SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):February 12, 2004
Nortek, Inc.
(Exact name of registrant as specified in charter)
| | | | | |
| Delaware | | 333-25505 | | 05-0314991 |
| | | | | |
(State or other jurisdiction
of incorporation) | | (Commission File Number) | | (I.R.S. Employer
Identification No.) |
| | | |
| 50 Kennedy Plaza, Providence, Rhode Island | | 02903-2360 |
| | | |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code:(401) 751-1600
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 12, 2004, Nortek, Inc. (the “Company”) completed the sale of the stock of Ply Gem Industries, Inc. (“Ply Gem”) to Ply Gem Investment Holdings, Inc. (the “Buyer”), an affiliate of Caxton-Iseman Capital, Inc. in a transaction valued at approximately $560 million including debt assumed by the Buyer. The Company estimates that the net after tax proceeds received will equal approximately $455 million after estimated income taxes payable on the transaction of approximately $63 million. The agreements related to the sale of Ply Gem were filed as exhibits to the Company’s Form 8-K filed on February 13, 2004 and the Company’s Form 8-K filed on December 22, 2003, which are incorporated by reference herein.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
On November 20, 2002, Nortek, Inc. (“Nortek” or the “Company”) was reorganized into a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings”), with Holdings becoming the successor public company and Nortek becoming its wholly-owned subsidiary. On January 9, 2003, Holdings completed a recapitalization transaction, which resulted in Holdings’ acquisition by certain affiliates and designees of Kelso & Company L.P. and certain members of Nortek’s management (the “Recapitalization”).
On February 12, 2004, the Company sold its subsidiary, Ply Gem Industries, Inc. (“Ply Gem”), to an affiliate of Caxton-Iseman Capital, Inc. in a transaction valued at approximately $560 million, including debt assumed by the buyer. Ply Gem’s results of operations include the results of operations of the Company’s Windows, Doors and Siding segment and corporate expenses of Ply Gem. The Company will treat the sale of Ply Gem as a discontinued operation in its annual report on Form 10-K for the year ended December 31, 2003 and, accordingly, the results of Ply Gem will be excluded from continuing operations for all periods presented in the Form 10-K filing. In addition, the assets and liabilities of Ply Gem will be reflected as assets and liabilities from discontinued operations for all consolidated balance sheets presented in the Company’s Form 10-K for the year ended December 31, 2003. The historical consolidated results of operations and balance sheets included within this unaudited pro forma condensed consolidated financial data do not reflect any adjustments to treat Ply Gem as a discontinued operation.
On February 13, 2004, the Company called for redemption on March 15, 2004 all of the Company’s outstanding 9 1/4% Senior Notes due March 15, 2007 (the “9 1/4% Senior Notes”) and on March 14, 2004 all of the Company’s outstanding 9 1/8% Senior Notes due September 1, 2007 (the “9 1/8% Senior Notes”). The 9 1/4% Senior Notes and the 9 1/8% Senior Notes are being called at a redemption price of 101.542% and 103.042%, respectively, of the principal amount thereof plus accrued and unpaid interest. In addition, the Company called for redemption on March 14, 2004 $60 million of the Company’s outstanding 8 7/8% Senior Notes due August 1, 2008 (the “8 7/8% Senior Notes”) at a redemption price of 104.438% of the principal amount thereof plus accrued and unpaid interest (collectively, the “Debt Redemptions”).
The following unaudited pro forma condensed consolidated financial data includes the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2002 and the periods from January 1, 2003 to January 9, 2003 and January 10, 2003 to October 4, 2003 and the unaudited pro forma condensed consolidated balance sheet as of October 4, 2003. The unaudited pro forma condensed consolidated financial data gives pro forma effect to the Recapitalization, the sale of Ply Gem and the Debt Redemptions.
The unaudited pro forma condensed consolidated balance sheet as of October 4, 2003 has been prepared by adjusting the historical unaudited condensed consolidated balance sheet of Nortek to give effect to the sale of Ply Gem and the Debt Redemptions as if they occurred as of that date. The preliminary estimated purchase accounting impact of the Recapitalization was previously included in the historical unaudited condensed consolidated balance sheet of the Company as of October 4, 2003. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2002, the period from January 1, 2003 to January 9, 2003 and the period from January 10, 2003 to October 4, 2003 give effect to these transactions and the Recapitalization as if they had occurred as of January 1, 2002. The unaudited pro forma condensed consolidated statement of operations exclude non-recurring items directly attributable to the Recapitalization and the Debt Redemptions.
3
The Recapitalization has been accounted for under the purchase method of accounting. The information contained herein has been prepared utilizing information available at the time this Form 8-K filing was prepared and is subject to refinement until all pertinent information has been obtained and the purchase accounting is finalized. The Company will finalize the purchase accounting associated with the Recapitalization prior to filing its annual report on Form 10-K for the year ended December 31, 2003 and the pro forma information presented does not include any adjustments that may arise in connection with finalizing the purchase accounting for the Recapitalization.
The unaudited pro forma condensed consolidated financial data is presented for informational purposes only and is not necessarily indicative of the financial condition and results of operations that would have occurred had the Recapitalization, the sale of Ply Gem and the Debt Redemptions, taken place on the dates indicated above, nor are they necessarily indicative of the Company’s future financial position or results of operations.
The unaudited pro forma condensed consolidated financial data should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 2002 and quarterly report on Form 10-Q for the quarterly period ended October 4, 2003, which are incorporated by reference herein.
4
NORTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2002
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Sale of | | | | Debt | | | |
| | | | Recapitalization | | | | Ply Gem | | | | Redemption | | | |
| | Nortek | | Pro Forma | | | | Pro Forma | | | | Pro Forma | | Nortek | |
| | Historical | | Adjustments | | Subtotal | | Adjustments(g) | | Subtotal | | Adjustments | | Pro Forma | |
| |
| |
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| |
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| |
| |
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| | |
| | (In thousands) |
| | |
| | (Unaudited) |
| Net Sales | | $ | 1,888,292 | | | $ | — | | | $ | 1,888,292 | | | $ | (504,167 | ) | | $ | 1,384,125 | | | $ | — | | | $ | 1,384,125 | | |
| Costs and Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of Products Sold | | | 1,361,101 | | | | (5,537 | )(a) | | | 1,355,564 | | | | (369,412 | ) | | | 986,152 | | | | — | | | | 986,152 | | |
| Selling, General and Administrative Expense | | | 333,917 | | | | (10,812 | )(b) | | | 323,105 | | | | (64,754 | ) | | | 258,351 | | | | — | | | | 258,351 | | |
| Amortization of Intangible Assets | | | 6,106 | | | | 6,075 | (c) | | | 12,181 | | | | (4,281 | ) | | | 7,900 | | | | — | | | | 7,900 | | |
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| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | | | 1,701,124 | | | | (10,274 | ) | | | 1,690,850 | | | | (438,447 | ) | | | 1,252,403 | | | | — | | | | 1,252,403 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Earnings | | | 187,168 | | | | 10,274 | | | | 197,442 | | | | (65,720 | ) | | | 131,722 | | | | — | | | | 131,722 | | |
| Interest Expense | | | (96,634 | ) | | | 1,575 | (d) | | | (95,059 | ) | | | 43,287 | | | | (51,772 | ) | | | 11,031 | (h) | | | (40,741 | ) | |
| Investment Income | | | 7,466 | | | | (5,214 | )(e) | | | 2,252 | | | | (1,523 | ) | | | 729 | | | | (514 | )(i) | | | 215 | | |
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| | |
| Earnings from Continuing Operations Before Provision for Income Taxes | | | 98,000 | | | | 6,635 | | | | 104,635 | | | | (23,956 | ) | | | 80,679 | | | | 10,517 | | | | 91,196 | | |
| Provision for Income Taxes | | | 39,000 | | | | 37 | (f) | | | 39,037 | | | | (9,684 | ) | | | 29,353 | | | | 3,681 | (j) | | | 33,034 | | |
| | | |
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| | |
| Earnings from Continuing Operations(k) | | $ | 59,000 | | | $ | 6,598 | | | $ | 65,598 | | | | (14,272 | ) | | $ | 51,326 | | | | 6,836 | | | | 58,162 | | |
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See Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Operations
5
NORTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the period from January 1, 2003 to January 9, 2003
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Sale of | | | | Debt | | | | |
| | | | Recapitalization | | | | Ply Gem | | | | Redemption | | | | |
| | Nortek | | Pro Forma | | | | Pro Forma | | | | Pro Forma | | Nortek |
| | Historical | | Adjustments | | Subtotal | | Adjustments(g) | | Subtotal | | Adjustments | | Pro Forma |
| |
| |
| |
| |
| |
| |
| |
|
| | |
| | (In thousands) |
| | |
| Net Sales | | $ | 33,775 | | | $ | — | | | $ | 33,775 | | | $ | (8,824 | ) | | $ | 24,951 | | | $ | — | | | $ | 24,951 |
| Costs and Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of Products Sold | | | 26,286 | | | | (337 | )(a) | | | 25,949 | | | | (7,589 | ) | | | 18,360 | | | | — | | | | 18,360 | |
| Selling, General and Administrative Expense | | | 94,185 | | | | (87,425 | )(b) | | | 6,760 | | | | (1,473 | ) | | | 5,287 | | | | — | | | | 5,287 | | |
| Amortization of Intangible Assets | | | 137 | | | | 97 | (c) | | | 234 | | | | (82 | ) | | | 152 | | | | — | | | | 152 |
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| | | |
| | | |
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| | | |
| | | |
| |
| | | | 120,608 | | | | (87,665 | ) | | | 32,943 | | | | (9,144 | ) | | | 23,799 | | | | — | | | | 23,799 | |
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| | | |
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| | | | | | | |
| |
| Operating Earnings (Loss) | | | (86,833 | ) | | | 87,665 | | | | 832 | | | | 320 | | | | 1,152 | | | | — | | | | 1,152 | |
| Interest Expense | | | (2,288 | ) | | | 142 | (d) | | | (2,146 | ) | | | 1,170 | | | | (976 | ) | | | 307 | (h) | | | (669 | ) | |
| Investment Income | | | 121 | | | | (23 | )(e) | | | 98 | | | | (2 | ) | | | 96 | | | | (46 | )(i) | | | 50 | | |
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Earnings (Loss) from Continuing Operations
Before Provision (Benefit) for Income Taxes | | | (89,000 | ) | | | 87,784 | | | | (1,216 | ) | | | 1,488 | | | | 272 | | | | 261 | | | | 533 | | |
| Provision (Benefit) for Income Taxes | | | (24,100 | ) | | | 24,010 | (f) | | | (90 | ) | | | 479 | | | | 389 | | | | 92 | (j) | | | 481 | | |
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| Earnings (Loss) from Continuing Operations(k) | | $ | (64,900 | ) | | $ | 63,774 | | | $ | (1,126 | ) | | | 1,009 | | | $ | (117 | ) | | | 169 | | | | 52 | | |
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See Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Operations
6
NORTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Period from January 10, 2003 to October 4, 2003
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Sale of | | | | Debt | | | | |
| | | | Recapitalization | | | | Ply Gem | | | | Redemption | | |
| | Nortek | | Pro Forma | | | | Pro Forma | | | | Pro Forma | | Nortek |
| | Historical | | Adjustments | | Subtotal | | Adjustments(g) | | Subtotal | | Adjustments | | Pro Forma |
| |
| |
| |
| |
| |
| |
| |
|
| | |
| | (In thousands) |
| | |
| Net Sales | | $ | 1,534,806 | | | $ | — | | | $ | 1,534,806 | | | $ | (410,147 | ) | | $ | 1,124,659 | | | $ | — | | | $ | 1,124,659 | |
| Costs and Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of Products Sold | | | 1,107,189 | | | | (6,018 | )(a) | | | 1,101,171 | | | | (306,872 | ) | | | 794,299 | | | | — | | | | 794,299 | |
| Selling, General and Administrative Expense | | | 242,999 | | | | — | | | | 242,999 | | | | (52,280 | ) | | | 190,719 | | | | — | | | | 190,719 | |
| Amortization of Intangible Assets | | | 8,956 | | | | — | | | | 8,956 | | | | (3,130 | ) | | | 5,826 | | | | — | | | | 5,826 | |
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| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | | 1,359,144 | | | | (6,018 | ) | | | 1,353,126 | | | | (362,282 | ) | | | 990,844 | | | | — | | | | 990,844 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| Operating Earnings | | | 175,662 | | | | 6,018 | | | | 181,680 | | | | (47,865 | ) | | | 133,815 | | | | — | | | | 133,815 | |
| Interest Expense | | | (71,039 | ) | | | 4,100 | (d) | | | (66,939 | ) | | | 29,104 | | | | (37,835 | ) | | | 7,282 | (h) | | | (30,553 | ) |
| Investment Income | | | 1,077 | | | | — | | | | 1,077 | | | | (152 | ) | | | 925 | | | | (725 | )(i) | | | 200 | |
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| | | |
| |
| Earnings from Continuing Operations Before Provision for Income Taxes | | | 105,700 | | | | 10,118 | | | | 115,818 | | | | (18,913 | ) | | | 96,905 | | | | 6,557 | | | | 103,462 | |
| Provision for Income Taxes | | | 43,200 | | | | 3,721 | (f) | | | 46,921 | | | | (7,536 | ) | | | 39,385 | | | | 2,294 | (j) | | | 41,679 | |
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| Earnings from Continuing Operations(k) | | $ | 62,500 | | | $ | 6,397 | | | $ | 68,897 | | | | (11,377 | ) | | $ | 57,520 | | | | 4,263 | | | | 61,783 | |
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See Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Operations
7
NORTEK, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | For the Period, |
| | | | | |
|
| | | | | | January 1, | | January 10, |
| | | | | | 2003 to | | 2003 to |
| | | | Year Ended | | January 9, | | October 4, |
| | | | December 31, 2002 | | 2003 | | 2003 |
| | | | Pro Forma | | Pro Forma | | Pro Forma |
| | | | Adjustments | | Adjustments | | Adjustments |
| | | |
| |
| |
|
| | |
| | | | | | | (In thousands) |
ADJUSTMENTS RELATED TO THE RECAPITALIZATION: | | | | | | | | | | | | | | | | |
(a) Cost of Products Sold | | | | | | | | | | | | | | | | |
| Amortization of inventory fair value adjustment | | | | | | $ | 6,018 | | | $ | — | | | $ | (6,018 | ) |
| Change in depreciation expense related to property, plant and equipment fair value adjustment and changes in estimated lives | | | | | | | (11,555 | ) | | | (337 | ) | | | — | |
| | | | | | | |
| | | |
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| |
| | | | | | | $ | (5,537 | ) | | $ | (337 | ) | | $ | (6,018 | ) |
| | | | | | | |
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| |
(b) Selling, General and Administrative Expense | | | | | | | | | | | | | | | | |
| Elimination of expenses of a Supplemental Executive Retirement Plan (“SERP”) | | | | | | $ | (7,460 | ) | | $ | (380 | ) | | $ | — | |
| Elimination of a Life Insurance Policy to partially fund expenses related to a SERP | | | | | | | 783 | | | | 211 | | | | — | |
| Contractural salary increases | | | | | | | 1,431 | | | | 36 | | | | — | |
| Kelso management fees | | | | | | | 1,500 | | | | 37 | | | | — | |
| Curtailment loss related to the termination of a SERP | | | | | | | — | | | | (70,142 | ) | | | — | |
| Management retention payments | | | | | | | — | | | | (425 | ) | | | — | |
| Stock option termination payments | | | | | | | — | | | | (4,710 | ) | | | — | |
| Insurance costs of Recapitalization | | | | | | | — | | | | (1,210 | ) | | | — | |
| Expenses of Nortek related to the consummation of the Recapitalization | | | | | | | (6,600 | ) | | | (10,833 | ) | | | — | |
| Post retirement medical plan fair value adjustment and other | | | | | | | (466 | ) | | | (9 | ) | | | | |
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| |
| | | | | | | $ | (10,812 | ) | | $ | (87,425 | ) | | $ | — | |
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(c) Amortization of intangible assets | | | | | | | | | | | | | | | | |
| Change in amortization of intangible assets related to intangible asset fair value adjustment and changes in lives | | | | | | $ | 6,075 | | | $ | 97 | | | $ | — | |
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(d) Interest Expense | | | | | | | | | | | | | | | | |
| Deferred financing costs of a bridge facility | | | | | | $ | 4,100 | | | $ | — | | | $ | (4,100 | ) |
| Change in interest expense related to fair value adjustments to debt | | | | | | | (5,675 | ) | | | (142 | ) | | | — | |
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| |
| | | | | | | $ | (1,575 | ) | | $ | (142 | ) | | $ | (4,100 | ) |
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| |
(e) Investment Income | | | | | | | | | | | | | | | | |
| Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to fund the Recapitalization and related transactions | | | | | | $ | (5,214 | ) | | $ | (23 | ) | | $ | — | |
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| |
8
NORTEK, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | For the Period, |
| | | | | |
|
| | | | | | January 1, | | January 10, |
| | | | | | 2003 to | | 2003 to |
| | | | Year Ended | | January 9, | | October 4, |
| | | | December 31, 2002 | | 2003 | | 2003 |
| | | | Pro Forma | | Pro Forma | | Pro Forma |
| | | | Adjustments | | Adjustments | | Adjustments |
| | | |
| |
| |
|
| | |
| | | | | | (In thousands) |
| (f) Provision (benefit) for Income Taxes | | | | | | | | | | | | |
| Elimination of expenses of a SERP | | | | | | $ | 2,611 | | | $ | 133 | | | $ | — | |
| Contractual salary increases | | | | | | | (500 | ) | | | (13 | ) | | | — | |
| Kelso management fees | | | | | | | (525 | ) | | | (13 | ) | | | — | |
| Bridge financing fees | | | | | | | (1,435 | ) | | | — | | | | 1,435 | |
| Reduction in investment income | | | | | | | (1,826 | ) | | | (8 | ) | | | — | |
| Impact of fair value adjustments related to the Recapitalization | | | | | | | 1,957 | | | | 144 | | | | 2,286 | |
| Curtailment loss related to the termination of a SERP | | | | | | | — | | | | 21,324 | | | | — | |
| Management retention payments | | | | | | | — | | | | 149 | | | | — | |
| Stock option termination payments | | | | | | | — | | | | 1,669 | | | | — | |
| Insurance costs of Recapitalization | | | | | | | — | | | | 424 | | | | — | |
| Expenses related to the consummation of the Recapitalization | | | | | | | (245 | ) | | | 201 | | | | — | |
| | | | | | | |
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| | | |
| |
| | | | | | | $ | 37 | | | $ | 24,010 | | | $ | 3,721 | |
| | | | | | | |
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| |
ADJUSTMENTS RELATED TO THE SALE OF PLY GEM: |
|
| (g) On February 12, 2004, the Company sold its subsidiary, Ply Gem. The pro forma adjustments relating to the sale of Ply Gem assume that the sale of Ply Gem occurred on January 1, 2002 and, accordingly, eliminate the historical results of operations of Ply Gem, record the impact of interest expense to be allocated to Ply Gem as a discontinued operation based upon the debt to be repaid from the net proceeds of the sale and reverse the portion of the Recapitalization pro forma adjustments related to Ply Gem for all periods presented. The following tables summarize the components of the pro forma adjustment for each of the periods presented to show the elimination of the historical results of Ply Gem and the reversal of the Recapitalization pro forma adjustments related to Ply Gem: |
9
NORTEK, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| | | | | | Reverse | | |
| | | | | | Ply Gem | | |
| | Eliminate | | | | Portion of | | |
| | Historical | | Allocation | | Recapitalization | | Sale of Ply Gem |
| | Results of | | of Interest | | Pro Forma | | Pro Forma |
| | Ply Gem | | Expense | | Adjustments | | Adjustments |
| |
| |
| |
| |
|
| | (In thousands) |
Year Ended December 31, 2002: | | | | | | | | | | | | | | | | |
| Net Sales | | $ | (504,167 | ) | | $ | — | | | $ | — | | | $ | (504,167 | ) |
| Cost and Expenses: | | | | | | | | | | | | | | | | |
| Cost of Products Sold | | | (368,802 | ) | | | — | | | | (610 | ) | | | (369,412 | ) |
| Selling, General and Administrative Expense | | | (64,646 | ) | | | — | | | | (108 | ) | | | (64,754 | ) |
| Amortization of Intangible Assets | | | (3,118 | ) | | | — | | | | (1,163 | ) | | | (4,281 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| | | | (436,566 | ) | | | — | | | | (1,881 | ) | | | (438,447 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Operating Earnings | | | (67,601 | ) | | | — | | | | 1,881 | | | | (65,720 | ) |
| Interest Expense | | | 2,424 | | | | 40,863 | | | | — | | | | 43,287 | |
| Investment Income | | | (1,523 | ) | | | — | | | | — | | | | (1,523 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Earnings from Continuing Operations
before Provision for Income Taxes | | | (66,700 | ) | | | 40,863 | | | | 1,881 | | | | (23,956 | ) |
| Provision for Income Taxes | | | (24,700 | ) | | | 14,302 | | | | 714 | | | | (9,684 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Earnings from Continuing Operations | | $ | (42,000 | ) | | $ | 26,561 | | | $ | 1,167 | | | $ | (14,272 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Period from January 1, 2003 to January 9, 2003: | | | | | | | | | | | | | | | | |
| Net Sales | | $ | (8,824 | ) | | $ | — | | | $ | — | | | $ | (8,824 | ) |
| Cost and Expenses: | | | | | | | | | | | | | | | | |
| Cost of Products Sold | | | (7,651 | ) | | | — | | | | 62 | | | | (7,589 | ) |
| Selling, General and Administrative Expense | | | (1,471 | ) | | | — | | | | (2 | ) | | | (1,473 | ) |
| Amortization of Intangible Assets | | | (70 | ) | | | — | | | | (12 | ) | | | (82 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| | | | (9,192 | ) | | | — | | | | 48 | | | | (9,144 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Operating Earnings (Loss) | | | 368 | | | | — | | | | (48 | ) | | | 320 | |
| Interest Expense | | | 34 | | | | 1,136 | | | | — | | | | 1,170 | |
| Investment Income | | | (2 | ) | | | — | | | | — | | | | (2 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Earnings (Loss) from Continuing Operations
before Provision (Benefit) for Income Taxes | | | 400 | | | | 1,136 | | | | (48 | ) | | | 1,488 | |
| Provision (Benefit) for Income Taxes | | | 100 | | | | 397 | | | | (18 | ) | | | 479 | |
| | | |
| | | |
| | | |
| | | |
| |
| Earnings (Loss) from Continuing Operations | | $ | 300 | | | $ | 739 | | | $ | (30 | ) | | $ | 1,009 | |
| | | |
| | | |
| | | |
| | | |
| |
Period from January 10, 2003 to October 4, 2003: | | | | | | | | | | | | | | | | |
| Net Sales | | $ | (410,147 | ) | | $ | — | | | $ | — | | | $ | (410,147 | ) |
| Cost and Expenses: | | | | | | | | | | | | | | | | |
| Cost of Products Sold | | | (308,259 | ) | | | — | | | | 1,387 | | | | (306,872 | ) |
| Selling, General and Administrative Expense | | | (52,280 | ) | | | — | | | | — | | | | (52,280 | ) |
| Amortization of Intangible Assets | | | (3,130 | ) | | | — | | | | — | | | | (3,130 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| | | | (363,669 | ) | | | — | | | | 1,387 | | | | (362,282 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Operating Earnings | | | (46,478 | ) | | | — | | | | (1,387 | ) | | | (47,865 | ) |
| Interest Expense | | | 1,130 | | | | 27,974 | | | | — | | | | 29,104 | |
| Investment Income | | | (152 | ) | | | — | | | | — | | | | (152 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Earnings from Continuing Operations
before Provision for Income Taxes | | | (45,500 | ) | | | 27,974 | | | | (1,387 | ) | | | (18,913 | ) |
| Provision for Income Taxes | | | (16,800 | ) | | | 9,791 | | | | (527 | ) | | | (7,536 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Earnings from Continuing Operations | | $ | (28,700 | ) | | | 18,183 | | | $ | (860 | ) | | $ | (11,377 | ) |
| | | |
| | | |
| | | |
| | | |
| |
10
NORTEK, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | For the Period, |
| | | | | |
|
| | | | | | January 1, | | January 10, |
| | | | | | 2003 to | | 2003 to |
| | | | Year Ended | | January 9, | | October 4, |
| | | | December 31, 2002 | | 2003 | | 2003 |
| | | | Pro Forma | | Pro Forma | | Pro Forma |
| | | | Adjustments | | Adjustments | | Adjustments |
| | | |
| |
| |
|
| | |
| | | | | | (In thousands) |
ADJUSTMENTS RELATED TO THE REDEMPTION OF SENIOR NOTES: | | | | | | | | | | | | | | | | |
(h) Interest Expense | | | | | | | | | | | | | | | | |
| Reduction in cash interest expense for debt redemptions | | | | | | | (49,800 | ) | | | (1,383 | ) | | | (36,626 | ) |
| Elimination of amortization of debt premium and discount and deferred financing costs | | | | | | | (2,094 | ) | | | (60 | ) | | | 1,370 | |
| Allocate interest expense to Ply Gem discontinued operations | | | | | | | 40,863 | | | | 1,136 | | | | 27,974 | |
| | | | | | | |
| | | |
| | | |
| |
| | | | | | | $ | (11,031 | ) | | $ | (307 | ) | | $ | (7,282 | ) |
| | | | | | | |
| | | |
| | | |
| |
(i) Investment Income | | | | | | | | | | | | | | | | |
| Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to partially fund the debt redemptions | | | | | | $ | (514 | ) | | $ | (46 | ) | | $ | (725 | ) |
| | | | | | | |
| | | |
| | | |
| |
(j) Provision for income taxes | | | | | | | | | | | | | | | | |
| Reduction in cash interest expense for debt redemptions | | | | | | | 17,430 | | | | 484 | | | | 12,819 | |
| Elimination of amortization of debt premium and discount and deferred financing costs | | | | | | | 733 | | | | 21 | | | | (480 | ) |
| Allocate interest expense to Ply Gem discontinued operations | | | | | | | (14,302 | ) | | | (397 | ) | | | (9,791 | ) |
| Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to partially fund the debt redemptions | | | | | | | (180 | ) | | | (16 | ) | | | (254 | ) |
| | | | | | | |
| | | |
| | | |
| |
| | | | | | | $ | 3,681 | | | $ | 92 | | | $ | 2,294 | |
| | | | | | | |
| | | |
| | | |
| |
(k) The pro forma condensed consolidated statements of operations for the year ended December 31, 2002, the period from January 1, 2003 to January 9, 2003 and the period from January 10, 2003 to October 4, 2003 do not include the approximately $3.9 million pro forma loss on redemption of debt, net of tax, which is included in the October 4, 2003 pro forma condensed consolidated balance sheet, as it is a non-recurring charge. |
11
NORTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
October 4, 2003
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Sale of | | | | | | Debt | | |
| | | | Ply Gem | | | | | | Redemption | | |
| | Nortek | | Pro Forma | | | | | | Pro Forma | | Nortek | |
| | Historical | | Adjustments(a) | | Subtotal | | Adjustments | | Pro Forma |
| |
| |
| |
| |
| |
|
| | |
| | |
| | (In thousands) |
| ASSETS | | | | |
| Unrestricted: | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash and Cash Equivalents | | $ | 121,026 | | | $ | 455,000 | | | $ | 576,026 | | | $ | (564,265 | )(b) | | $ | 11,761 | | |
| Restricted: | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash and Marketable Securities | | | 1,538 | | | | (1,538 | ) | | | — | | | | — | | | | — | |
| Accounts Receivable, net | | | 301,037 | | | | (74,306 | ) | | | 226,731 | | | | — | | | | 226,731 | | |
| Inventories, net | | | 211,326 | | | | (43,965 | ) | | | 167,361 | | | | — | | | | 167,361 | |
| Prepaid Expenses | | | 13,121 | | | | (1,138 | ) | | | 11,983 | | | | — | | | | 11,983 | |
| Other Current Assets | | | 19,019 | | | | (5,969 | ) | | | 13,050 | | | | — | | | | 13,050 | |
| Prepaid Income Taxes | | | 31,570 | | | | (11,100 | ) | | | 20,470 | | | | — | | | | 20,470 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | Total Current Assets | | | 698,637 | | | | 316,984 | | | | 1,015,621 | | | | (564,265 | ) | | | 451,356 | |
| Property, Plant and Equipment, net | | | 377,306 | | | | (150,763 | ) | | | 226,543 | | | | — | | | | 226,543 | |
| Goodwill | | | 844,023 | | | | (252,517 | ) | | | 591,506 | | | | — | | | | 591,506 | |
| Intangible Assets | | | 174,717 | | | | (61,082 | ) | | | 113,635 | | | | — | | | | 113,635 | |
| Deferred Debt Expense | | | 3,194 | | | | (177 | ) | | | 3,017 | | | | — | | | | 3,017 | |
| Other Assets | | | 18,776 | | | | (652 | ) | | | 18,124 | | | | — | | | | 18,124 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | Total Assets | | $ | 2,116,653 | | | $ | (148,207 | ) | | $ | 1,968,446 | | | $ | (564,265 | ) | | $ | 1,404,181 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| LIABILITIES AND STOCKHOLDER’S INVESTMENT | | | | |
| Notes Payable and Other Short Term Obligations | | | 4,584 | | | $ | — | | | $ | 4,584 | | | $ | — | | | $ | 4,584 | |
| Current Maturities of Long-Term Debt and Capital Leases | | | 4,309 | | | | (928 | ) | | | 3,381 | | | | — | | | | 3,381 | |
| Accounts Payable | | | 150,089 | | | | (28,696 | ) | | | 121,393 | | | | — | | | | 121,393 | |
| Accrued Expenses and Taxes, net | | | 188,149 | | | | (28,507 | ) | | | 159,642 | | | | (6,555 | )(c) | | | 153,087 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | Total Current Liabilities | | | 347,131 | | | | (58,131 | ) | | | 289,000 | | | | (6,555 | ) | | | 282,445 | |
| Deferred Income Taxes | | | 87,300 | | | | (46,641 | ) | | | 40,659 | | | | — | | | | 40,659 | |
| Other Long-Term Liabilities | | | 159,067 | | | | (14,569 | ) | | | 144,498 | | | | — | | | | 144,498 | |
| Notes, Mortgages, Capital Leases and Obligations Payable Less Current Maturities | | | 1,005,317 | | | | (28,866 | ) | | | 976,451 | | | | (553,842 | )(d) | | | 422,609 | |
| Common Stock | | | — | | | | — | | | | — | | | | — | | | | — | |
| Additional Paid In Capital | | | 441,845 | | | | — | | | | 441,845 | | | | — | | | | 441,845 | |
| Retained Earnings | | | 62,500 | | | | — | | | | 62,500 | | | | (3,868 | )(e) | | | 58,632 | |
| Accumulated Other Comprehensive Income | | | 13,493 | | | | — | | | | 13,493 | | | | — | | | | 13,493 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | Total Stockholder’s Investment | | | 517,838 | | | | — | | | | 517,838 | | | | (3,868 | ) | | | 513,970 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | Total Liabilities and Stockholder’s Investment | | $ | 2,116,653 | | | $ | (148,207 | ) | | $ | 1,968,446 | | | $ | (564,265 | ) | | $ | 1,404,181 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
See Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
12
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
ADJUSTMENTS RELATED TO THE SALE OF PLY GEM:
(a) Pro forma summary of the sale of Ply Gem:
On February 12, 2004, the Company sold its subsidiary, Ply Gem. The following table summarizes the pro forma adjustment for the sale of Ply Gem to show the elimination of the assets purchased and liabilities assumed by the buyer, excluding liabilities indemnified by Nortek as part of the agreement, and to reflect the net proceeds received from the sale of Ply Gem, after the assumed payment of income taxes, and to record accrued transaction costs payable, as if the sale of Ply Gem had occurred on October 4, 2003:
| | | | | | | | | | | | | | |
| | Eliminate | | | | |
| | Historical | | | | |
| | Balance | | | | Pro Forma |
| | Sheet | | Sale | | Sale of |
| | Accounts | | Proceeds | | Ply Gem |
| |
| |
| |
|
| ASSETS | (in thousands) |
Current Assets: | | | | | | | | | | | | |
| Unrestricted: | | | | | | | | | | | | |
| | Cash and Cash Equivalents | | $ | — | | | $ | 455,000 | | | $ | 455,000 | |
| Restricted: | | | | | | | | | | | | |
| | Cash and Marketable Securities | | | (1,538 | ) | | | — | | | | (1,538 | ) |
| Accounts Receivable | | | (74,306 | ) | | | — | | | | (74,306 | ) |
| Inventories, net | | | (43,965 | ) | | | — | | | | (43,965 | ) |
| Prepaid Expenses | | | (1,138 | ) | | | — | | | | (1,138 | ) |
| Other Current Assets | | | (5,969 | ) | | | — | | | | (5,969 | ) |
| Prepaid Income taxes | | | (11,100 | ) | | | — | | | | (11,100 | ) |
| | | |
| | | |
| | | |
| |
| | Total Current Assets | | | (138,016 | ) | | | 455,000 | | | | 316,984 | |
| Property, Plant and Equipment, net | | | (150,763 | ) | | | — | | | | (150,763 | ) |
| Goodwill | | | (252,517 | ) | | | — | | | | (252,517 | ) |
| Intangible Assets | | | (61,082 | ) | | | — | | | | (61,082 | ) |
| Deferred Debt Expense | | | (177 | ) | | | — | | | | (177 | ) |
| Other Assets | | | (652 | ) | | | — | | | | (652 | ) |
| | | |
| | | |
| | | |
| |
| | Total Assets | | $ | (603,207 | ) | | $ | 455,000 | | | $ | (148,207 | ) |
| | | |
| | | |
| | | |
| |
| |
| LIABILITIES |
Current Liabilities: | | | | | | | | | | | | |
| Notes Payable and Other Short-term Obligations | | $ | — | | | $ | — | | | $ | — | |
| Current Maturities of Long-term Debt and Capital Leases | | | (928 | ) | | | — | | | | (928 | ) |
| Accounts Payable | | | (28,696 | ) | | | — | | | | (28,696 | ) |
| Accrued Expenses and Taxes, net | | | (31,196 | ) | | | 2,689 | | | | (28,507 | ) |
| | | |
| | | |
| | | |
| |
| | Total Current Liabilities | | | (60,820 | ) | | | 2,689 | | | | (58,131 | ) |
| Deferred Income Taxes | | | (46,641 | ) | | | — | | | | (46,641 | ) |
| Other Long-term Liabilities | | | (14,569 | ) | | | — | | | | (14,569 | ) |
| Notes, Mortgages Capital Leases and Obligations Payable less Current Maturities | | | (28,866 | ) | | | — | | | | (28,866 | ) |
| | | |
| | | |
| | | |
| |
| | Total Liabilities | | $ | (150,896 | ) | | $ | 2,689 | | | $ | (148,207 | ) |
| | | |
| | | |
| | | |
| |
| | Net Assets Sold | | $ | (452,311 | ) | | $ | 452,311 | | | $ | — | |
| | | |
| | | |
| | | |
| |
13
ADJUSTMENTS RELATED TO THE REDEMPTION OF SENIOR NOTES
| | | | | |
| | As of |
| | 10-04-03 |
| | Pro Forma |
| | Adjustments |
| |
|
(b) Cash and cash equivalents | | | | |
| Redemption of Senior Notes | | $ | (545,000 | ) |
| Payment of call premium due upon redemption of Senior Notes | | | (14,792 | ) |
| Payment of accrued interest due on Senior Notes in connection with redemption | | | (4,473 | ) |
| | | |
| |
| | | $ | (564,265 | ) |
| | | |
| |
(c) Accrued expenses and taxes, net | | | | |
| Payment of accrued interest due on Senior Notes in connection with redemption | | $ | (4,473 | ) |
| Reduction in accrued federal income taxes payable related to loss on debt redemption | | | (2,082 | ) |
| | | |
| |
| | | $ | (6,555 | ) |
| | | |
| |
(d) Long-term debt | | | | |
| Redemption of Senior Notes | | $ | (545,000 | ) |
| Elimination of unamortized debt premium associated with redemption of Senior Notes | | | (8,842 | ) |
| | | |
| |
| | | $ | (553,842 | ) |
| | | |
| |
(e) Retained earnings | | | | |
| Loss on debt redemption, net of related federal tax benefit | | $ | (3,868 | ) |
| | | |
| |
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | |
| | NORTEK, INC. |
| | | By:
Name: Kevin W. Donnelly
Title: Vice President, General Counsel
and Secretary |
Date: February 17, 2004
15
