Ply Gem Acquisition Additional Cost Savings and approximately $15.0 million in annual cost reductions that Nortek estimates can be achieved as a result of the NuTone Acquisition and excludes the effect of approximately $22.2 million of charges recorded by Ply Gem prior to the Ply Gem Acquisition as described above. The information entitled "Pro Forma Adjusted Company" for the three months ended April 4, 1998 gives pro forma effect to items (ii) through (iv) described in the second preceding paragraph above and approximately $3.8 million in cost reductions that Nortek estimates can be achieved as a result of the NuTone Acquisition. 19 UNAUDITED AS ADJUSTED AND PRO FORMA ADJUSTED CONSOLIDATED BALANCE SHEET APRIL 4, 1998 (IN THOUSANDS)
ADJUSTMENTS FOR THE PRO FORMA NORTEK COMMON NORTEK NUTONE PRO FORMA ADJUSTED HISTORICAL STOCK OFFERING AS ADJUSTED HISTORICAL ADJUSTMENTS COMPANY ---------- -------------- ----------- ---------- ----------- ---------- ASSETS Cash and cash equivalents........ $ 81,091 $64,290(a) $ 145,381 $ 1,393 ($ 46,258)(a) $ 100,516 Marketable securities available for sale....................... 22,210 -- 22,210 -- -- 22,210 Restricted cash and marketable securities..................... 6,368 -- 6,368 -- -- 6,368 Accounts receivable, net......... 204,487 -- 204,487 35,065 -- 239,552 Inventories, net................. 186,902 -- 186,902 4,706 23,627(b) 215,235 Prepaid expenses................. 11,705 -- 11,705 5,183 -- 16,888 Other current assets............. 10,854 -- 10,854 -- -- 10,854 Net assets of discounted operation...................... 27,065 -- 27,065 -- -- 27,065 Prepaid income taxes............. 46,800 -- 46,800 4,900 (9,451)(c) 42,249 ---------- ------- ---------- ---------- --------- ---------- Total current assets..... 597,482 64,290 661,772 51,247 (32,082) 680,937 Property, plant and equipment, net............................ 240,132 -- 240,132 18,107 -- 258,239 Goodwill......................... 375,639 -- 375,639 -- 227,132(d) 602,771 Intangible assets................ 8,477 -- 8,477 -- -- 8,477 Notes receivable and other investments.................... 9,848 -- 9,848 -- -- 9,848 Deferred income taxes............ 10,476 -- 10,476 14,398 -- 24,874 Deferred debt expense............ 20,556 -- 20,556 -- 6,504(e) 27,060 Other assets..................... 19,896 -- 19,896 -- -- 19,896 ---------- ------- ---------- ---------- --------- ---------- Total assets............. $1,282,506 $64,290 $1,346,796 $ 83,752 $ 201,554 $1,632,102 ========== ======= ========== ========== ========= ========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Notes payable and other short term obligations............... $ 13,427 $ -- $ 13,427 $ -- $ -- $ 13,427 Intercompany borrowings.......... -- -- -- 24,211 (24,211)(f) -- Current maturities of long-term debt and capital leases........ 5,898 -- 5,898 -- -- 5,898 Accounts payable................. 115,534 -- 115,534 15,619 -- 131,153 Accrued expenses and taxes, net............................ 126,345 -- 126,345 14,491 -- 140,836 ---------- ------- ---------- ---------- --------- ---------- Total current liabilities............ 261,204 -- 261,204 54,321 (24,211) 291,314 Other long term liabilities...... 64,152 -- 64,152 45,950 -- 110,102 Notes, mortgages, capital leases and obligations payable less current maturities............. 833,459 -- 833,459 -- 209,246(g) 1,042,705 Long-term intercompany borrowings..................... -- -- -- 131,000 (131,000)(h) -- Preferred stock.................. -- -- -- -- -- -- Common stock..................... 16,213 2,183(i) 18,396 -- -- 18,396 Special common stock............. 865 -- 865 -- -- 865 Additional paid in capital....... 136,736 62,107(j) 198,843 -- -- 198,843 Retained earnings (deficit)...... 60,266 -- 60,266 -- -- 60,266 Cumulative translation, pension and other...................... (6,033) -- (6,033) -- -- (6,033) Treasury stock-common............ (82,399) -- (82,399) -- -- (82,399) Treasury stock-special common.... (1,957) -- (1,957) -- -- (1,957) ---------- ------- ---------- ---------- --------- ---------- Total stockholders' investment............. 123,691 64,290 187,981 (147,519) 147,519(k) 187,981 ---------- ------- ---------- ---------- --------- ---------- Total liabilities and stockholders' investment......... $1,282,506 $64,290 $1,346,796 $ 83,752 $ 201,554 $1,632,102 ========== ======= ========== ========== ========= ==========
See Notes to the Unaudited As Adjusted Pro Forma and Pro Forma Adjusted Consolidated Balance Sheet 20 NOTES TO THE UNAUDITED AS ADJUSTED AND PRO FORMA ADJUSTED CONSOLIDATED BALANCE SHEET APRIL 4, 1998 (IN THOUSANDS)
ADJUSTMENTS FOR THE COMMON STOCK PRO FORMA OFFERING ADJUSTMENTS ------------ ----------- (a) CASH AND CASH EQUIVALENTS Net proceeds from the Common Stock Offering................. $64,290 $ -- ======= Cash payment related to the NuTone Acquisition.............. (245,500) Fees, expenses and other costs related to the NuTone Acquisition and the 8 7/8% Notes.......................... (10,004) --------- (255,504) --------- Less gross proceeds from the 8 7/8% Notes .................. 209,246 --------- A portion of the cash proceeds from the Common Stock Offering, used to partially fund the NuTone Acquisition... $ (46,258) ========= (b) INVENTORIES, NET Increase in inventories to estimated fair market value in connection with the NuTone Acquisition.................... $ 23,627 ========= (c) DEFERRED INCOME TAXES Deferred income taxes related to the NuTone Acquisition..... $ (9,451) ========= (d) GOODWILL Additional costs in excess of net assets acquired in connection with the NuTone Acquisition.................... $ 227,132 ========= (e) DEFERRED DEBT EXPENSE Financing costs related to the 8 7/8% Notes................. $ 6,504 ========= (f) INTERCOMPANY BORROWINGS Eliminate intercompany borrowings not assumed in connection with the NuTone Acquisition............................... $ (24,211) ========= (g) NOTES, MORTGAGES, CAPITAL LEASES AND OBLIGATIONS PAYABLE LESS CURRENT MATURITIES Issuance of the 8 7/8% Notes................................ $ 209,246 ========= (h) LONG-TERM INTERCOMPANY BORROWINGS Eliminate intercompany borrowings not assumed in connection with the NuTone Acquisition............................... $(131,000) ========= (i) COMMON STOCK Sale of 2,182,500 shares of Common Stock, $1.00 par value per share................................................. $ 2,183 ======= (j) ADDITIONAL PAID-IN CAPITAL Additional paid-in capital related to the Common Stock Offering.................................................. $62,107 ======= (k) TOTAL STOCKHOLDERS' INVESTMENT Eliminate NuTone's stockholders' deficit in connection with the NuTone Acquisition.................................... $ 147,519 =========
21 UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED(FOR PLY GEM AND NUTONE) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA NORTEK PRO FORMA AND NUTONE PRO FORMA PRO FORMA ADDITIONAL ADJUSTED PLY GEM HISTORICAL ADJUSTMENTS COMPANY ADJUSTMENTS COMPANY --------- ---------- ----------- --------- ----------- --------- Net sales....................... $1,650,052 $199,072 $ -- $1,849,124 $ -- $1,849,124 Cost and expenses: Cost of products sold....... 1,256,349 122,897 -- 1,379,246 (11,500)(e) 1,367,746 Amortization of acquired goodwill.................. 11,090 -- 5,678(a) 16,768 -- 16,768 Selling, general and administrative expense.... 311,542 51,387 (1,746)(b) 361,183 (39,761)(f) 321,422 ---------- -------- ------- ---------- -------- ---------- 1,578,981 174,284 3,932 1,757,197 (51,261) 1,705,936 ---------- -------- ------- ---------- -------- ---------- Operating earnings (loss)....... 71,071 24,788 (3,932) 91,927 51,261 143,188 Interest expense................ (77,793) (11,852) (7,483)(c) (97,128) -- (97,128) Investment income............... 7,489 42 -- 7,531 -- 7,531 ---------- -------- ------- ---------- -------- ---------- Earnings (loss) from continuing operations before provision (benefit) for income taxes.... 767 12,978 (11,415) 2,330 51,261 53,591 Provision (benefit) for income taxes......................... 2,271 5,043 (1,470)(d) 5,844 19,720(g) 25,564 ---------- -------- ------- ---------- -------- ---------- Earnings (loss) from continuing operations.................... $ (1,504) $ 7,935 $(9,945) $ (3,514) $ 31,541 $ 28,027 ========== ======== ======= ========== ======== ========== EARNINGS (LOSS) PER SHARE AS ADJUSTED FOR THE COMMON STOCK OFFERING: Earnings (loss) from continuing operations: Basic....................... $ (.13) $ (.30) $ 2.38 Diluted..................... (.13) (.30) 2.33 Weighted average number of shares: Basic....................... 11,788 11,788 11,788 Diluted..................... 12,038 12,038 12,038
See Notes to the Unaudited Pro Forma and Pro Forma Adjusted (For Ply Gem and Nutone) Condensed Consolidated Statement of Operations 22 UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED (FOR PLY GEM AND NUTONE) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THREE MONTHS ENDED APRIL 4, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
NORTEK PRO FORMA AS NUTONE PRO FORMA PRO FORMA ADDITIONAL ADJUSTED ADJUSTED HISTORICAL ADJUSTMENTS COMPANY ADJUSTMENTS COMPANY -------- ---------- ----------- --------- ----------- --------- Net sales....................... $ 392,468 $ 49,564 $ -- $ 442,032 $ -- $ 442,032 Cost and expenses: Cost of products sold....... 294,654 31,811 -- 326,465 -- 326,465 Amortization of acquired goodwill.................. 2,560 -- 1,420(a) 3,980 -- 3,980 Selling, general and administrative expense.... 75,561 13,561 (482)(b) 88,640 (3,750)(f) 84,890 ---------- -------- ------- ---------- -------- ---------- 372,775 45,372 938 419,085 (3,750) 415,335 ---------- -------- ------- ---------- -------- ---------- Operating earnings (loss)....... 19,693 4,192 (938) 22,947 3,750 26,697 Interest expense................ (19,458) (3,060) (1,774)(c) (24,292) -- (24,292) Investment income............... 2,265 18 -- 2,283 -- 2,283 ---------- -------- ------- ---------- -------- ---------- Earnings (loss) from continuing operations before provision for income taxes.............. 2,500 1,150 (2,712) 938 3,750 4,688 Provision for income taxes...... 1,200 460 (279)(d) 1,381 1,500(g) 2,881 ---------- -------- ------- ---------- -------- ---------- Earnings (loss) from continuing operations.................... $ 1,300 $ 690 $(2,433) $ (443) $ 2,250 $ 1,807 ========== ======== ======= ========== ======== ========== EARNINGS PER SHARE AS ADJUSTED FOR THE COMMON STOCK OFFERING: Earnings from continuing operations: Basic....................... $ .11 $ (.04) $ .15 Diluted..................... .11 (.04) .15 Weighted average number of shares: Basic....................... 11,723 11,723 11,723 Diluted..................... 11,893 11,893 11,893
See Notes to the Unaudited Pro Forma and Pro Forma Adjusted (For Ply Gem and NuTone) Condensed Consolidated Statement of Operations 23 UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED (FOR PLY GEM AND NUTONE) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED APRIL 4, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA NORTEK PRO FORMA AND NUTONE PRO FORMA PRO FORMA ADDITIONAL ADJUSTED PLY GEM HISTORICAL ADJUSTMENTS COMPANY ADJUSTMENTS COMPANY --------- ---------- ----------- --------- ----------- --------- Net sales....................... $1,685,470 $202,075 $ -- $1,887,545 $ -- $1,887,545 Cost and expenses: Cost of products sold....... 1,278,519 125,834 -- 1,404,353 (11,500)(e) 1,392,853 Amortization of acquired goodwill.................. 10,739 -- 5,678(a) 16,417 -- 16,417 Selling, general and administrative expense.... 320,132 50,626 (1,754)(b) 369,004 (36,083)(f) 332,921 ---------- -------- -------- ---------- -------- ---------- 1,609,390 176,460 3,924 1,789,774 (47,583) 1,742,191 ---------- -------- -------- ---------- -------- ---------- Operating earnings (loss)....... 76,080 25,615 (3,924) 97,771 47,583 145,354 Interest expense................ (77,559) (11,892) (7,443)(c) (96,894) -- (96,894) Investment income............... 8,358 50 -- 8,408 -- 8,408 ---------- -------- -------- ---------- -------- ---------- Earnings (loss) from continuing operations before provision (benefit) for income taxes.... 6,879 13,773 (11,367) 9,285 47,583 56,868 Provision (benefit) for income taxes......................... 4,092 5,361 (1,452)(d) 8,001 18,433(g) 26,434 ---------- -------- -------- ---------- -------- ---------- Earnings (loss) from continuing operations.................... $ 2,787 $ 8,412 $ (9,915) $ 1,284 $ 29,150 $ 30,434 ========== ======== ======== ========== ======== ========== EARNINGS PER SHARE AS ADJUSTED FOR THE COMMON STOCK OFFERING: Earnings from continuing operations: Basic....................... $ .24 $ .11 $ 2.60 Diluted..................... .23 .11 2.56 Weighted average number of shares: Basic....................... 11,723 11,723 11,723 Diluted..................... 11,893 11,893 11,893
See Notes to the Unaudited Pro Forma and Pro Forma Adjusted (For Ply Gem and NuTone) Condensed Consolidated Statement of Operations 24 NOTES TO THE UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED (FOR PLY GEM AND NUTONE) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS)
THREE MONTHS TWELVE MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, 1997 APRIL 4, 1998 APRIL 4, 1998 ----------------- ------------- ------------- (a) AMORTIZATION OF ACQUIRED GOODWILL Amortization of goodwill over 40 years related to the NuTone Acquisition........................................ $ 5,678 $ 1,420 $ 5,678 ======== ======== ======== (b) SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Elimination of management fees and other charges paid by NuTone to Williams plc and related entities, net of estimated incremental Nortek management costs............. $ (1,746) $ (482) $ (1,754) ======== ======== ======== (c) INTEREST EXPENSE Interest expense related to the 8 7/8% Notes................ $(18,637) $ (4,659) $(18,637) Amortization of debt issuance costs related to the Offering.................................................. (649) (162) (649) Amortization of debt discount related to the 8 7/8% Notes... (49) (13) (49) Reduction of interest expense related to intercompany borrowings not assumed in the NuTone Acquisition.......... 11,852 3,060 11,892 -------- -------- -------- $ (7,483) $ (1,774) $ (7,443) ======== ======== ======== (d) PROVISION (BENEFIT) FOR INCOME TAXES Net provision (benefit) for income taxes related to notes (b) and (c) above......................................... $ (1,470) $ (279) $ (1,452) ======== ======== ======== (e) COST OF PRODUCTS SOLD Elimination of charges recorded by Ply Gem prior to the Ply Gem Acquisition, to provide certain valuation reserves and to conform accounting policies to Nortek's................ $(11,500) $ -- $(11,500) ======== ======== ======== (f) SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Estimated Ply Gem Acquisition Additional Cost Savings....... $(14,061) $ -- $(10,383) Elimination of charges recorded by Ply Gem prior to the Ply Gem Acquisition, to provide certain valuation reserves and to conform accounting policies to Nortek's................ (10,700) -- (10,700) Estimated cost reductions related to the NuTone Acquisition............................................... (15,000) (3,750) (15,000) -------- -------- -------- $(39,761) $ (3,750) $(36,083) ======== ======== ======== (g) PROVISION FOR INCOME TAXES Tax provisions on the Ply Gem additional cost savings and reductions and eliminations of charges recorded by Ply Gem referred to in notes (e) and (f) above.................... $ 13,891 $ -- $ 12,604 Tax provision related to the estimated cost reductions as referred to in note (f) above............................. 5,829 1,500 5,829 -------- -------- -------- $ 19,720 $ 1,500 $ 18,433 ======== ======== ========
25 UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED (FOR PLY GEM) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA ADJUSTED NORTEK PLY GEM PRO FORMA NORTEK AND ADDITIONAL NORTEK AND HISTORICAL HISTORICAL(a) ADJUSTMENTS PLY GEM ADJUSTMENTS PLY GEM ---------- ------------- ----------- ---------- ----------- ---------- Net sales................... $1,134,129 $515,923 $ -- $1,650,052 $ -- $1,650,052 Cost and expenses: Cost of products sold... 826,453 431,196 (1,300)(b) 1,256,349 (11,500)(h) 1,244,849 Amortization of acquired goodwill.............. 5,319 976 4,795(c) 11,090 -- 11,090 Selling, general and administrative expense............... 219,376 99,912 (7,746)(d) 311,542 (24,761)(i) 286,781 ---------- -------- -------- ---------- -------- ---------- 1,051,148 532,084 (4,251) 1,578,981 (36,261) 1,542,720 ---------- -------- -------- ---------- -------- ---------- Operating earnings (loss)... 82,981 (16,161) 4,251 71,071 36,261 107,332 Interest expense............ (50,210) (5,696) (21,887)(e) (77,793) -- (77,793) Investment income........... 9,929 302 (2,742)(f) 7,489 -- 7,489 ---------- -------- -------- ---------- -------- ---------- Earnings (loss) from continuing operations before provision (benefit) for income taxes.......... 42,700 (21,555) (20,378) 767 36,261 37,028 Provision (benefit) for income taxes.............. 16,300 (8,484) (5,545)(g) 2,271 13,891(j) 16,162 ---------- -------- -------- ---------- -------- ---------- Earnings (loss) from continuing operations..... $ 26,400 $(13,071) $(14,833) $ (1,504) $ 22,370 $ 20,866 ========== ======== ======== ========== ======== ========== EARNINGS (LOSS) PER SHARE AS ADJUSTED FOR THE COMMON STOCK OFFERING: Earnings (loss) from continuing operations: Basic................... $ 2.24 $ (.13) $ 1.77 Diluted................. 2.19 (.13) 1.73 Weighted average number of shares: Basic................... 11,788 11,788 11,788 Diluted................. 12,038 12,038 12,038
See Notes to the Unaudited Pro Forma and Pro Forma Adjusted (For Ply Gem) Condensed Consolidated Statement of Operations 26 UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED (FOR PLY GEM) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED APRIL 4, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA ADJUSTED NORTEK PLY GEM PRO FORMA NORTEK AND ADDITIONAL NORTEK AND HISTORICAL HISTORICAL(a) ADJUSTMENTS PLY GEM ADJUSTMENTS PLY GEM ---------- ------------- ----------- ---------- ----------- ---------- Net sales................... $1,332,359 $353,111 $ -- $1,685,470 $ -- $1,685,470 Cost and expenses: Cost of products sold... 984,121 295,198 (800)(b) 1,278,519 (11,500)(h) 1,267,019 Amortization of acquired goodwill.............. 7,167 610 2,962(c) 10,739 -- 10,739 Selling, general and administrative expense............... 251,859 73,065 (4,792)(d) 320,132 (21,083)(i) 299,049 ---------- -------- -------- ---------- -------- ---------- 1,243,147 368,873 (2,630) 1,609,390 (32,583) 1,576,807 ---------- -------- -------- ---------- -------- ---------- Operating earnings (loss)... 89,212 (15,762) 2,630 76,080 32,583 108,663 Interest expense............ (62,345) (4,028) (11,186)(e) (77,559) -- (77,559) Investment income........... 10,733 148 (2,523)(f) 8,358 -- 8,358 ---------- -------- -------- ---------- -------- ---------- Earnings (loss) from continuing operations before provision (benefit) for income taxes.......... 37,600 (19,642) (11,079) 6,879 32,583 39,462 Provision (benefit) for income taxes.............. 14,600 (7,623) (2,885)(g) 4,092 12,604(j) 16,696 ---------- -------- -------- ---------- -------- ---------- Earnings (loss) from continuing operations..... $ 23,000 $(12,019) $ (8,194) $ 2,787 $ 19,979 $ 22,766 ========== ======== ======== ========== ======== ========== EARNINGS PER SHARE AS ADJUSTED FOR THE COMMON STOCK OFFERING: Earnings from continuing operations: Basic................... $ 1.96 $ .24 $ 1.94 Diluted................. 1.93 .23 1.91 Weighted average number of shares: Basic................... 11,723 11,723 11,723 Diluted................. 11,893 11,893 11,893
See Notes to the Unaudited Pro Forma and Pro Forma Adjusted (For Ply Gem) Condensed Consolidated Statement of Operations 27 NOTES TO THE UNAUDITED PRO FORMA AND PRO FORMA ADJUSTED (FOR PLY GEM) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS)
YEAR ENDED TWELVE MONTHS DECEMBER 31, ENDED 1997 APRIL 4, 1998 ------------ ------------- (a) PLY GEM HISTORICAL Amounts for the year ended December 31, 1997 include the unaudited results of Ply Gem for the period from January 1, 1997 to August 25, 1997. Amounts for the twelve months ended April 4, 1998 include the unaudited results of Ply Gem for the period from April 1, 1997 to August 25, 1997. (b) COST OF PRODUCTS SOLD Change in estimated lives of property, plant and equipment offset by increased depreciation over 10 years due to increase in Property, Plant and Equipment to estimated fair value................................................ $ (1,300) $ (800) ======== ======== (c) AMORTIZATION OF ACQUIRED GOODWILL Increase amortization of goodwill over 40 years due to the Ply Gem Acquisition....................................... $ 4,795 $ 2,962 ======== ======== (d) SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Estimated Ply Gem Acquisition Related Cost Savings.......... $ (3,983) $ (2,316) Reduction of goodwill and intangible amortization included in Ply Gem's selling, general and administrative expense................................................... (1,733) (1,055) Decrease due to termination and repurchase of amounts outstanding under Ply Gem's accounts receivable securitization program.................................... (2,030) (1,421) -------- -------- $ (7,746) $ (4,792) ======== ======== (e) INTEREST EXPENSE Interest expense related to the 9 1/4% Notes................ $ (3,438) $ -- Amortization of related debt issuance costs of the 9 1/4% Notes..................................................... (106) -- Reduction of interest expense related to debt refinanced with a portion of the proceeds from the 9 1/4% Notes...... 1,143 341 Interest expense related to the 9 1/8% Notes................ (18,495) (11,423) Amortization of related debt discount and issuance costs of the 9 1/8% Notes.......................................... (771) (476) Interest expense at an assumed average rate of 6.85% on indebtedness outstanding under the Ply Gem Credit Facility.................................................. (4,971) (3,070) Reduction in interest expense related to the refinancing of Ply Gem indebtedness at the date of the Ply Gem Acquisition............................................... 4,751 3,442 -------- -------- $(21,887) $(11,186) ======== ======== (f) INVESTMENT INCOME Reduction in interest income on marketable securities sold to fund the Ply Gem Acquisition and related transactions.............................................. $ (2,742) $ (2,523) ======== ======== (g) PROVISION (BENEFIT) FOR INCOME TAXES Net benefit for income taxes related to notes (b), (d), (e) and (f) above............................................. $ (5,545) $ (2,885) ======== ======== (h) COST OF PRODUCTS SOLD Elimination of charges recorded by Ply Gem prior to the Ply Gem Acquisition, to provide certain valuation reserves and to conform accounting policies to Nortek's................ $(11,500) $(11,500) ======== ========
28
YEAR ENDED TWELVE MONTHS DECEMBER 31, ENDED 1997 APRIL 4, 1998 ------------ ------------- (i) SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Estimated Ply Gem Acquisition Additional Cost Savings....... $(14,061) $(10,383) Elimination of charges recorded by Ply Gem prior to the Ply Gem Acquisition, to provide certain valuation reserves and to conform accounting policies to Nortek's................ (10,700) (10,700) -------- -------- $(24,761) $(21,083) ======== ======== (j) PROVISION FOR INCOME TAXES Net provision for income taxes related to notes (h) and (i) above..................................................... $ 13,891 $ 12,604 ======== ========
29 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report be signed on its behalf of the undersigned hereunto duly authorized. NORTEK, INC. Date: August 12, 1998 By: /s/ Almon C. Hall --------------------------- Almon C. Hall Vice President - Controller EX-2.2 2 AMENDMENTS TO STOCK PURCHASE AND SALE AGREEMENT 1 Exhibit 2.2 AMENDMENT NO. 1 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 1 (the "Amendment") to the Stock Purchase and Sale Agreement (the "Agreement") dated as of March 9, 1998 by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 11th day of May, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below. NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "June 19, 1998" with "July 3, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "May 15, 1998" with "May 29, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "May 29, 1998" with "June 12, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "July 17, 1998" with "July 31, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "July 17, 1998" with "July 31, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "July 10, 1998" with "July 24, 1998". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by replacing the reference therein to "July 10, 1998" with "July 24, 1998". 8. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 9. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. 2 IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen --------------------------------- Name: TIM ALLEN --------------------------------- Title: Head Group Manager --------------------------------- WILLIAMS PLC By: /s/ Tim Allen --------------------------------- Name: TIM ALLEN --------------------------------- Title: Head Group Manager --------------------------------- NTK SUB, INC. By: /s/ Kevin W. Donnelly --------------------------------- Name: KEVIN W. DONNELLY --------------------------------- Title: VICE PRESIDENT --------------------------------- NORTEK, INC. By: /s/ Kevin W. Donnelly --------------------------------- Name: KEVIN W. DONNELLY --------------------------------- Title: VICE PRESIDENT, GENERAL COUNSEL --------------------------------- -2- 3 AMENDMENT NO. 2 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 2 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No. 1 thereto dated May 11, 1998, the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 28th day of May, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "July 3, 1998" with "July 13, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "May 29, 1998" with "June 8, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 12, 1998" with "June 22, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "July 31, 1998" with "August 10, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "July 31, 1998" with "August 10, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "July 24, 1998" with "August 3, 1998". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by replacing the reference therein to "July 24, 1998" with "August 3, 1998". 8. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093819 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after August 10, 1998. 4 9. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 10. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen ------------------------------------- Name: Tim Allen ----------------------------------- Title: HEAD GROUP MANAGER ---------------------------------- WILLIAMS PLC By: /s/ Tim Allen ------------------------------------- Name: Tim Allen ----------------------------------- Title: HEAD GROUP MANAGER ---------------------------------- NTK SUB, INC. By: /s/ Kevin W. Donnelly ------------------------------------- Name: Kevin W. Donnelly ----------------------------------- Title: Vice President ---------------------------------- NORTEK, INC. By: /s/ Kevin W. Donnelly ------------------------------------- Name: Kevin W. Donnelly ----------------------------------- Title: Vice President, General Counsel ---------------------------------- -2- 5 AMENDMENT NO. 3 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 3 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No. 1 thereto dated May 11, 1998 and Amendment No. 2 thereto dated May 28, 1998, the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 3rd day of June, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "July 13, 1998" with "July 20, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 8, 1998" with "June 15, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 22, 1998" with "June 29, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "August 10, 1998" with "August 17, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "August 10, 1998" with "August 17, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "August 3, 1998" with "August 10, 1998". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by replacing the reference therein to "August 3, 1998" with "August 10, 1998". 8. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093819 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after August 17, 1998. 6 9. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 10. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen ------------------------------------- Name: Tim Allen ----------------------------------- Title: Head Group Manager ---------------------------------- WILLIAMS PLC By: /s/ Tim Allen ------------------------------------- Name: Tim Allen ----------------------------------- Title: Head Group Manager ----------------------------------- NTK SUB, INC. By: /s/ Kevin W. Donnelly -------------------------------- Name: Kevin W. Donnelly ------------------------------ Title: Vice President ----------------------------- NORTEK, INC. By: /s/ Kevin W. Donnelly -------------------------------- Name: Kevin W. Donnelly ------------------------------ Title: Vice President, General Counsel ------------------------------ -2- 7 AMENDMENT NO. 4 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 4 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No. 1 thereto dated May 11, 1998, Amendment No. 2 thereto dated May 28, 1998, and Amendment No. 3 thereto dated June 3, 1998, the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 11th day of June, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "July 20, 1998" with "July 27, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 15, 1998" with "June 22, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 29, 1998" with "July 6, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "August 17, 1998" with "August 24, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "August 17, 1998" with "August 24, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "August 10, 1998" with "August 17, 1998". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by replacing the reference therein to "August 10, 1998" with "August 17, 1998". 8. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093819 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after August 24, 1998. 8 9. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 10. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen ------------------------------------- Name: TIM ALLEN ----------------------------------- Title: Head Group Manager ---------------------------------- WILLIAMS PLC By: /s/ Tim Allen ------------------------------------- Name: TIM ALLEN ----------------------------------- Title: Head Group Manager ---------------------------------- NTK SUB, INC. By: /s/ Kevin W. Donnelly ------------------------------------- Name: KEVIN W. DONNELLY ----------------------------------- Title: VICE PRESIDENT ---------------------------------- NORTEK, INC. By: /s/ Kevin W. Donnelly ------------------------------------- Name: KEVIN W. DONNELLY ----------------------------------- Title: VICE PRESIDENT, GENERAL COUNSEL ---------------------------------- -2- 9 AMENDMENT NO. 5 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 5 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No. 1 thereto dated May 11, 1998, Amendment No. 2 thereto dated May 28, 1998, Amendment No. 3 thereto dated June 3, 1998, and Amendment No. 4 thereto dated June 11, 1998, the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub,Inc., a Delaware corporation (the "Buyer"), is entered into as of the 18th day of June, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "July 27, 1998" with "August 3, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 22, 1998" with "June 29, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "July 6, 1998" with "July 13, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "August 24, 1998" with "August 31, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "August 24, 1998" with "August 31, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "August 17, 1998" with "August 24, 1998". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by replacing the reference therein to "August 17, 1998" with "August 24, 1998". 8. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093S19 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after August 31, 1998. 10 9. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 10. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen ---------------------- Name: Tim Allen ---------------------- Title: Head Group Manager ---------------------- WILLIAMS PLC By: /s/ Tim Allen ---------------------- Name: Tim Allen ---------------------- Title: Head Group Manager ---------------------- NTK SUB, INC. By: /s/ Kevin W. Donnelly ---------------------- Name: Kevin W. Donnelly ---------------------- Title: Vice President ---------------------- NORTEK, INC. By: /s/ Kevin W. Donnelly ---------------------- Name: Kevin W. Donnelly ---------------------- Title: Vice President, General Counsel ---------------------- -2- 11 AMENDMENT NO. 6 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 6 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No. 1 thereto dated May 11, 1998, Amendment No. 2 thereto dated May 28, 1998, Amendment No. 3 thereto dated June 3, 1998, Amendment No. 4 thereto dated June 11, 1998, and Amendment No. 5 thereto dated June 18, 1998, the "Agreement) by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 26th day of June, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "August 3, 1998" with "August 17, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "June 29, 1998" with "July 13, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "July 13, 1998" with "July 27, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "August 31, 1998" with "September 14, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "August 31, 1998" with "September 14, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by (i) replacing the reference therein to "August 24, 1998" with "September 8, 1998" and (ii) replacing the reference therein to "45 days" with "30 days". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by (i) replacing the reference therein to "August 24, 1998" with "September 8, 1998" and (ii) replacing the reference therein to "45 days" with "30 days". 8. Section 1.3 of the Agreement is hereby amended by replacing the reference therein to "45 days" with "30 days". 12 9. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093819 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after September 14, 1998. 10. Section 4.2 of the Agreement is hereby amended by deleting the final sentence thereof and replacing it with the following: "For purposes of this Agreement, the term "FTC Clearance Date" shall mean the first of the following dates to occur: (i) the date that the post-Second-Request compliance waiting period applicable to the consummation of the transactions contemplated by this Agreement under the Hart-Scott-Rodino Act has expired without the FTC seeking to restrain or enjoin consummation of the transactions contemplated by this Agreement; (ii) the date that the post-Second-Request compliance waiting period applicable to the consummation of the transactions contemplated by this Agreement under the Hart-Scott-Rodino Act has been terminated by the FTC with the indication that the FTC will not seek to restrain or enjoin consummation of the transactions contemplated by this Agreement; and (iii) the date that the post-Second-Request compliance waiting period applicable to the consummation of the transactions contemplated by this Agreement under the Hart-Scott-Rodino Act has been terminated by the FTC concurrently with or following the FTC's provisional acceptance of a consent decree executed by or on behalf of the Buyer or an Affiliate of the Buyer." 11. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 12. Except as amended hereby, the Amendment shall remain in full force and effect in accordance with its terms. -2- 13 IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 6 as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. BY: /s/ Tim Allen --------------------------- Name: Tim Allen --------------------------- Title: Head Group Manager --------------------------- WILLIAMS PLC By: /s/ Tim Allen --------------------------- Name: Tim Allen --------------------------- Title: Head Group Manager --------------------------- NTK SUB, INC. By: /s/ KEVIN W. DONNELLY --------------------------- Name: Kevin W. Donnelly ------------------------- Title: Vice President ------------------------ NORTEK, INC. By: /s/ KEVIN W. DONNELLY --------------------------- Name: Kevin W. Donnelly ------------------------- Title: Vice President, General Manger ------------------------ -3- 14 AMENDMENT NO. 7 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 7 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No. 1 thereto dated May 11, 1998, Amendment No. 2 thereto dated May 28, 1998, Amendment No. 3 thereto dated June 3, 1998, Amendment No. 4 thereto dated June 11, 1998, Amendment No. 5 thereto dated June 18, 1998 and Amendment No. 6 thereto dated June 26, 1998, the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 8th day of July, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend certain provisions of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "August 17, 1998" with "August 31, 1998". 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "July 13, 1998" with "July 27, 1998". 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "July 27, 1998" with "August 10, 1998". 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "September 14, 1998" with "September 28, 1998". 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "September 14, 1998" with "September 28, 1998". 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "September 8, 1998" with "September 21, 1998". 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by (i) replacing the reference therein to "September 8, 1998" with "September 21, 1998". 8. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093819 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after September 28, 1998. 9. Section 4.2 of the Agreement is hereby amended by deleting the final sentence thereof and replacing it with the following: "For purposes of this Agreement, the term "FTC Clearance Date" shall mean the first of the following dates to occur: (i) the date that the post-Second-Request compliance waiting period applicable to the consummation of the 15 transactions contemplated by this Agreement under the Hart-Scott-Rodino Act has expired without the FTC seeking to restrain or enjoin consummation of the transactions contemplated by this Agreement: (ii) the date that the post-Second-Request compliance waiting period applicable to the consummation of the transactions contemplated by this Agreement under the Hart-Scott-Rodino Act has been terminated by the FTC with the indication that the FTC will not seek to restrain or enjoin consummation of the transactions contemplated by this Agreement; and (iii) the date that the post-Second-Request compliance waiting period applicable to the consummation of the transactions contemplated by this Agreement under the Hart-Scott-Rodino Act has been terminated by the FTC concurrently with or following the FTC's provisional acceptance of a consent decree executed by or on behalf of the Buyer or an Affiliate of the Buyer pursuant to the Agreement to Hold Separate and the Consent Order entered into between the Buyer and the FTC (File No. 981-0111)." 10. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 11. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 7 as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen ---------------------------------------- Name: Tim Allen -------------------------------------- Title: Head Group Mgr and Corporate Affairs ------------------------------------- WILLIAMS PLC By: /s/ Tim Allen ---------------------------------------- Name: Tim Allen -------------------------------------- Title: Head Group Mgr and Corporate Affairs ------------------------------------- NTK SUB, INC. By: /s/ Kevin W. Donnelly ---------------------------------------- Name: Kevin W. Donnelly -------------------------------------- Title: Vice President ------------------------------------- NORTEK, INC. By: /s/ Kevin W. Donnelly ---------------------------------------- Name: Kevin W. Donnelly -------------------------------------- Title: Vice President, General Counsel ------------------------------------- -2- 16 AMENDMENT NO. 8 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 8 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998 (as amended by Amendment No.1 thereto dated May 11, 1998, Amendment No. 2 thereto dated May 28, 1998, Amendment No. 3 thereto dated June 3, 1998, Amendment No. 4 thereto dated June 11, 1998, Amendment No. 5 thereto dated June 18, 1998, Amendment No. 6 thereto dated June 26, 1998 and Amendment No. 7 thereto dated July 8, 1998, the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 23rd day of July, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend the provision of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 7.1(e) of the Agreement is hereby amended by replacing the two references therein to "August 31, 1998" with "September 8, 1998." 2. Clause (ii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "July 27, 1998" with "August 3, 1998." 3. Clause (iii) of Section 7.2(b) of the Agreement is hereby amended by replacing the reference therein to "August 10, 1998" with "August 17, 1998." 4. Section 7.1(c) of the Agreement is hereby amended by replacing the reference therein to "September 28, 1998" with "October 5, 1998." 5. Section 7.1(d) of the Agreement is hereby amended by replacing the reference therein to "September 28, 1998" with "October 5, 1998." 6. Section 7.1(f) of the Agreement is hereby amended by replacing the reference therein to "September 21, 1998" with "September 28,1998." 7. Clause (iii) of Section 7.2(c) of the Agreement is hereby amended by replacing the reference therein to "September 21, 1998" with "September 28, 1998." 8. If requested by the Seller, the Buyer shall cause Standby Letter of Credit No. RS1093819 (Date of Issue: March 9, 1998), which was previously issued by Fleet National Bank pursuant to Section 7.2(d) of the Agreement, to be amended on or prior to July 31, 1998 to extend the "Expiration Date" (as defined therein) to a date that is on or after October 5, 1998. 17 9. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 10. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. 11. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 8 as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Tim Allen ------------------------------------ Name: Tim Allen Title: WILLIAMS PLC By: /s/ Tim Allen ------------------------------------ Name: Tim Allen Title: NTK SUB, INC. By: /s/ Kevin W. Donnelly ------------------------------------ Name: Kevin W. Donnelly Title: Vice President NORTEK, INC. By: /s/ Kevin W. Donnelly ------------------------------------ Name: Kevin W. Donnelly Title: Vice President, General Manager -2- 18 AMENDMENT NO. 9 TO STOCK PURCHASE AND SALE AGREEMENT This Amendment No. 9 (the "Amendment") to the Stock Purchase and Sale Agreement dated as of March 9, 1998, (as amended by Amendment No. 1 thereto dated May 11, 1998, Amendment No. 2 thereto dated May 28, 1998, Amendment No. 3 thereto dated June 3, 1998, Amendment No. 4 thereto dated June 11, 1998, Amendment No. 5 thereto dated June 18, 1998, Amendment No. 6 thereto dated June 26, 1998, Amendment No. 7 thereto dated July 8, 1998 and Amendment No. 8 thereto dated July 23, 1998 (the "Agreement") by and between Williams Y&N Holdings, Inc., a Delaware corporation (the "Seller"), and NTK Sub, Inc., a Delaware corporation (the "Buyer"), is entered into as of the 28th day of July, 1998. Capitalized terms used herein and not otherwise defined shall have the same meaning as in the Agreement. WHEREAS, the Parties desire to amend the provision of the Agreement as set forth below, NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: 1. Section 1.4(a)(I) of the Agreement is hereby amended by adding the following proviso at the end of the first sentence: "provided however, that if the Closing occurs on or before July 31st, then the Closing Balance Sheet Date shall be August 1, 1998." 2. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Amendment may be executed by facsimile signature. 3. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 9 as of the date first above written. WILLIAMS Y&N HOLDINGS, INC. By: /s/ Robin Brown -------------------------- Name: Robin Brown -------------------------- Title: Associate Director of Corporate Finance ----------------------- 19 WILLIAMS PLC By: /s/ Robin Brown ------------------------------------ Name: Robin Brown Title: Associate Director of Corporate Finance NTK SUB, INC. By: /s/ Kevin W. Donnelly ------------------------------------ Name: Kevin W. Donnelly Title: Vice President NORTEK, INC. By: /s/ Kevin W. Donnelly ------------------------------------ Name: Kevin W. Donnelly Title: Vice President, General Manager & Secretary -2- EX-23.1 3 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 [PRICEWATERHOUSECOOPERS LLP LETTERHEAD] CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Form 8-K, and to the incorporation by reference in the registration statements of Nortek, Inc. on Form S-8 (File No.'s 33-22527, 33-47897 and 333-39293), of our report dated February 20, 1998, on our audit of the consolidated financial statements of NuTone Inc. and Subsidiary as of December 31, 1997, and for the year then ended. /s/ PricewaterhouseCoopers LLP Cincinnati, Ohio August 12, 1998 -----END PRIVACY-ENHANCED MESSAGE-----