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Nortek Holdings Inc · 10-K405/A · For 12/31/97

Filed On 4/20/98 · SEC File 1-06112 · Accession Number 72423-98-5

  As Of               Filer                 Filing     On/For/As Docs:Pgs

 4/20/98  Nortek Holdings Inc               10-K405/A  12/31/97   12:74

Amendment to Annual Report -- [X] Reg. S-K Item 405 · Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405/A   Nortek 1997 Amended Form                              63    307K 
 2: EX-21       Subsidiaries of the Registrant                         1      9K 
 3: EX-23       Consent of Experts or Counsel                          1      7K 
 4: EX-27       Financial Data Schedule                                1      7K 
 5: EX-27       Financial Data Schedule                                1      7K 
 6: EX-27       Financial Data Schedule                                1      7K 
 7: EX-27       Financial Data Schedule                                1      7K 
 8: EX-27       Financial Data Schedule                                1      7K 
 9: EX-27       Financial Data Schedule                                1      7K 
10: EX-27       Financial Data Schedule                                1      7K 
11: EX-27       Financial Data Schedule                                1      7K 
12: EX-27       Financial Data Schedule                                1      7K

10-K405/A · Nortek 1997 Amended Form
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Business Certain Relationships and Related Transactions Consolidated Selected Financial Data Nortek, Inc. and Subsidiaries Directors and Executive Officers of the Registrant Disagreements on Accounting and Financial Disclosure Executive Compensation Exhibits, Financial Statement Schedules and Reports on Form 8-K Financial Statements and Supplementary Data Legal Proceedings Liquidity and Capital Resources Management's Discussion and Analysis of Financial Condition and Results of Operations Properties Quantitative and Qualitative Disclosure About Market Risk Security Ownership of Certain Beneficial Owners and Management Submission of Matters to a Vote of Security Holders
1	1st Page
2	Item 1. Business
12	Item 2. Properties
13	Item 3. Legal Proceedings
14	Item 4. Submission of Matters to a Vote of Security Holders
15	Item 6. Consolidated Selected Financial Data Nortek, Inc. and Subsidiaries
16	Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
22	Liquidity and Capital Resources
26	Item 7A. Quantitative and Qualitative Disclosure About Market Risk
"	Item 8. Financial Statements and Supplementary Data
"	Item 9. Disagreements on Accounting and Financial Disclosure
"	Item 10. Directors and Executive Officers of the Registrant
"	Item 11. Executive Compensation
"	Item 12. Security Ownership of Certain Beneficial Owners and Management
"	Item 13. Certain Relationships and Related Transactions
27	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

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SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549  
----------------- 
Form 10-K405/A    
Amendment No.1    
(Mark One)      ------------------                    
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
THE SECURITIES EXCHANGE ACT OF 1934 
For the fiscal year ended December 31, 1997 
OR  
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  
SECURITIES EXCHANGE ACT OF 1934 
For the transition period from          to  
Commission file number:  1-6112 
------------------------  
Nortek, Inc.  
(exact name of Registrant as specified in its charter)  

Delaware                      05-0314991              
(State or other jurisdiction           (IRS Employer                      
of incorporation or organization)     Identification Number)                  

50 Kennedy Plaza                                                  
Providence, Rhode Island                   02903-2360                     
(Address of principal executive offices)      (zip code)                        

Registrant's telephone number, including area code:  (401) 751-1600       

Securities registered pursuant to Section 12(b) of the Act: 

                 Name of each exchange
Title of each class          on which registered          
Common Stock, $1.00 par value     New York Stock Exchange               
Preference Stock Purchase Rights   New York Stock Exchange                

Securities registered pursuant to Section 12(g) of the Act: 
Title of Class  
Special Common Stock, $1.00 par value 

Indicate by check mark whether registrant (1) has filed all reports required to 
be  filed by Section 13 or 15(d) of the Securities Exchange Act of 1934  during 
the  preceding  12 months (or for such shorter period that the  registrant  was 
required  to  file  such  reports), and (2) has been  subject  to  such  filing 
requirements for the past 90 days. Yes X No __.                                 

Indicate by check mark if disclosure of delinquent filers pursuant to Item  405 
of  Regulation S-K is not contained herein, and will not be contained,  to  the 
best  of  registrant's knowledge, in definitive proxy or information statements 
incorporated  by  reference in Part III of this Form 10-K or any  amendment  to 
this Form 10-K [X].                                                             

The  aggregate  market value of the voting stock held by nonaffiliates  of  the 
registrant as of April 17, 1998 was $261,747,742. See Item 12.                  

The  number of shares of Common Stock outstanding as of April 17,  1998  was    
8,978,958.  The  number  of shares of Special Common Stock  outstanding  as  of 
April 17, 1998 was 578,322.                                                     

Documents Incorporated by Reference 

Portions of the registrant's Proxy Statement for use at its 1998 Annual Meeting 
of Shareholders are incorporated by reference into Part III.                    

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PART I                                                                          

ITEM 1. Business                                                                

    The  Company  is a diversified manufacturer of residential and  commercial
building  products,  operating  within  four  principal  product  groups:   the 
Residential Building Products Group; the Air Conditioning and Heating  ("HVAC") 
Products  Group; the Windows, Doors and Siding Group and the Specialty Products 
and  Distribution Group. Through these product groups, the Company manufactures 
and sells, primarily in the United States, Canada and Europe, a wide variety of 
products for the residential and commercial construction, manufactured housing, 
and  the do-it-yourself and professional remodeling and renovation markets. (As 
used  in  this report, the terms "Company" and "Nortek" refer to Nortek,  Inc., 
together  with  its subsidiaries, unless the context indicates otherwise.  Such 
terms  as  "Company" and "Nortek" are used for convenience  only  and  are  not 
intended as a precise description of any of the separate corporations, each  of 
which manages its own affairs.)                                                 

    The  Company's  domestic performance is dependent to a significant  extent
upon  the  levels of new residential construction, residential replacement  and 
remodeling and non-residential construction, which are affected by such factors 
as interest rates, inflation, consumer spending habits and unemployment.        

    Additional information concerning the Company's business is set  forth  in
Management's  Discussion  and Analysis of Financial Condition  and  Results  of 
Operations,  Item 7, Part II of this report, incorporated herein by  reference. 
Information on foreign and domestic operations is set forth in Note  10,  Notes 
to  Consolidated  Financial  Statements, Item 8 of  Part  II  of  this  report, 
incorporated herein by reference.                                               

Residential Building Products Group                                             

     The Residential Building Products Group manufactures and distributes built-
in  products primarily for the residential new construction, do-it-yourself and 
professional remodeling and renovation markets. The principal products sold  by 
the  Group  are kitchen range hoods, bath fans, combination units (fan,  heater 
and  light  combinations), shower doors and bath cabinets.  The  Group  is  the 
largest  supplier  in North America of range hoods, bath fans  and  combination 
units, indoor air quality products (such as continuous-ventilation systems  and 
energy-recovery  ventilators)  and  one of the  leading  suppliers  in  Western 
Europe,  South America and the Middle East of luxury "Eurostyle"  range  hoods. 
Products  are sold under the Broan(R), Nautilus(R), Venmar(R), Flair, vanEE(R), 
Rangaire(R) and Best(R) brand names, among others, to distributors and  dealers 
of  electrical  and  lighting products, kitchen and bath dealers,  retail  home 
centers  and original equipment manufacturers (OEMs). Customers for the Group's 
products   include   residential  and  electrical   contractors,   professional 
remodelers  and do-it-yourself homeowners. Other products sold  by  this  Group 
include, among others, wireless security products, garage door openers,  built- 
in  home  intercoms  and entertainment systems, home automation  systems,  door 
chimes,  paddle fans, central vacuum systems and fluorescent lighting fixtures. 
The Company's sales of kitchen range hoods accounted for approximately 14.8% of 
the Company's consolidated net sales in 1997.                                   

     A  key component of the Group's operating strategy is the introduction of
new  products which capitalize on the strong Broan(R), Nautilus(R),  Venmar(R), 
Flair,  vanEE(R),  Rangaire(R)  and  Best(R)  brand  names  and  the  extensive 

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distribution system of the Group's businesses. Products sold under these brand  
names include the Broan Rangemaster and Finesse(TM) rangehood, Solitaire and    
Solitaire Ultra Silent fans and fan lights, the Best by Broan(R) European       
style luxury rangehoods, the Venmar(R), Flair and vanEE(R) Super Compact line   
of indoor air quality systems and the Broan 12" wide trash compactor. Consumer  
preferences are important in developing new products and establishing marketing 
strategies,  and the Company believes that the Group's ability to  develop  new 
and  improved  product  styles and features provides a significant  competitive 
advantage.                                                                      

     With  respect  to certain product lines, several private label  customers
account for a substantial portion of net sales. In 1997, approximately 20.2% of 
the total sales of the Group were made to private label customers.              

    Production generally consists of fabrication from coil and sheet steel and
formed  metal  utilizing stamping, pressing and welding methods, assembly  with 
components  and  subassemblies  purchased from  outside  sources  (motors,  fan 
blades,  heating  elements,  wiring  harnesses,  controlling  devices,   glass, 
mirrors, lighting fixtures, lumber, wood and polyethylene components, speakers, 
grilles  and  similar electronic components, and compact disc and  tape  player 
mechanisms) and painting, finishing and packaging.                              

     The  Group  offers  a broad array of products with various  features  and
styles  across a range of price points. The Company believes that  the  Group's 
variety  of  product offerings helps the Group maintain and improve its  market 
position  for  its principal products.  At the same time, the Company  believes 
that  the  Group's status as a low-cost producer, in large part as a result  of 
advanced  manufacturing  processes,  provides  the  Group  with  a  competitive 
advantage.                                                                      

     The Group's primary products compete with many domestic and international
suppliers  in  their  various  markets. The Group competes  with  suppliers  of 
competitive products primarily on the basis of quality, distribution,  delivery 
and  price. With respect to range hoods, bath fans, combination units and radio 
intercoms,  the Company believes that the Group's primary competitor  in  North 
America  is NuTone, a subsidiary of Williams plc. The market for bath  cabinets 
is  highly  fragmented  with no single dominant supplier.  Although  the  Group 
believes it competes favorably among suppliers of the Group's products, certain 
of  these  suppliers  have greater financial and marketing resources  than  the 
Group.                                                                          

     The Group has seventeen manufacturing plants and employed 2,791 full-time
people  as  of  December  31,  1997, 306 of  whom  are  covered  by  collective 
bargaining agreements which expire in 1999, 2000 and 2001. The Company believes 
that the Group's relationships with its employees are satisfactory.             

Air Conditioning and Heating Products Group                                     

     The  Air  Conditioning and Heating Products Group manufactures and  sells
HVAC  systems  for custom-designed commercial applications and for manufactured 
and site-built residential housing. The Group's commercial products consist  of 
HVAC  systems  which  are custom-designed to meet customer  specifications  for 
commercial offices, manufacturing and educational facilities, hospitals, retail 
stores  and  governmental  buildings. Such systems are  primarily  designed  to 
operate on building rooftops (including large self-contained walk-in-units)  or 
on  individual  floors within a building, and range from  40  to  600  tons  of 
cooling  capacity.  The  Group  markets  its  commercial  products  under   the 

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Governair(R),  Mammoth(R), Temtrol(TM), Aston and Venmar(R)  brand  names.  For 
manufactured  and site built residential housing, the Group's products  include 
central  air conditioners, heat pumps, furnaces and a wide range of accessories 
marketed under the Intertherm(R), Miller(R) and POWERmiser(R) brand names,  and 
has  recently acquired the use of Frigidaire(R), Tappan(R), and Philco(R) brand 
names.  Residential central air conditioning products range from 1.5 to 5  tons 
of  cooling capacity and furnaces range from 45,000 BTU's to 144,000  BTU's  of 
heating capacity.                                                               

Commercial  Products. The Group's commercial products include packaged  rooftop 
units  and  air handlers, custom walk-in mechanical equipment rooms, individual 
floor  by  floor units, heat pumps and heat recovery equipment. The market  for 
commercial  HVAC  equipment is segmented between standard  and  custom-designed 
equipment. Standard equipment can be manufactured at a lower cost and therefore 
offered  at  substantially lower initial prices than custom-designed equipment. 
As  a result, suppliers of standard equipment generally have a larger share  of 
the overall commercial HVAC market than suppliers of custom-designed equipment, 
including  the Group. However, because of certain building designs,  shapes  or 
other  characteristics, the Company believes there are  many  applications  for 
which custom-designed equipment is required or is more cost effective over  the 
life  of  the building. Unlike standard equipment, the Group's commercial  HVAC 
equipment  can  be designed to match the exact space, capacity and  performance 
requirements of the customer. The Group sells its commercial products primarily 
to   contractors,  owners  and  developers  of  commercial  office   buildings, 
manufacturing  and  educational  facilities,  hospitals,  retail   stores   and 
governmental  buildings.  The  Group seeks  to  maintain  strong  relationships 
nationwide  with design engineers, owners and developers, and the  persons  who 
are  most likely to value the benefits and long-term cost efficiencies  of  the 
Group's custom-designed equipment.                                              

     The Company estimates that about half of the Group's commercial sales  in
1997 were attributable to replacement and retrofit activity, which typically is 
less  cyclical  than  new construction activity and generally  commands  higher 
margins.  The  Group  continues to develop product and  marketing  programs  to 
increase penetration in the growing replacement and retrofit market.            

    For many commercial applications, the ability to provide a custom-designed
system  is the principal concern of the customer. The Group's packaged  rooftop 
and self-contained walk-in equipment rooms maximize a building's rentable floor 
space  because  they  are located outside the building.  In  addition,  factors 
relating to the manner of construction and timing of installation of commercial 
HVAC equipment can often favor custom-designed rather than standard systems. As 
compared  with  site-built and standard HVAC systems, the Group's  systems  are 
factory assembled and then installed, rather than assembled on site, permitting 
extensive  testing  prior  to  shipment. As a result,  the  Group's  commercial 
systems  can  be  installed later in the construction process  than  site-built 
systems,  thereby saving the owner or developer construction and  labor  costs. 
The Group's individual floor units offer flexibility in metering and billing, a 
substantial advantage if a building is to be occupied in stages or  where  HVAC 
usage varies significantly from floor to floor.                                 

     The  Group's commercial products are marketed through independently-owned
manufacturers' representatives and an in-house sales, marketing and engineering 
group of 110 persons as of December 31, 1997. The independent representatives   

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are  typically  HVAC engineers, a factor which is significant in marketing  the 
Group's  commercial  products because of the design  intensive  nature  of  the 
market segment in which the Group competes.                                     

     The  Company  believes that the Group is among the largest  suppliers  of
custom-designed  commercial  HVAC products in the United  States.  The  Group's 
three  largest competitors in the commercial HVAC market are York International 
Corporation  (which sells under the "Pace" trade name) and it's  Miller-Picking 
division, McQuay International (a subsidiary of OYL Corporation), and The Trane 
Company  (a subsidiary of American Standard Inc.). The Group competes primarily 
on  the  basis  of  engineering support, quality,  flexibility  in  design  and 
construction  and  total installed system cost. Although the  Company  believes 
that  the  Group  competes favorably with respect to certain of these  factors, 
most  of the Group's competitors have greater financial and marketing resources 
than the Group and enjoy greater brand awareness. However, the Company believes 
that  the  Group's  ability  to produce equipment that  meets  the  performance 
characteristics required by the particular product application provides it with 
advantages not enjoyed by certain of these competitors.                         

Residential  Products.  The  Group  is one of  the  largest  suppliers  of  air 
conditioners, heat pumps and furnaces to the manufactured housing market in the 
United  States. In addition, the Group manufactures and markets HVAC and  light 
commercial products for site-built homes and light commercial structures.       

     The  principal  factors affecting the market for the Group's  residential
HVAC  products  are  the levels of manufactured housing shipments  and  housing 
starts and the demand for replacements and modernization of existing equipment. 
The Company anticipates that the replacement market will continue to expand  as 
a  large  number  of previously installed heating and cooling  products  become 
outdated or reach the end of their useful lives. This growth may be accelerated 
by  a  tendency  among consumers to replace older heating and cooling  products 
with higher efficiency models prior to the end of such equipment's useful life. 
The market for residential cooling products, including those sold by the Group, 
is  affected by spring and summer temperatures. The Group does not sell  window 
air  conditioners,  a  segment  of the market  which  is  highly  seasonal  and 
especially  affected  by spring and summer temperatures. The  Company  believes 
that  the  Group's  ability to offer both heating and  cooling  products  helps 
offset the effects of seasonality of the Group's sales.                         

     The  Group  sells  its  manufactured  housing  products  to  builders  of
manufactured  housing  and,  through  distributors,  to  manufactured   housing 
retailers  and  owners of such housing. The majority of sales  to  builders  of 
manufactured  housing consist of furnaces designed and engineered  to  meet  or 
exceed  certain  standards mandated by federal agencies, including  HUD.  These 
standards differ in several important respects from the standards for  furnaces 
used  in site-built residential homes. The after market channel of distribution 
includes  sales  of both new and replacement air conditioning  units  and  heat 
pumps  and  replacement furnaces. The Company believes that the Group  has  one 
major  competitor  in the furnace segment of this market, Evcon  Industries,  a 
subsidiary of York International Corporation, which markets its products  under 
the "Evcon/Coleman" name.                                                       

     A  substantial  portion  of  site-built residential  products  have  been
introduced  in the past several years, including a new line of furnaces  and  a 
reengineered  line  of  high  efficiency  air  conditioners  and  heat   pumps. 
Residential  HVAC  products  for  use  in site-built  homes  are  sold  through 

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independently-owned distributors who sell to HVAC contractors. New products for 
commercial application through 10 tons have also been recently introduced.      

    Competition in the site-built residential HVAC market is intense, and many
suppliers  of such equipment have substantially greater financial and marketing 
resources  than the Group and enjoy greater brand awareness. In these  markets, 
the Group competes with, among others, Carrier Corporation, Rheem Manufacturing 
Company,   Lennox   Industries,  The  Trane  Company  and  York   International 
Corporation. The Group competes in both the manufactured housing and site-built 
markets  on the basis of breadth and quality of its product line, distribution, 
product  availability and price. The Company believes that the  Group  competes 
favorably with respect to these factors. To provide greater consumer acceptance 
and  pull through for its products, the Company has recently licensed from White
Consolidated  Industries,  Inc.  the use of the Frigidaire(R),  Tappan(R),  and 
Philco(R) name brands.                                                          

    The  Company  estimates  that  more than half  of  the  Group's  sales  of
residential HVAC products in 1997 were attributable to the replacement  market, 
which tends to be less cyclical than the new construction market.               

     The  Group  has  nine manufacturing plants and employed  2,288  full-time
people  as  of  December  31, 1997, 212 of whom are  covered  by  a  collective 
bargaining  agreement  which expires in 1998. The  Company  believes  that  the 
Group's relationships with its employees are satisfactory.                      

Windows, Doors and Siding Group                                                 

    The Windows, Doors and Siding Group, which was acquired by the Company  in
1997, is a manufacturer and distributor of vinyl and wood windows, doors, vinyl 
siding, soffit, skirting and shutters for use in the replacement/remodeling and 
new construction segments of the building products market. The Company believes 
it  is  among  the  largest suppliers of vinyl windows serving the  replacement 
market in the United States. Additionally, the Company believes it is a leading 
supplier of wood windows to major home centers and a leading supplier of  vinyl 
siding  in  the United States. The Company's sales of windows, since the  August
1997,  acquisition   accounted  for  approximately  10.1%  of   the   Company's 
consolidated net sales in 1997.                                                 

Windows and Doors. The Group manufactures and sells a full line of wood,  clad, 
composition  (wood  and  vinyl) and vinyl windows and patio  doors,  glass  and 
polycarbonate   skylights,  and  wooden  interior  bifold   doors   under   the 
Crestline(R) , Vetter(R) , Kenergy(R) and AWC(R) brand names. In addition,  the 
Group  manufactures  energy efficient and maintenance free  vinyl  windows  and 
patio doors under the Great Lakes(R)  Gold, PLY GEM(R)  Premium, Uniframe(R)  , 
MC+(TM), and Garden Windows(TM) brand names. The products are marketed to  both 
the  home  improvement  and  new  construction markets  through  wholesale  and 
specialty  distributors, large contractors, home centers and lumber yards.  The 
Company believes that it is the fourth largest producer of wood windows in  the 
United States.                                                                  

    Through the Crestline(R)  and Vetter(R)  brands wood windows are available
with  primed  or clad exteriors, and offer innovative product features  with  a 
wide  selection  of options. A complete range of window styles  include  double 
hung,  single  hung,  casement, awning, sliding,  garden,  angle  bay  and  bow 
windows. Specialty and custom windows are available in a wide variety of shapes 
and  sizes.  Patio  doors  are offered in traditional  hinged,  French  hinged, 

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sliding  and  French sliding designs. The CrestWood(TM) series of premium  wood 
windows  and  patio  doors  combine the performance  of  an  energy  efficient, 
maintenance-free solid vinyl exterior with the warmth and beauty of  a  natural 
pine,  oak, walnut or cherry interior that can be painted or stained.  Most  of 
the  products  are  available with insulated divided light  glass,  a  patented 
energy  efficient  replica of historically correct narrow  muntin  bar  divided 
light wood windows and patio doors. VinylCrest(TM) and ProCraft(TM) comprise  a 
complete  line of solid vinyl windows, which are available for replacement  and 
new  construction  applications,  in a full  range  of  styles.  These  product 
offerings  are an important component of the Group's strategy to offer  windows 
in  all  price  points and market segments. In addition  to  a  broad  line  of 
standard  windows  and doors, its custom window factory can  build  nearly  any 
shape and size window.                                                          

    The  Group manufactures a series of vinyl windows and patio doors for  new
construction  in both standard and custom sizes. Replacement units  are  custom 
manufactured  to customer specifications. These products include  single  hung, 
double hung, bow and bay, casement, garden, sliding and awning windows, as well 
as  hinged  and sliding patio doors in a variety of vinyl colors  and  interior 
woodgrains, several different grille styles and patterns and a wide  assortment 
of  glass  options. Product lines feature fusion welded sash and frame  corners 
which   are  guaranteed  not  to  separate,  leak  air  or  water,  or  require 
maintenance. The Intercept(TM) warm edge glass spacer system is manufactured in 
one  continuous piece, resulting in a stronger, more energy efficient insulated 
glass  unit.  The Company is the only vinyl window manufacturer to offer  Easy- 
Clean(TM)  glass, which works like Teflon(TM) on cookware, providing  an  owner 
with  a  window which requires less cleaning. These products incorporate  other 
innovations   which   differentiate  the  product  line   from   other   window 
manufacturers,  including  wood  grain  vinyl  interiors  available  in   three 
finishes, multi-point locking hardware, and sliding patio doors which utilize a 
proprietary  tank  type roller system. Replacement products  are  sold  through 
specialty  distributors and directly to large contractors. The new construction 
series  of vinyl windows and patio doors is currently being sold under  private 
label  programs  and to a select number of dealer distributors.  This  multiple 
brand  approach  has allowed the Group to achieve increased  penetration  in  a 
given geographic area, by offering dealer distributors individual brands on  an 
exclusive basis.                                                                

    The Group differentiates itself from its competition with a multiple brand
strategy,  multi-channels of distribution (with an emphasis on the home  center 
market),  an  established  distribution network  utilizing  custom  design  and 
manufacturing  capabilities,  and a trained field  sales  and  service  support 
network.  Its  ability  to  sell  in full truckload  and  less  than  truckload 
quantities is tailored to the desires of large home center chains which  prefer 
to  purchase windows direct from the manufacturer. The Group's ability to offer 
a  broad  product line that includes primed, clad composition (wood and  vinyl) 
and vinyl windows and patio doors, along with skylights under a single brand is 
also  important  to the Groups sales and marketing strategy together  with  the 
Company's focus on one of the fastest growing segments in the industry  -  home 
centers and lumberyards.                                                        

Siding.  The  Group  is  a manufacturer of vinyl siding, soffit,  skirting  and 
accessories,  which are available in a variety of woodgrains  and  colors.  Its 
products  are  used  in  both  remodeling and  new  construction  applications, 
including  manufactured housing. Vinyl siding has captured an increasing  share 
of  the  overall  market  for exterior siding materials  due  to  its  ease  of 

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installation,  high performance, durability, low maintenance  requirements  and 
price  stability  as compared to alternative siding materials (including  wood, 
aluminum  and  masonry).  These products are marketed  under  Cedar  Lane(R)  , 
Varigrain(R)  ,  Duragrain(R) , Timber Oak(R) , and ProLoc(R)  brands  and  the 
Georgia Pacific label. The Company believes it is the leading supplier to  home 
centers and lumberyards, and the fourth largest producer of vinyl siding in the 
United  States.  In addition, the Group is a supplier to the  Eastern  European 
market.                                                                         

    Vinyl  siding is sold to either specialty distributors who, in turn,  sell
directly  to  remodeling  contractors or builders,  or  to  building  materials 
wholesale distributors who sell to home centers and lumberyards who,  in  turn, 
sell  to  remodeling  contractors and consumers  (two-step  distribution).  The 
Company  believes that it is able to compete on favorable terms as a result  of 
its   distribution  coverage,  quality  innovative  products,  and   production 
efficiency.  Additionally, it is strong in the retail segment  of  the  market, 
which continues to grow at a rate faster than the overall market.               

The  Group  also manufactures a line of injection molded siding components  for 
the  remodeling and new construction markets. Siding components include blocks, 
which allow for the flush mounting of items like light fixtures to the exterior 
of  a  home,  and gable vents that provide attic ventilation. The products  are 
sold  to  home  centers,  lumberyards and wholesale  distributors  of  building 
materials.  It is the only manufacturer of siding components to offer  a  color 
selection to match or compliment the colors offered by most major manufacturers 
of  vinyl  siding. The group has also recently introduced a line of  fixed  and 
variable dimension shutters.                                                    

The  Group operates ten manufacturing plants in the United States and  employed 
3,436  full-time people as of December 31, 1997, 1,578 of whom are  covered  by 
collective  bargaining agreements which expire in 1998 and  1999.  The  Company 
believes that the Group's relationships with its employees are satisfactory.    

Specialty Products and Distribution Group                                       

The  Specialty  Products  and Distribution Group, which  was  acquired  by  the 
Company  in 1997, manufactures and distributes pressure treated wood  products, 
specialty lumber and decorative home products. The Group offers a full range of 
preservative and fire retardant treated lumber and plywood products  which  are 
marketed   to   home  centers,  cooperative  buying  groups,  lumberyards   and 
independent  wholesale distributors for use generally in  residential  decking, 
roofing,  siding  and  landscaping as well as various  commercial  construction 
applications. The Group's products include fire retardant treated wood products 
which are used nationwide for commercial and noncombustible construction. These 
products, PYRO-GUARD(R)  and EXTERIOR FIRE-X(R)  are the United States market's 
major  brands. They are available from Company plants east of the  Rockies  and 
from  licensees  west  of  the  Rockies. Other treated  wood  products  include 
CCA/KDAT  preservative treated wood for commercial and residential construction 
that  is  kiln dried after treatment, COP-8(R)  food-safe preservative  treated 
wood and PLYWALL preservative treated wood highway noise barriers.              

The  Group  manufactures and distributes specialty lumber and related  building 
products  for a variety of uses including roofing, decking, siding, landscaping 
and  interior paneling. The Group also distributes decorative products for  the 
home  including  prefinished  wood  paneling,  solid  wood  planking,  imported 
ceramic, marble and porcelain tile and melamine coated panels. Finished and     

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unfinished  wood and melamine shelving as well as other products  are  sold  to 
home  centers  and  lumberyards. The Group has become a strategic,  value-added 
supplier of a wide range of products for the national home center chains.       

While  the  specialty wood products industry is very competitive,  the  Company 
believes  it  is  able  to compete effectively by providing  superior  customer 
service and quality, and wherever possible, proprietary products. The companies 
within the Group focus on high margin, niche markets within the broader defined 
wood  products  industry which tends to be commodity driven. Its  products  are 
sold  through home center retailers and wholesalers of building materials.  The 
Company  believes that growth of this segment of its business will result  from 
continued expansion of its share of the home center market.                     

The  Group also distributes a broad range of high end specialty wood  and  wood 
related  products,  including hardwood plywood, melamine  and  other  laminated 
board  products, hardwood lumber, high pressure laminates (HPL), solid  surface 
materials  and  cabinet hardware and is a leading importer  of  specialty  wood 
panels from all over the world, including Russian plywood sold under its  brand 
name  Baltic Birch(R) . Customers of these products are industrial woodworkers, 
including  cabinet manufacturers, architectural millworkers, and  manufacturers 
of  store fixtures, furniture and signs and exhibits. Products are sold through 
an extensive network of Company operated warehouse facilities, and in addition, 
public warehouses from time to time located in various major port cities. Sales 
are generated by a well trained and experienced sales force. These distribution 
operations  are  differentiated  from those  of  competitors,  which  primarily 
include   local   independent  distributors,  by  superior  customer   service, 
geographic  coverage and breadth of product line. As a result,  the  Group  has 
become  a  preferred distributor of many products, selling them on an exclusive 
or  limited  exclusive basis. The Company believes that future growth  will  be 
from the introduction of new products and expansion of its market territories.  

     In  addition,  the Group is a west coast manufacturer and distributor  of
furniture  components, laminates and board products to furniture  manufacturers 
and  other  original equipment manufacturers, building materials retailers  and 
wholesalers.  In addition to distribution of wood products, its  strengths  are 
laminating, drawer parts, cut to size components and other value added services 
on  a  just-in-time  basis. As a large manufacturer  and  distributor  of  high 
quality, cost efficient products for the furniture, ready-to-assemble,  cabinet 
and   building   industries,  the  Company  specializes  in  providing   custom 
laminations to industrial customers that meet almost any specification.         

     The  Specialty Products and Distribution Group operates eight  production
facilities  and twelve distribution centers in the United States  and  employed 
707  full-time  people  as of December 31, 1997, 163 of  whom  are  covered  by 
collective  bargaining agreements which expire in 1998 and  1999.  The  Company 
believes that the Group's relationships with the employees are satisfactory.    

RECENT DEVELOPMENTS                                                             

Acquisition                                                                     

     On August 26, 1997, the Company acquired Ply Gem Industries, Inc.(PlyGem)
(See  Note  2  of  the  Notes  to  Consolidated Financial  Statements  included 
elsewhere herein).                                                              

    On  March 9, 1998, the Company through a wholly-owned subsidiary,  entered
into  an  agreement (the "Agreement") to purchase NuTone, Inc., a  wholly-owned 
subsidiary of Williams plc, for approximately $242,500,000 in cash, subject  to 
adjustment.   The acquisition is subject to the requirements of the Hart-Scott- 

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Rodino  Antitrust  Improvements  Act. In connection  with  its  review  of  the 
acquisition  under the Act, the Federal Trade Commission ("FTC") has  issued  a 
"second  request"  for certain additional information.  The Agreement  provides 
that completion of the acquisition is to take place within 45 days of clearance 
by  the FTC. The FTC has taken no position with respect to the transaction  and 
there  can  be  no  assurance  that  the  transaction,  as  proposed,  will  be 
consummated. If the acquisition is not consummated, the Company expects that it 
would  incur  an approximately $3,000,000 ($0.31 per diluted share)  net  after 
tax  charge  to  its  earnings  as a result of  fees,  expenses  and  other     
acquisition related costs. In order to consummate the acquisition, the  Company 
will  need  to  raise  additional funds through  debt  and  equity  financings. 
Following  the acquisition the Company anticipates that it will  enter  into  a 
bank facility in order to meet its working capital needs.                       

    NuTone  is  a  leading  U.S. manufacturer and supplier  of  built-in  home
products  for  use  in  residential  construction  and  remodeling.   Based  in 
Cincinnati,  Ohio,  it  sells primarily to the North American  market  and  has 
operations  in Canada through its wholly-owned subsidiary NuTone  Canada,  Inc. 
NuTone's  product  range  includes  exhaust fans,  range  hoods,  door  chimes, 
intercoms, central vacuum cleaners and bathroom cabinets and accessories.       

    In  the  year  ended December 31, 1997, NuTone had sales of  approximately
$199,000,000  and  EBITDA of approximately $30,200,000.  The  consideration  of 
$242,500,000 is based on the acquired business being debt free at closing, with 
an agreed level of net assets.  The consideration will be subject to adjustment 
dependent  on  the actual level of net assets at closing (See note  13  of  the 
Notes to Consolidated Financial Statements included elsewhere herein).          

Discontinued Operations                                                         

     In  the  fourth quarter of 1997 the Company adopted a plan to discontinue
its  Plumbing  Products  Group,  a  manufacturer  of  vitreous  china  bathroom 
fixtures,  gelcoat and acrylic bathtubs, shower stalls, whirlpools,  and  brass 
and  die  cast  faucets.   (See Note 9 of the Notes to  Consolidated  Financial 
Statements included elsewhere herein).                                          

GENERAL CONSIDERATIONS                                                          

Employees                                                                       

The Company employed approximately 9,262 persons at December 31, 1997.

Backlog                                                                         

     Backlog  expected to be filled during 1998 was approximately $127,137,000
at  December  31,  1997  ($107,907,000 at December 31, 1996).  Backlog  is  not 
regarded as a significant factor for operations where orders are generally  for 
prompt delivery. While backlog stated for December 31, 1997 is believed  to  be 
firm,  the  possibility  of  cancellations makes it  difficult  to  assess  the 
firmness of backlog with certainty.                                             

Research and Development                                                        

     The  Company's  research and development activities are  principally  new
product development and represent approximately 1% of net sales.                

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Patents and Trademarks                                                          

     The  Company holds numerous design and process patents that it  considers
important,  but  no  single patent is material to the overall  conduct  of  its 
business.  It  is  the Company's policy to obtain and protect patents  whenever 
such  action  would  be  beneficial to the Company. The  Company  owns  several 
trademarks  that  it  considers  material to the  marketing  of  its  products, 
including  Broan(R),  Nautilus(R), Venmar(R), vanEE(R),  Rangaire(R),  Best(R), 
Crestline(R),  Vetter(R),  AWC(R), Kenergy(R),  CrestWood(TM),  VinylCrest(TM), 
ProCraft(TM),   Cedar  Lane(R),  Varigrain(R),  Duragrain(R),  Timber   Oak(R), 
ProLoc(R),  Great  Lakes(R)  Gold, PLY GEM(R)  Premium,  Uniframe(R),  MC+(TM), 
Intercept(TM), Easy-Clean(TM), PYRO-GUARD(R), EXTERIOR FIRE-X(R), CCA/KDAT, COP-
8(R),   PLYWALL,   Baltic  Birch(R),  Governair(R),  Mammoth(R),   Temtrol(TM), 
Miller(R),  Intertherm(R)  and POWERmiser(R). The  Company  believes  that  its 
rights in these trademarks are adequately protected.                            

Raw Materials                                                                   

     The  Company  purchases  raw materials and most components  used  in  its
various manufacturing processes. The principal raw materials purchased  by  the 
Company are rolled sheet, formed and galvanized steel, copper, aluminum,  plate 
mirror  glass,  PVC,  polypropylene, glass, vinyl extrusions,  particle  board, 
fiberboard, lumber, plywood, various chemicals, paints, resins, and plastics.   

    The materials, molds and dyes, subassemblies and components purchased from
other  manufacturers,  and other materials and supplies used  in  manufacturing 
processes  have  generally been available from a variety of  sources.  Whenever 
practical,  the  Company establishes multiple sources for the purchase  of  raw 
materials and components to achieve competitive pricing, ensure flexibility and 
protect  against supply disruption. From time to time increases in raw material 
costs can affect future supply availability due in part to raw material demands 
by other industries.                                                            

Working Capital                                                                 

The carrying of inventories to support customers and  to permit prompt
delivery of finished goods requires substantial working capital.      
Substantial working capital is also required to carry receivables. The
demand  for  the Company's products is seasonal, particularly in the  Northeast 
and  Midwest regions of the United States and in Canada where inclement weather 
during  the  winter months usually reduces the level of building and remodeling 
activity in both the home improvement and new construction markets. The Ply Gem 
businesses,  acquired in August 1997, have in the past been  more  seasonal  in 
nature  than  the Company's subsidiaries owned prior to the acquisition.  As  a 
result, the demand for working capital of the Company's subsidiaries is greater 
from  late  in  the  first  quarter until early  in  the  fourth  quarter.  See 
"Liquidity  and Capital Resources" in Management's Discussion and  Analysis  of 
Financial   Condition  and  Results  of  Operations,  incorporated  herein   by 
reference.                                                                      

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Executive Officers of the Registrant                                            

Name                     Age       Position                                     

Richard L. Bready        53   Chairman, President and                           
   Chief Executive Officer

Almon C. Hall            51   Vice President, Controller                        
        and Chief Accounting Officer

Richard J. Harris        61   Vice President and Treasurer                      

Kenneth J. Ortman        62   Senior Vice President - Group                     
Operations          

Kevin W. Donnelly        43   Vice President, General                           
 Counsel and Secretary

     The  executive officers have served in the same or substantially  similar
executive  positions  with  the  Company for at  least  the  past  five  years. 
Executive  Officers  are  elected annually by the Board  of  Directors  of  the 
Company  and serve until their successors are chosen and qualified. Mr.  Bready 
has  an  employment agreement with the Company providing for his employment  as 
Chief Executive Officer through 2002, which term is extended at the end of each 
year  for  an  additional year until either party gives notice it will  not  be 
further  extended. The Company's executive officers include only those officers 
of  the Company who perform policy-making functions for the Company as a  whole 
and  have managerial responsibility for major aspects of the Company's  overall 
operations.  A  number  of  other individuals who  serve  as  officers  of  the 
Company's  subsidiaries  perform policy-making functions  and  have  managerial 
responsibilities  for the subsidiary or division by which  they  are  employed, 
although  not  for  the  Company overall. Certain of these  individuals  could, 
depending  on  earnings  of  such unit, be more highly  compensated  than  some 
executive officers of the Company.                                              

ITEM 2. Properties                                                              

Set forth below is a brief description of the location and general character of 
the  principal  administrative and manufacturing facilities and other  material 
real  properties of the Company, all of which the Company considers  to  be  in 
satisfactory repair. All properties are owned, except for those indicated by an 
asterisk, which are leased.                                                     

Location               Description                                 Approximate  
                                                                 Square Feet
Union, IL              Manufacturing/Warehouse/Administrative         197,000   
Hartford, WI           Manufacturing/Warehouse/Administrative         462,000   
Old Forge, PA          Warehouse/Administrative                        40,000   
Bensenville, IL        Warehouse/Administrative                        69,000*  
Mississauga, ONT       Manufacturing/Administrative                   108,000   
Dallas, TX             Manufacturing/Administrative                    71,000   
Carlsbad, CA           Administrative                                  30,000   
Hong Kong              Manufacturing                                   20,000*  

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Waupaca, WI            Manufacturing                                   35,000   
Fabriano, Italy        Manufacturing/Administrative                    97,500*  
Cerreto D'Esi,Italy    Manufacturing/Administrative                   135,000   
Montefano, Italy       Manufacturing/Administrative                    74,000   
Cleburne, TX           Manufacturing/Administrative                   210,000   
Drummondville, QUE     Manufacturing/Administrative                    66,000*  
St. Leonard d'Aston,QU Manufacturing/Administrative                    88,000   
St. Peters, MO         Warehouse/Administrative                       250,000*  
St. Louis, MO          Manufacturing                                  214,000   
Boonsville, MO         Manufacturing                                  250,000*  
Chaska, MN             Manufacturing/Administrative                   230,000*  
Oklahoma City, OK      Manufacturing/Administrative                   127,000   
Okarche, OK            Manufacturing/Administrative                   135,000   
Los Angeles, CA        Manufacturing/Administrative                   177,000   
Chicago, IL            Manufacturing/Warehouse/Administrative         126,000   
Lynwood, CA            Manufacturing/Warehouse/Administrative         256,000*  
Toledo, OH             Manufacturing/Warehouse/Administrative         291,500   
Concord, MA            Administrative                                   9,300*  
Kearney, MO            Manufacturing/Administrative                   145,000   
Martinsburg, WV        Manufacturing                                  162,000   
Jasper, TN             Manufacturing                                  110,000   
Gloucester City, NJ    Manufacturing                                  210,000*  
Mosinee, WI            Manufacturing/Warehouse/Administrative         850,000*  
Stevens Point, WI      Manufacturing                                  107,000   
Huntington, WV         Manufacturing/Warehouse                        286,000*  
Albuquerque, NM        Manufacturing/Wholesale Lumberyards           31 Acres   
Montrose, CO           Manufacturing/Wholesale Lumberyards           19 Acres   
Pine Bluff, AR         Manufacturing                                 35 Acres   
Thomson, GA            Manufacturing                                 29 Acres   
Milford, VA            Manufacturing                                 45 Acres   
Detroit, MI            Manufacturing                                 10 Acres   
Providence, RI         Administrative                                  23,900*  

ITEM 3. Legal Proceedings                                                       

     The  Company and its subsidiaries are subject to numerous federal,  state
and  local  laws and regulations, including environmental laws and  regulations 
that  impose limitations on the discharge of pollutants into the air and  water 
and  establish standards for the treatment, storage and disposal of  solid  and 
hazardous  wastes.  The  Company believes that it is in substantial  compliance 
with  the  material  laws and regulations applicable  to  it.  The  Company  is 
involved in current, and may become involved in future, remedial actions  under 
federal and state environmental laws and regulations which impose liability  on 
companies to clean up, or contribute to the cost of cleaning up, sites at which 
their  hazardous wastes or materials were disposed of or released. Such  claims 
may  relate  to  properties or business lines acquired by the Company  after  a 
release  has occurred. In other instances, the Company may be partially  liable 
under  law or contract to other parties that have acquired businesses or assets 

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from   the   Company  for  past  practices  relating  to  hazardous  substances 
management. The Company believes that all such claims asserted against  it,  or 
such  obligations incurred by it, will not have a material adverse effect  upon 
the  Company's  financial condition or results of operations.  Expenditures  in 
1996  and 1997 to evaluate and remediate such sites were not material. However, 
the  Company is presently unable to estimate accurately its ultimate  financial 
exposure in connection with identified or yet to be identified remedial actions 
due  among  other  reasons  to: (i) uncertainties surrounding  the  nature  and 
application   of  environmental  regulations,  (ii)  the  Company's   lack   of 
information  about additional sites to which it may be listed as a  potentially 
responsible party ("PRP"), (iii) the level of clean-up that may be required  at 
specific  sites  and  choices  concerning the technologies  to  be  applied  in 
corrective actions and (iv) the time periods over which remediation may  occur. 
Furthermore,  since liability for site remediation is joint and  several,  each 
PRP  is  potentially  wholly liable for other PRPs  that  become  insolvent  or 
bankrupt.  Thus, the solvency of other PRPs could directly affect the Company's 
ultimate  aggregate  clean-up  costs. In certain circumstances,  the  Company's 
liability for clean-up costs may be covered in whole or in part by insurance or 
indemnification obligations of third parties.                                   

    In  addition  to  the legal matters described above, the Company  and  its
subsidiaries are parties to various legal proceedings incident to  the  conduct 
of  their  businesses. None of these proceedings is expected to have a material 
adverse  effect,  either  individually or in the aggregate,  on  the  Company's 
financial  position or results of operations (See Note 8 Notes to  Consolidated 
Financial  Statements, Item 8 of Part II of this report incorporated herein  by 
reference).                                                                     

ITEM 4. Submission of Matters to a Vote of Security Holders                     

Not applicable.                                                       

PART II                                                                         
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS    

     Stockholders  of  record  of Nortek Common and Special  Common  Stock  at
February  27,  1998,  numbered  3,096 and 2,434, respectively.  There  were  no 
dividends declared on the Common and Special Common in 1997 or 1996.  The  high 
and  low  sales  prices of Nortek's Common Stock traded on the New  York  Stock 
Exchange in each quarter of 1997 and 1996 were:                                 

1997                                                                            
Quarter        High      Low                                                    
-------        ----      ---                                                    

First          27 1/2    19 1/2                                                 
Second         25        17 3/4                                                 
Third          27 1/4    23 3/16                                                
Fourth         26 15/16  21 13/16                                               

1996                                                                            
Quarter        High      Low                                                    
-------        ----      ---                                                    

First          12 1/4     9 3/4                                                 
Second         16 1/8    11 5/8                                                 
Third          14 1/4    11                                                     
Fourth         20 5/8    13 1/2                                                 

See Note 6, Notes to Consolidated Financial Statements.               

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Item 6. Consolidated Selected Financial Data                                    
Nortek, Inc. and Subsidiaries                                   

                              For the Five Years Ended December 31, 1997
                              ------------------------------------------------
                             1997      1996       1995       1994       1993
                             ----      ----       ----       ----       ----
                        (In Thousands Except Ratios and Per Share Amounts)
Consolidated Summary of                                                         
Operations:                                                                     
Net sales                 $1,134,129  $841,557   $656,800  $615,952  $627,489 
Operating earnings            82,981    60,951     42,973    44,393    31,674 
Loss on businesses sold          ---       ---        ---    (1,750)  (20,300)
Earnings (loss) from                                                          
   Continuing Operations      26,400    23,700     17,500    15,400   (10,200)
Earnings (loss) from                                                          
   Discontinued Operations    (5,200)   (1,700)    (2,500)    1,800    (4,000)
Extraordinary gain (loss)                                                     
   from debt retirements         ---       ---        ---       200    (6,100)
Cumulative effect of                                                          
   accounting changes            ---       ---        ---       400      (500)
Net earnings (loss)           21,200    22,000     15,000    17,800   (20,800)

Financial Position:                                                             
Unrestricted cash, invest-                                                    
ments and marketable                                                    
  securities               $161,830  $ 92,093   $103,313  $105,080  $ 82,498
Working capital              341,821   163,133    180,218   194,330   133,824 
Total assets               1,304,546   590,233    604,950   494,573   486,069 
Total debt--                                                                  
Current                       17,739    36,486     41,948     4,452    37,249 
Long-term                    835,840   243,769    240,125   219,241   177,348 
Current ratio                  2.3:1     1.9:1      1.9:1     2.4:1     1.7:1 
Debt to equity ratio           6.7:1     2.4:1      2.1:1     1.9:1     2.1:1 
Depreciation and amortization                                                 
  including non-cash interest28,407    20,995     16,225    15,539    18,012
Capital expenditures          22,464    19,798     15,665    14,375     8,718 
Stockholders' investment     128,088   118,795    131,291   117,790   104,007 
Common and special common                                                     
  shares outstanding          9,500     9,873     12,074    12,550    12,542

Per Share:                                                                      
Earnings (loss) from                                                          
Continuing Operations                                                   
Basic                          $2.75     $2.26      $1.41     $1.23     $(.81)
Diluted                         2.68      2.23       1.39      1.21      (.81)
Net earnings (loss)                                                           
Basic                           2.21      2.10       1.21      1.42     (1.66)
Diluted                         2.15      2.07       1.19      1.39     (1.66)
Stockholders' investment       13.48     12.03      10.87      9.39      8.29 

See  Notes 2, 9 to 11 and 14 of the Notes to Consolidated Financial Statements, 
and  Item  7,  Management's Discussion and Analysis of Financial Condition  and 
Results  of  Operations, below, regarding the effect on  operating  results  of 
acquisitions, discontinued operations, businesses sold and other matters. There 
have  not  been any cash dividends declared or paid on the Company's Common  or 
Special Common Stock during the past five years.                                

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Item  7.Management's Discussion and Analysis of Financial Condition and Results 
of Operations                                                                   

The  Company  is  a  diversified  manufacturer of  residential  and  commercial 
building  products,  operating  within  four  principal  product  groups:   the 
Residential Building Products Group; the Air Conditioning and Heating  ("HVAC") 
Products Group; the Windows, Doors and Siding Group; and the Specialty Products 
and  Distribution Group. Through these product groups, the Company manufactures 
and sells, primarily in the United States, Canada and Europe, a wide variety of 
products for the residential and commercial construction, manufactured  housing 
and the do-it-yourself and professional remodeling and renovation markets.      

In  the  fourth  quarter  of  1995,  several  of  the  Company's  wholly  owned 
subsidiaries  completed  the  acquisition of the  assets,  subject  to  certain 
liabilities,  of Rangaire Company ("Rangaire"), all the capital stock  of  Best 
S.p.A.  and  related  entities ("Best") and all the  capital  stock  of  Venmar 
Ventilation, inc. ("Venmar").                                                   

On  August 26, 1997, the Company acquired Ply Gem, which is accounted for under 
the  purchase  method of accounting. Accordingly, the results of  Ply  Gem  are 
included  in the Company's consolidated results since that date. (See Liquidity 
and  Capital Resources and Notes 1 and 2 of the Notes to Consolidated Financial 
Statements included elsewhere herein.)                                          

In  the  fourth quarter of 1997, the Company adopted a plan to discontinue  its 
Plumbing  Products  Group. Accordingly, the results of  the  Plumbing  Products 
Group  have  been  excluded  from  earnings  from  continuing  operations   and 
classified  separately  as discontinued operations for all  periods  presented. 
(See  Note  9  of  the Notes to the Consolidated Financial Statements  included 
elsewhere herein.)                                                              

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Results of Operations                                                           

The  following tables set forth, for the three years ended December  31,  1997, 
(a)  certain consolidated operating results, (b) the percentage change of  such 
results  as  compared to the prior year, (c) the percentage which such  results 
bears  to net sales and (d) the change of such percentages as compared  to  the 
prior year:                                                                     

                                                       Percentage Change
                                                      --------------
                           Year Ended December 31,    1996    1995
                         -----------------------      to      to
                           1997     1996     1995     1997    1996
                           ----     ----     ----     ----    ----
               (Amounts in Millions)
Net sales                      $1,134.1   $841.6   $656.8   34.8%    28.1%      
Cost of products sold             831.7    600.3    472.3  (38.5)   (27.1)      
Selling, general and admini-                                                    
strative expense              219.4    180.3    141.5   (21.7)  (27.4)  
Operating earnings                 83.0     61.0     43.0    36.1    41.9       
Interest expense                  (50.2)   (28.4)   (23.0)  (76.8)  (23.5)      
Investment income                   9.9      6.0      8.1    65.0   (25.9)      
Earnings from continuing                                                        
operations before provision                                             
for income taxes               42.7     38.6     28.1    10.6    37.4   
Provision for income taxes         16.3     14.9     10.6    (9.4)  (40.6)      
Earnings from                                                                   
continuing operations          26.4     23.7     17.5    11.4    35.4   
Loss from discontinued operations  (5.2)    (1.7)    (2.5) (205.9)   32.0       
Net earnings                       21.2     22.0     15.0    (3.6)   46.7       

                                                    Percentage
                      Percentage of Net Sales       Change
                                                   -------------
                           Year Ended December 31,   1996     1995
                         -----------------------     to       to
                           1997     1996     1995    1997     1996
                           ----     ----     ----    ----     ----
Net sales                         100.0%   100.0%   100.0%   ---%    ---%       
Cost of products sold              73.4     71.3     71.9    (2.1)    0.6       
Selling, general and admini-                                                    
strative expense               19.3     21.4     21.5     2.1     0.1   
Operating earnings                  7.3      7.3      6.6     ---     0.7       
Interest expense                   (4.4)    (3.4)    (3.5)   (1.0)    0.1       
Investment income                   0.9      0.7      1.2     0.2    (0.5)      
Earnings from continuing                                                        
operations before provision                                             
for income taxes                3.8      4.6      4.3    (0.8)    0.3   
Provision for income taxes          1.4      1.8      1.6     0.4    (0.2)      
Earnings from continuing                                                        
operations                      2.4      2.8      2.7    (0.4)    0.1   
Loss from discontinued operations  (0.5)    (0.2)    (0.4)   (0.3)    0.2       
Net earnings                        1.9      2.6      2.3    (0.7)    0.3       

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The  following table presents the net sales for the Company's principal product 
groups  for the three years ended December 31, 1997, and the percentage  change 
of such results as compared to the prior year. Certain amounts in the table for 
prior periods have been reclassified to conform to the presentation for 1997.   

                                                            Percentage
                                                            Change
                                                            ------
                                                            1996      1995
                                Year  Ended December 31,    to        to
           -----------------------
                               1997      1996      1995     1997      1996
Net Sales:                        ----      ----      ----     ----      ----   
                                 (Amounts in Millions)

Residential Building Products    $430.5    $418.5    $293.4     2.9%     42.6%  
Air Conditioning and                                                            
Heating Products                419.4     423.1     363.4    (0.9)     16.4 
Windows, Doors and Siding         189.0       ---       ---      ---      ---   
Specialty Products and                                                          
Distribution                     95.2       ---       ---      ---      --- 
                             --------    ------    ------    -----     -----
                             $1,134.1    $841.6    $656.8    34.8%     28.1%
                             ========    ======    ======    =====     =====

Year Ended December 31, 1997 as Compared to the Year Ended December 31, 1996    

Net  sales  increased  approximately $292,500,000, or approximately  34.8%,  as 
compared  to  1996  (or increased approximately $300,500,000, or  approximately 
35.7%,   excluding  the  effect  of  foreign  exchange).  Net  sales  increased 
principally as a result of the acquisition of Ply Gem on August 26, 1997, which 
contributed approximately $284,200,000 to net sales. Excluding sales  from  the 
acquisition, net sales increased approximately $8,300,000, or 1.0%, as compared 
to   1996  (or  increased  approximately  $16,400,000,  or  approximately  2.0% 
excluding the effect of foreign exchange). This increase was principally  as  a 
result  of  slightly higher sales volume in the Residential  Building  Products 
Group  (partially  offset by the effects of foreign exchange)  and  residential 
products of the Air Conditioning and Heating Products Group partially offset by 
lower  sales  levels  of commercial HVAC products and approximately  $3,600,000 
lower sales from the sale of a residential HVAC product line in 1997.           

Cost of products sold as a percentage of net sales increased from approximately 
71.3% in 1996 to approximately 73.4% in 1997. Excluding the Ply Gem businesses, 
(which  have  a  higher  level  of cost of sales  than  the  overall  group  of 
businesses  owned  prior  to  the acquisition), cost  of  products  sold  as  a 
percentage  of  net sales decreased from approximately 71.3%  to  approximately 
70.4% in 1997, as compared to 1996. This decrease in the percentage principally 
resulted  from a reduction in the cost of certain raw materials and  components 
compared  to  1996  and decreased labor as a percentage of  net  sales  in  the 
Residential Building Products and Air Conditioning and Heating Products  Groups 
due  to the increased volume of higher margin products and improved efficiency. 
Had  all  year-end  inventory values been stated  on  a  FIFO  basis,  year-end 
inventory   would  have  been  approximately  $  5,041,000  higher   in   1997, 
approximately $6,015,000 higher in 1996 and approximately $7,873,000 higher  in 
1995.  Overall,  changes in the cost of products sold as a  percentage  of  net 
sales  for  one period as compared to another period may reflect  a  number  of 
factors, including changes in the relative mix of products sold, the effect  of 
changes  in  sales prices, the material cost of Products sold  and  changes  in 
productivity levels.                                                            

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Year Ended December 31, 1997 as Compared to the Year Ended December 31, 1996    
Continued                                                                       

Selling,  general  and  administrative expense as a  percentage  of  net  sales 
decreased  from  approximately 21.4% in 1996 to approximately  19.3%  in  1997. 
Excluding the Ply Gem businesses, (which have a lower level of selling, general 
and  administrative expense to net sales than the overall group  of  businesses 
owned prior to the acquisition), selling, general and administrative expense as 
a  percentage  of  net  sales decreased from approximately  21.4%  in  1996  to 
approximately  21.2%  in  1997.  This  decrease  in  the  percentage  was   due 
principally  to higher sales levels in the Residential Building Products  Group 
without  a  proportionate increase in expense and the effect of the sale  of  a 
residential  HVAC  product line noted above, partially offset  by  lower  sales 
levels  of  commercial products  by the Air Conditioning and  Heating  Products 
Group without a proportionate decrease in expense.                              

Segment  earnings  were  approximately $97,000,000 for  1997,  as  compared  to 
approximately  $74,900,000 for 1996. Segment earnings  are  operating  earnings 
from  continuing operations before corporate and other expenses  that  are  not 
directly  attributable to the Company's product groups. The Ply Gem acquisition 
in  late August 1997 contributed approximately $11,300,000 to segment earnings. 
Segment earnings have been reduced by depreciation and amortization expense  of 
approximately  $26,600,000 and approximately $19,500,000  for  1997  and  1996, 
respectively.  The acquisition of Ply Gem contributed approximately  $6,300,000 
of  the  increase in depreciation and amortization expense in 1997. The overall 
increase in segment earnings was due principally, in addition to the effect  of 
the acquisition of Ply Gem, to increased sales volume without a proportionate   
increase  in  expense particularly in the Residential Building  Products  Group 
and, to  a lesser extent, the residential sector of the Air Conditioning and    
Heating Products Group and was affected by the factors previously noted.        

Earnings  of  foreign  operations,  consisting  primarily  of  the  results  of 
operations   of  the  Company's  Canadian  and  European  subsidiaries,   which 
manufacture built-in ventilating products, decreased to approximately 10.8%  of 
segment earnings in 1997 from approximately 11.2% of such earnings in 1996. The 
decrease in the percentage is due to an increase in domestic earnings in  1997, 
in  part as a result of $11,300,000 contributed by Ply Gem, which has primarily 
domestic  operations. Sales and earnings derived from the international  market 
are subject to the risks of currency fluctuations.                              

Operating   earnings   in   1997   increased  approximately   $22,000,000,   or 
approximately  36.1%,  as  compared  to 1996,  primarily  due  to  the  factors 
previously discussed.                                                           

Interest  expense in 1997 increased approximately $21,800,000 or  approximately 
76.8%,  as  compared to 1996, primarily as a result of the sale of $175,000,000 
principal  amount  of 9 1/4% Senior Notes due 2007 ("9 1/4% Notes")  in  March, 
1997, the sale of $310,000,000 principal amount of 9 1/8% Senior Notes due 2007 
("9  1/8  Notes")in August 1997 and the existing indebtedness of Ply Gem.  This 
increase  was  partially  offset  by  the refinancing  of  certain  outstanding 
indebtedness of the Company's subsidiaries primarily in the second  quarter  of 
1997.  (See Notes 2 and 5 of the Notes to the Consolidated Financial statements 
included elsewhere herein.)                                                     

Investment  income in 1997 increased approximately $3,900,000, or approximately 
65.0%, as compared to 1996, principally due to higher average invested balances 
of short-term investments and marketable securities.                            

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The  provision  for  income taxes was approximately $16,300,000  for  1997,  as 
compared to approximately $14,900,000 for 1996. The provision for income  taxes 
was reduced by approximately $1,540,000 in 1997 and $481,000 in 1996 reflecting 
the  reversal of tax reserves no longer required. The income tax rates differed 
from the United States Federal statutory rate of 35% principally as a result of 
state  income  tax  provisions,  nondeductible amortization  expense  (for  tax 
purposes), changes in tax reserves, the effect of foreign income tax on foreign 
source  income and the effect of product development tax credits  from  foreign 
operations.  (See Note 4 of the Notes to the Consolidated Financial  Statements 
included elsewhere herein.)                                                     

In the fourth quarter of 1997, the Company adopted a plan of disposition of its 
Plumbing  Products  Group.  Loss from discontinued operations  related  to  the 
Plumbing  Products Group increased approximately $3,500,000;  from  a  loss  of 
$1,700,000  in  1996  to a loss of $5,200,000 in 1997. Loss  from  discontinued 
operations  in  1997 includes a net after tax loss of $1,600,000 for  operating 
losses expected to occur during the disposal period and is net of an income tax 
benefit  of $900,000. Loss from discontinued operations includes net after  tax 
operating  losses of $3,600,000 in 1997 and $1,700,000 in 1996 and are  net  of 
income tax benefits of $2,100,000 and $900,000 for 1997 and 1996, respectively. 
Operating results of discontinued operations reflect an allocation of corporate 
interest  expense of approximately $1,900,000 and $1,700,000 in 1997 and  1996, 
respectively  and are net of income tax benefits of $670,000  and  $600,000  in 
1997  and  1996,  respectively. (See Note 9 of the  Notes  to  the  Consolidated
Financial Statements included elsewhere herein.)                                

Year Ended December 31, 1996 as Compared to the Year Ended December 31, 1995    

Net  sales  increased  approximately $184,800,000, or approximately  28.1%,  as 
compared  to 1995. The Residential Building Products Group net sales  increased 
principally   as a   result  of  fourth  quarter 1995  acquisitions,  which     
contributed  approximately  $140,400,000 in 1996 as compared  to  approximately 
$24,600,000  in  1995.  Shipments  of new  and  replacement  HVAC  products  to 
manufactured  housing customers and increased sales levels  of  commercial  and 
industrial  HVAC products were the primary reasons for increased sales  in  the 
Air  Conditioning and Heating Products Group. Modest sales price  increases  in 
certain product lines of the Residential Building Products Group, were  also  a 
factor,  and were partially offset by lower sales prices of certain residential 
HVAC products in the Air Conditioning and Heating Products Group.               

Cost of products sold as a percentage of net sales decreased from approximately 
71.9%  in  1995 to approximately 71.3% in 1996. The decrease in the  percentage 
principally resulted from a reduction in cost in 1996 of certain raw  materials 
and components compared to 1995 and decreased overhead costs as a percentage of 
sales  in  the Residential Building Products and Air Conditioning  and  Heating 
Products  Groups  due  to  increased  volume  and  improved  efficiency.  These 
decreases were partially offset by the 1995 acquisitions, which have  a  higher 
level  of cost of sales to net sales than the overall group of businesses owned 
prior  to  the acquisitions, the effect of the development and introduction  of 
new  products  and  the effect of an extended shut-down  period  in  the  third 
quarter  in  Europe. Had all year-end inventory values been stated  on  a  FIFO 
basis,  year-end inventory would have been approximately $6,015,000  higher  in 
1996,  approximately  $7,873,000 higher in 1995  and  approximately  $4,254,000 
higher in 1994.                                                                 

Selling, general and administrative expenses as a percentage of net sales  were 
consistent between years at approximately 21.5% in 1995 and 21.4% in 1996.  The 
fourth  quarter 1995 acquisitions, which have a lower level of selling, general 

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Year Ended December 31, 1996 as Compared to the Year Ended December 31, 1995    
Continued                                                                       

and  administrative expense to net sales than the overall group  of  businesses 
owned prior to the acquisitions, resulted in a decrease in the percentage which 
was primarily offset by the effect of limited sales activity during an extended 
shutdown  period  in  the  third  quarter of 1996  by  the  Company's  European 
subsidiaries  without  a  proportionate reduction in  expense  and  higher  net 
unallocated expense.                                                            

Segment  earnings  were  approximately $74,900,000 for  1996,  as  compared  to 
approximately $50,600,000 for 1995. Fourth quarter 1995 acquisitions,  included 
in   the   Residential  Building  Products  Group,  contributed   approximately 
$8,400,000  to  segment  earnings in 1996 as compared to  $1,050,000  in  1995. 
Segment earnings have been reduced by depreciation and amortization expense  of 
approximately  $19,500,000 and approximately $14,800,000  for  1996  and  1995, 
respectively.  Acquisitions  accounted  for  approximately  $5,100,000  of  the 
depreciation and amortization expense in 1996 as compared to $750,000 in  1995. 
The overall increase in segment earnings was due principally to increased sales 
volume in each of the Company's operating groups, particularly increased  sales 
volume  of  residential and commercial HVAC products and  residential  building 
products,  the  effect  of  increased  sales  from  the  fourth  quarter   1995 
acquisitions, and a reduction in the price paid for certain materials  in  each 
of  the  Company's operating groups and was affected by the factors  previously 
noted.                                                                          

Foreign segment earnings, consisting primarily of the results of operations  of 
the  Company's  Canadian and European subsidiaries, which manufacture  built-in 
ventilating  products, increased to approximately 11.2% of segment earnings  in 
1996 from approximately 5.8% of such earnings in 1995. The increase in 1996 was 
primarily  attributable to an approximate 184.2% increase  in  foreign  segment 
earnings  in  1996, as compared to a 39.1% increase in domestic  earnings.  The 
increase  in 1996 was primarily attributable to earnings of the Company's  1995 
Canadian and European acquisitions.                                             

Operating   earnings   in   1996   increased  approximately   $18,000,000,   or 
approximately  41.9%,  as  compared  to 1995,  primarily  due  to  the  factors 
previously discussed.                                                           

Interest  expense in 1996 increased approximately $5,400,000, or  approximately 
23.5%,  as  compared  to  1995,  primarily as a  result  of  higher  borrowings 
resulting  from  the  1995 acquisitions including existing  short-term  working 
capital borrowings of the acquired subsidiaries.                                

Investment  income in 1996 decreased approximately $2,100,000, or approximately 
25.9%,  as compared to 1995, principally due to lower average invested balances 
of short-term investments and marketable securities, principally resulting from 
the  1995  acquisitions  and  from purchases of the  Company's  capital  stock, 
partially offset by increased cash from operating results.                      

The  provision  for  income taxes was approximately $14,900,000  for  1996,  as 
compared to approximately $10,600,000 for 1995. The provision for income  taxes 
has been reduced by approximately $481,000 in 1996 and approximately $1,100,000 
in  1995,  respectively, reflecting the reversal of tax valuation  reserves  no 
longer  required, of which approximately $263,000 in 1996 and $670,000 in  1995 
are  as  a result of the gain on the sale of certain investments and marketable 

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Year Ended December 31, 1996 as Compared to the Year Ended December 31, 1995    
Continued                                                                       

securities.  The  income  tax rates differed from  the  United  States  Federal 
statutory  rate of 35% principally as a result of state income tax  provisions, 
nondeductible  amortization  expense (for tax purposes),  the  changes  in  tax 
reserves,  the  effect of foreign income tax on foreign source income,  and  in 
1996 from  the  effect  of product development tax credits from foreign         
operations. (See  Note 4 of the Notes to the Consolidated Financial Statements  
included elsewhere herein.)                                                     

Loss  from  discontinued  operations related to  the  Plumbing  Products  Group 
decreased approximately $800,000 from a loss of $2,500,000 in 1995 to a loss of 
$1,700,000 in 1996. Loss from discontinued operations includes a net after  tax 
operating loss of $1,700,000 in 1996 and $2,500,000 in 1995 and is net  of  tax 
benefits  of $900,000 and $1,300,000 for 1996 and 1995, respectively. Operating 
results  of discontinued operations reflect an allocation of corporate interest 
expense   of  approximately  $1,700,000  and  $1,900,000  in  1996  and   1995, 
respectively and are net of a tax benefit of $600,000 and $670,000 in 1996  and 
1995,  respectively.  (See  Note  9  of the  Notes  to  Consolidated  Financial 
Statements included elsewhere herein.)                                          

Liquidity and Capital Resources                                                 

    On  March 9, 1998, the Company through a wholly-owned subsidiary,  entered
into  an  agreement  to  purchase NuTone, Inc., a  wholly-owned  subsidiary  of 
Williams  plc,  for approximately $242,500,000 in cash, subject to  adjustment. 
The  acquisition  is  subject  to  the requirements  of  the  Hart-Scott-Rodino 
Antitrust  Improvements Act. In connection with its review of  the  transaction 
under  the  Act,  the  Federal Trade Commission ("FTC") has  issued  a  "second 
request" for certain additional information. The FTC has taken no position with 
respect  to the transaction and there can be no assurance that the transaction, 
as  proposed,  will be consummated. If the acquisition is not consummated,  the 
Company  expects  that  it would incur an approximately $3,000,000  ($0.31  per 
diluted  share) net after  tax charge to its earnings as a result of the  fees, 
expenses  and  other  acquisition related costs. In  order  to  consummate  the 
acquisition, the Company will need to raise additional funds through  debt  and 
equity financings. (See discussion in Item 1 under Recent Developments and Note 
13  to  the  Notes  to the Consolidated Financial Statements.)   Following  the 
acquisition,  the Company anticipates that it will need to enter  into  a  bank 
facility in order to meet its working capital needs.                            

On  August  26,  1997, a wholly-owned subsidiary of the Company, completed  the 
acquisition  of Ply Gem Industries, Inc. ("Ply Gem") in a tender  offer  for  a 
cash  price of $19.50 per outstanding share of common stock. Net cash paid  for 
the acquisition of Ply Gem, including expenses, settlement of stock options and 
the  payment to terminate Ply Gem's existing accounts receivable securitization 
program  was  approximately $407,419,000 at December 31, 1997.  On  August  26, 
1997,  prior  to the acquisition, Ply Gem refinanced approximately $108,900,000 
of its existing indebtedness.                                                   

On  August 26, 1997, the Company sold $310,000,000 principal amount of  9  1/8% 
Notes due 2007 for approximately $297,269,000, net of a discount of             
approximately $2,505,000 and approximately $10,226,000 of expenses incurred  in 
connection  with  the sale. The Company used a portion of these  net  proceeds, 

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together  with available cash, to purchase the shares of Ply Gem, to  fund  the 
approximate  $45,000,000  payment  to terminate  Ply  Gem's  existing  accounts 
receivable securitization program and to pay certain fees and expenses.         

On  March  17, 1997, the Company sold $175,000,000 principal amount of  9  1/4% 
Notes   due  2007  for  approximately  $168,945,000,  net  of  a  discount   of 
approximately $1,011,000 and approximately $5,044,000 of expenses  incurred  in 
connection with the sale.                                                       

Unrestricted cash and cash equivalents increased approximately $84,800,000 from 
December  31,  1996  to  December 31, 1997, primarily as  the  result  of  cash 
generated from operations and the net proceeds from the sale of the 9 1/4%  and 
the  9  1/8% Notes, net of cash paid in connection with the acquisition of  Ply 
Gem  as  described  above  and  the reduction in certain  indebtedness  of  the 
Company's subsidiaries.                                                         

The  Company's  investment  in  marketable  securities  at  December  31,  1997 
consisted  primarily  of investments in bank issued money  market  instruments, 
commercial paper and United States Treasury securities. At December  31,  1997, 
approximately $6,348,000 of the Company's cash and investments were pledged  as 
collateral  for  insurance  and  other  requirements  and  were  classified  as 
restricted in current assets in the Company's accompanying consolidated balance 
sheet.                                                                          

The  Company's  Board of Directors has authorized a program to purchase  up  to 
500,000  shares of the Company's Common and Special Common Stock in open-market 
or  negotiated transactions subject to market conditions, cash availability and 
provisions  of the Company's outstanding debt instruments. As of  February  28, 
1998, the Company had purchased approximately 316,500 shares of its Common  and 
Special  Common  Stock  under  this program for  approximately  $9,314,000  and 
accounted for such share purchases as Treasury Stock.                           

At  March  1, 1998, approximately $ 6,872,000 was available for the payment  of 
cash  dividends  or  stock  payments under the terms  of  the  Company's   most 
restrictive Indenture.                                                          

The  Company's  working capital and current ratio increased from  approximately 
$163,133,000 and 1.9:1, respectively, to approximately $341,821,000 and  2.3:1, 
respectively, between December 31, 1996 and December 31, 1997. The increase was 
principally  as  a  result  of the acquisition of Ply  Gem,  which  contributed 
approximately  $212,971,000 to current assets and approximately $88,385,000  to 
current liabilities at December 31, 1997 and an increase in unrestricted  cash, 
investments and marketable securities of approximately $84,800,000.             

Accounts  receivable  increased  approximately  $72,212,000,  or  approximately 
66.7%,  between  December  31, 1996 and December  31,  1997,  while  net  sales 
increased  approximately $206,282,000, or approximately  98.5%  in  the  fourth 
quarter  of  1997  as  compared to the fourth quarter  of  1996.  Approximately 
$69,000,000   of   the  increase  in  accounts  receivable  and   approximately 
$201,000,000  of  the  increase  in  net  sales  was  principally  due  to  the 
acquisition  of Ply Gem. The rate of change in accounts receivable  in  certain 
periods  may  be  different than the rate of change in sales  in  such  periods 
principally due to the timing of net sales. Increases or decreases in net sales 
near  the  end  of any period generally result in significant  changes  in  the 
amount  of accounts receivable on the date of the balance sheet at the  end  of 
such  period, as was the situation on December 31, 1997 as compared to December 

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31,  1996.  The Company has not experienced any significant changes  in  credit 
terms,  collection  efforts,  credit utilization  or  delinquency  in  accounts 
receivable in 1997.                                                             

Inventories increased approximately $86,264,000 or approximately 95.9%, between 
December  31, 1996 and December 31, 1997. The increase is due to the  inclusion 
of  approximately $88,000,000 of inventory related to Ply Gem at  December  31, 
1997.                                                                           

Accounts  payable  increased approximately $24,660,000 or  approximately  36.9% 
between  December  31,  1996  and  December 31, 1997,  including  approximately 
$28,355,000  of  accounts payable at December 31, 1997 from the acquisition  of 
Ply Gem.                                                                        

Unrestricted cash and cash equivalents increased approximately $84,800,000 from 
December  31,  1996  to  December 31, 1997, principally  as  a  result  of  the 
following:                                                                      

                                     Condensed
                                      Consolidated
                                      Cash Flows
                                      ----------
Operating Activities--                                                          
Cash flow from operations, net                      $ 52,407,000              
Decrease in accounts receivable, net                  10,259,000              
Decrease in inventories                                6,524,000              
Decrease in prepaids and other current assets          5,699,000              
Decrease in net assets of discontinued operations      4,934,000              
Decrease in trade accounts payable                   (16,359,000)             
Increase in accrued expenses and taxes                25,968,000              

Investing Activities-                                                           
Net cash paid for a business acquired               (407,419,000)             
Purchase of marketable securities                   (283,918,000)             
Proceeds from the sale of marketable securities      298,158,000              
Capital expenditures                                 (22,464,000)             

Financing Activities-                                                           
Sale of Notes                                        466,214,000              
Payment of borrowings, net                           (33,354,000)             
Purchase of Nortek Common and Special                                         
Common Stock                                       (10,177,000)           
Other, net                                            (11,672,000)              
                                      ------------
                                      $ 84,800,000
                                      ============
The  impact  of  changes in foreign currency exchange rates  on  cash  was  not 
material and has been included in other, net.                                   

The  Company's  debt-to-equity  ratio increased  from  approximately  2.4:1  at 
December 31, 1996 to 6.7:1 at December 31, 1997, primarily as a result  of  the 
sale  of  the  9 1/4% Notes and the 9 1/8% Notes, indebtedness of  Ply  Gem  of 
approximately $128,529,000 existing at the date of acquisition and  the  effect 
of  the purchase of the Company's Common and Special Common Stock (see Notes 2, 
5 and 6 to Consolidated Financial Statements), partially offset by the payment  
of  certain  subsidiary  indebtedness and by net earnings  for  the  year-ended 
December  31, 1997. (See the Consolidated Statement of Stockholders' Investment 
included elsewhere herein.)                                                     

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At  December  31, 1997, the Company had approximately $60,800,000 of  net  U.S. 
federal  prepaid  income tax assets which are expected to be  realized  through 
future  operating earnings. (See Note 4 to the Notes to Consolidated  Financial 
Statements.)                                                                    

The  Company  believes that its growth will be generated  largely  by  internal 
growth,  augmented  by strategic acquisitions. The Company regularly  evaluates 
potential  acquisitions which would increase or expand the  market  penetration 
of, or otherwise complement, its current product lines.                         

Absent  the  acquisition of Nutone, the Company believes that  cash  flow  from 
subsidiary  operations,  unrestricted  cash  and  marketable  securities,   and 
borrowings  under new credit facilities or arrangements which  may  be  entered 
into  will provide sufficient liquidity to meet the Company's working  capital, 
capital expenditure, debt service and other ongoing business needs through  the 
next 12 months. Capital expenditures were approximately $22,500,000 in 1997 and 
are expected to be approximately $40,000,000 in 1998.                           

Inflation, Trends and General Considerations                                    

The  Company's performance is dependent to a significant extent upon the levels 
of new residential construction, residential replacement and remodeling and non-
residential construction, all of which are affected by such factors as interest 
rates,  inflation  and unemployment. In the near term, the Company  expects  to 
operate  in  an  environment of relatively stable levels  of  construction  and 
remodeling activity. However, increases in interest rates could have a negative 
impact on the level of housing construction and remodeling activity.            

The  demand  for  the  Company's  products is  seasonal,  particularly  in  the 
Northeast  and  Midwest  regions of the United States where  inclement  weather 
during  the  winter months usually reduces the level of building and remodeling 
activity  in  both  the  home  improvement and new  construction  markets.  The 
Company's  lower  sales  levels  usually occur  during  the  first  and  fourth 
quarters.  Since a high percentage of the Company's manufacturing overhead  and 
operating  expenses are relatively fixed throughout the year, operating  income 
and  net  earnings  tend to be lower in quarters with lower  sales  levels.  In 
addition,  the  demand for cash to fund the working capital  of  the  Company's 
subsidiaries  is  greater from late in the first quarter  until  early  in  the 
fourth quarter.                                                                 

The  Company is in the process of updating its computer systems to ensure  that 
its systems are Year 2000 compliant and to improve the systems. The Company has 
and  will continue to make investments in its computer systems and applications 
to  ensure that the Company is Year 2000 compliant. The financial impact to the 
Company  of  its  Year  2000  compliance programs  has  not  been  and  is  not 
anticipated  to be material to its financial position or results of  operations 
in  any given year. While the Company does not believe it will suffer any major 
effect  from  the  Year  2000 issue, it is possible  that  such  effects  could 
materially impact future financial results.                                     

Forward-Looking Statements                                                      

When   used  in  this  discussion  and  throughout  this  document,  the  words 
"believes", "anticipates" and "expects" and similar expressions are intended to 
identify  forward-looking statements. Such statements are  subject  to  certain 
risks  and  uncertainties, over which the Company has no control,  which  could 

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cause actual results to differ materially from those presented. These risks and 
uncertainties  include  increases  in raw  material  costs,  (including,  among 
others,  steel, copper, packaging material, plastics, resins, glass,  wood  and 
aluminum)  and  purchased component costs, the level of  domestic  and  foreign 
construction  and  remodeling  activity affecting  residential  and  commercial 
markets,  interest  rates,  employment, inflation,  consumer  spending  levels, 
operating  in  international economies, the rate of  sales  growth,  price  and 
product liability claims. Readers are cautioned not to place undue reliance  on 
these  forward-looking statements which speak only as of the date  hereof.  The 
Company   undertakes   no  obligation  to  republish  revised   forward-looking 
statements  to  reflect events or circumstances after the date  thereof  or  to 
reflect  the  occurrence of unanticipated events. Readers  are  also  urged  to 
carefully  review and consider the various disclosures made by the Company,  in 
this report, as well as the Company's periodic reports on Forms 10-K, 10-Q  and 
8-K, filed with the Securities and Exchange Commission.                         

Item 7A. Quantitative and Qualitative Disclosure About Market Risk              

Not applicable.                                                                 

Item 8. Financial Statements and Supplementary Data                             

Financial  statements and supplementary data required by this Item  8  are  set 
forth at the pages indicated in Item 14(a) included elsewhere herein.           

Item 9. Disagreements on Accounting and Financial Disclosure                    

Not applicable.                                                                 

PART III                                                                        

Item 10.  Directors and Executive Officers of the Registrant                    

See  Election of Directors in the definitive Proxy Statement for the  Company's 
1998 Annual Meeting of Stockholders, incorporated herein by reference. See also 
Part  I,  Item  1,  Business-General Considerations-Executive Officers  of  the 
Registrant.                                                                     

Item 11.  Executive Compensation                                                

See  Executive Compensation in the definitive Proxy Statement for the Company's 
1998 Annual Meeting of Stockholders, incorporated herein by reference.          

Item 12.  Security Ownership of Certain Beneficial Owners and Management        

See  Security  Ownership of Certain Beneficial Owners  and  Management  in  the 
definitive   Proxy  Statement  for  the  Company's  1998  Annual   Meeting   of 
Stockholders, incorporated herein by reference.                                 

Item 13.  Certain Relationships and Related Transactions                        

See  Election of Directors in the definitive Proxy Statement for the  Company's 
1998 Annual Meeting of Stockholders, incorporated herein by reference.          

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PART IV                                                                         

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K       

(a) Financial Statements and Schedules                                          

The following documents are filed as part of this report:               

1. Financial Statements:                                    Page No.          

Consolidated Statement of                                               
Operations for the three                                            
years ended December 31, 1997                              29       

Consolidated Balance Sheet                                              
as of December 31, 1997 and 1996                           30       

Consolidated Statement of                                               
Cash Flows for the three                                            
years ended December 31, 1997                              32       

Consolidated Statement of                                               
Stockholders' Investment                                            
for the three years ended                                           
December 31, 1997                                          33       

Notes to Consolidated Financial Statements                   35         

Report of Independent Public Accountants                     55         

2. Financial Statement Schedules:                                             

Schedule I Condensed Financial Information of Registrant     56         

Schedule II Valuation and Qualifying Accounts                62         

3. The  exhibits  are  listed in the Exhibit Index,  which  is  incorporated  
herein by reference.                                                    

(b) Reports on Form 8-K                                                         

No reports on Form 8-K were filed by the Registrant during the last   
quarter of the period covered by this report.                         

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SIGNATURES  

Pursuant  to the requirements of the Securities Exchange Act  of  1934, the     
registrant has duly caused this Amendment No. 1 on its Annual Report on Form    
10-K to be signed  on  its behalf by the undersigned, hereunto duly authorized. 

      NORTEK, INC.

              By: /s/Almon C. Hall
                          ------------------------
                               Almon C. Hall, Vice President
                           and Controller (principal
                     accounting officer)
Dated: April 20, 1998                                                           

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Nortek, Inc. and Subsidiaries                                                   
Consolidated Statement of Operations                                            

                               For the Years Ended December 31
                                --------------------------------
                                 1997       1996        1995
                                ----        ----        ----
                               (In Thousands Except Per Share Amounts)

Net Sales                             $1,134,129   $841,557    $656,800         
                             ----------    -------     -------
Costs and Expenses:                                                             
Cost of products sold                    831,772    600,298     472,286         
Selling, general and administrative                                             
expense                                 219,376    180,308     141,541        
                              ---------    -------     -------
                              1,051,148    780,606     613,827
                              ---------    -------     -------
Operating earnings                        82,981     60,951      42,973         
Interest expense                         (50,210)   (28,400)    (22,993)        
Investment income                          9,929      6,049       8,120         
                              ---------    -------     -------
Earnings from continuing                                                        
operations before provision                                                   
for income taxes                         42,700     38,600      28,100        
Provision for income taxes                16,300     14,900      10,600         
                               --------    -------     -------
Earnings from continuing operations       26,400     23,700      17,500         
Loss from discontinued operations         (5,200)    (1,700)     (2,500)        
                               --------   --------    --------
Net Earnings                            $ 21,200   $ 22,000    $ 15,000         
                               ========   ========    ========
Earnings Per Share:                                                             
Earnings from continuing operations:                                            
Basic                                     $2.75      $2.26       $1.41        

Diluted                                   $2.68      $2.23       $1.39        

Loss from discontinued operations:                                              
Basic                                     $(.54)     $(.16)      $(.20)       
                                  -----      -----       -----
Diluted                                   $(.53)     $(.16)      $(.20)       
                                  -----      -----       -----
Net Earnings:                                                                   
Basic                                     $2.21      $2.10       $1.21        
                                   ====       ====        ====
Diluted                                   $2.15      $2.07       $1.19        
                                   ====       ====        ====
Weighted Average Number of Shares:                                              
Basic                                     9,605     10,485      12,445        
                                 ======     ======      ======
Diluted                                   9,855     10,641      12,569        
                                 ======     ======      ======

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

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Nortek, Inc. and Subsidiaries                                                   
Consolidated Balance Sheet                                                      

                                  December 31,
                                  ------------------
Assets                                           1997        1996               
                                  ----        ----
                                  (Amounts in Thousands)
Current Assets:                                                                 
Unrestricted                                                                    
Cash and cash equivalents                   $ 125,842    $ 41,042           
Marketable securities available for sale       35,988      51,051           
Restricted                                                                      
Investments and marketable                                                  
securities at cost, which approximates                                
market                                       6,348       5,681        
Accounts receivable, less allowances                                            
of $11,047,000 and $3,656,000                 180,414     108,202           
Inventories                                                                     
Raw materials                                  72,693      35,160           
Work in process                                18,399      11,688           
Finished goods                                 85,161      43,141           
                                   -------     -------
                                   176,253      89,989
                                   -------     -------

Prepaid expenses                                  8,391       4,736             
Other current assets                             12,627       9,209             
Net assets of a discontinued operation           22,386      24,789             
Prepaid income taxes                             46,800      20,000             
                                   -------     -------
Total current assets                       615,049     354,699        
                                   -------     -------

Property and Equipment, at Cost:                                                
Land                                             12,081       6,461             
Buildings and improvements                       96,606      62,756             
Machinery and equipment                         250,677     152,454             
                                   -------     -------
                                   359,364     221,671
Less accumulated depreciation                   116,841     100,124             
                                   -------     -------
Total property and equipment, net          242,523     121,547        
                                   -------     -------
Other Assets:                                                                   
Goodwill, less accumulated amortization                                         
of $31,773,000 and $26,615,000                378,232      90,679           
Intangible assets                                 8,752       4,263             
Notes receivable and other investments           10,235       1,379             
Deferred income taxes                            10,022         ---             
Deferred debt expense                            20,170       6,647             
Other                                            19,563      11,019             
                                   -------     -------
                                   446,974     113,987
                                 ---------     -------
                                $1,304,546    $590,233
                                ==========     =======

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

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Nortek, Inc. and Subsidiaries                                                   
Consolidated Balance Sheet                                                      

                                    December 31,
                                      ------------------
                                    1997        1996
                                     ----       ----
                                      (Amounts in Thousands)
Liabilities and Stockholders' Investment                                        

Current Liabilities:                                                            
Notes payable and other short-term                                              
obligations                                  $ 11,770    $ 25,334           
Current maturities of long-term debt              5,969      11,152             
Accounts payable                                 91,488      66,828             
Accrued expenses and taxes, net                 164,001      88,252             
                                   -------     -------
Total current liabilities                  273,228     191,566        
                                   -------     -------
Other Liabilities:                                                              
Deferred income taxes                               ---      17,637             
Other                                            67,390      18,466             
                                   -------     -------
                                    67,390      36,103
                                   -------     -------
Notes, Mortgage Notes and Obligations                                           
Payable, Less Current Maturities              835,840     243,769           
                                   -------     -------

Commitments and Contingencies (Note 8)                                          

Stockholders' Investment:                                                       
Preference stock, $1 par value; authorized                                      
7,000,000 shares, none issued                     ---         ---           
Common stock, $1 par value; authorized                                          
40,000,000 shares; 16,050,794 and                                           
15,965,585 shares issued                       16,051      15,966           
Special common stock, $1 par value;                                             
authorized 5,000,000 shares; 767,287 and                                    
784,169 shares issued                             767         784           
Additional paid-in capital                      135,345     135,028             
Retained earnings                                58,966      37,766             
Cumulative translation, pension                                                 
and other adjustments                          (5,327)     (3,212)          
Less --treasury common stock at cost,                                           
7,032,497 and 6,599,645 shares            (75,779)    (65,805)      
--treasury special common stock                                       
at cost, 285,304 and                                                
276,910 shares                             (1,935)     (1,732)      
                                   -------     -------
Total stockholders' investment             128,088     118,795        
                                ----------     -------
                                $1,304,546    $590,233
                                ==========     =======

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

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Nortek, Inc. and Subsidiaries                                                   
Consolidated Statement of Cash Flows                                            
                                          For the Years Ended December 31,
                                          ------------------------
                                         1997      1996     1995
                                         ----      ----     ----
                                              (Amounts in Thousands)
Cash Flows from operating activities:                                           
Net earnings from continuing operations        $26,400   $23,700   $17,500      
Net loss from discontinued operations           (5,200)   (1,700)   (2,500)     
Net earnings                                    21,200    22,000    15,000      
                                          ------    ------    ------

Adjustments to reconcile net earnings to cash:                                  
Depreciation and amortization                   26,696    19,831    15,155      
Non-cash interest expense                        1,711     1,164     1,070      
Net gain on investments and marketable                                          
securities                                     (200)     (750)   (2,000)  
Deferred federal income tax                                                     
provision (benefit)                             4,000    (3,000)    1,200     
Deferred federal income tax (benefit) provision                                 
on discontinued operations                     (1,000)    1,200       100     
Changes in certain assets and liabilities, net                                  
of effects from acquisitions and dispositions:                                
Accounts receivable, net                       10,259    (3,729)    2,302     
Prepaids and other current assets               5,699     3,280      (781)    
Inventories                                     6,524    11,828     5,405     
Net assets of discontinued operations           4,934       817     1,666     
Accounts payable                              (16,359)    1,699    (5,299)    
Accrued expenses and taxes                     25,968    (7,550)   (2,698)    
Long-term assets, liabilities and other, net   (4,317)      583     2,219     
                                          ------    ------    ------
Total adjustments to net earnings            63,915    25,373    18,339   
                                          ------    ------    ------
Net cash provided by operating activities    85,115    47,373    33,339   
                                          ------    ------    ------
Cash Flows from investing activities:                                           
Capital expenditures                           (22,464)  (19,267)  (14,859)     
Net cash paid for businesses acquired         (407,419)      ---   (27,543)     
Purchase of investments and marketable                                          
securities                                   (283,918)  (66,901) (104,762)    
Proceeds from the sale of investments                                           
and marketable securities                     298,158    82,435   112,173     
Other, net                                      (7,738)   (1,477)     (108)     
                                         -------   -------   -------
Net cash used in investing activities      (423,381)   (5,210)  (35,099)  
                                         -------   -------   -------
Cash Flows from financing activities:                                           
Sale of notes, net                             466,214       ---       ---      
Increase in borrowings                             612     9,609    10,763      
Payment of borrowings                          (33,966)  (13,598)   (1,142)     
Purchase of Nortek Common and Special Common                                    
Stock                                         (10,177)  (34,822)   (4,664)    
Other, net                                         383       479      (822)     
                                         -------   -------   -------
Net cash provided by (used in) financing                                  
activities                                 423,066   (38,332)    4,135  
                                         -------   -------   -------
Net increase in unrestricted                                                    
cash and cash equivalents                      84,800     3,831     2,375     
Unrestricted cash and cash equivalents                                          
at the beginning of the year                   41,042    37,211    34,836     
                                         -------   -------   -------
Unrestricted cash and cash equivalents                                          
at the end of the year                       $125,842  $ 41,042  $ 37,211     
                                         =======   =======   =======

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

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Nortek, Inc. and Subsidiaries                                                   
Consolidated Statement of Stockholders' Investment                              

                   For the Three Years Ended December 31, 1997
                       -------------------------------------------------------
                                                  Cumulative
                                                    Translation,
                                Addi-              Pension and
                 Special  tional               Other
                       Common Common   Paid-in   Retained   Adjust-   Treasury
                     Stock  Stock  Capital    Earnings    ments    Stock
                       -----  -----  -------   -----------  -----    -------
Balance, December 31,                                                           
1994                  $15,814   $802  $134,627    $   766  $(6,168)$(28,051)  
27,731 shares of                                                                
special common stock                                                          
converted into 27,731                                                         
shares of common stock     28    (28)      ---        ---      ---      ---   
41,450 shares of common                                                         
stock issued upon                                                             
exercise of stock                                                             
options                    41    ---        63        ---      ---      ---   
511,671 shares of                                                               
treasury stock                                                                
acquired                  ---    ---       ---        ---      ---   (5,029)  
Translation adjustment     ---    ---       ---        ---      701      ---    
Pension adjustment         ---    ---       ---        ---     (244)     ---    
Unrealized appreciation                                                         
in marketable                                                                 
securities                ---    ---       ---        ---    2,969      ---   
Net earnings               ---    ---       ---     15,000      ---      ---    
                     ------    ---   -------     ------    ------  -------
Balance, December 31,                                                           
1995                  $15,883   $774  $134,690    $15,766  $(2,742)$(33,080)  
27,697 shares of                                                                
special common stock                                                          
converted into 27,697                                                         
shares of common stock     28    (28)      ---        ---      ---      ---   
54,461 shares of common                                                         
stock and 37,500 shares                                                       
of special common stock                                                       
issued upon exercise of                                                       
stock options              55     38       338        ---      ---      ---   
2,293,065 shares of                                                             
treasury stock acquired   ---    ---       ---        ---      ---  (34,457)  
Translation adjustment     ---    ---       ---        ---      138      ---    
Pension adjustment         ---    ---       ---        ---     (127)     ---    
Unrealized decline in                                                           
marketable securities     ---    ---       ---        ---     (481)     ---   
Net earnings               ---    ---       ---     22,000      ---      ---    
                   -------   ----  --------   --------  ------- --------
Balance,                                                                        
December 31, 1996     $15,966   $784  $135,028    $37,766  $(3,212)$(67,537)  

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Nortek, Inc. and Subsidiaries                                                   
Consolidated Statement of Stockholders' Investment                              

22,690 shares of                                                                
special common stock                                                          
converted into 22,690                                                         
shares of common stock     23    (23)      ---        ---       ---      ---  
62,519 shares of common                                                         
stock and 5,808 shares of                                                     
special common stock                                                          
issued upon exercise of                                                       
stock options              62      6       317        ---       ---      ---  
441,246 shares of treasury                                                      
stock acquired            ---    ---       ---        ---       ---  (10,177) 
Translation adjustment     ---    ---       ---        ---    (3,815)     ---   
Pension adjustment         ---    ---       ---        ---       919      ---   
Unrealized appreciation                                                         
in the value of                                                               
marketable securities     ---    ---       ---        ---       781      ---  
Net earnings               ---    ---       ---     21,200       ---      ---   
                    -------   ----  --------    -------  -------  --------
Balance                                                                         
December 31, 1997      $16,051   $767  $135,345    $58,966  $(5,327) $(77,714)  

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

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      

1. Summary of Significant Accounting Policies                                   

The  Company  is  a  diversified  manufacturer of  residential  and  commercial 
building  products,  operating  within  four  principal  product  groups:   the 
Residential Building Products Group; the Air Conditioning and Heating  Products 
Group;  the  Windows,  Doors and Siding Group and the  Specialty  Products  and 
Distribution Group. Through these product groups, the Company manufactures  and 
sells,  primarily in the United States, Canada and Europe, a  wide  variety  of 
products for the residential and commercial construction, manufactured housing, 
and the do-it-yourself and professional remodeling and renovation markets.      

Principles of Consolidation                                                     

The  consolidated financial statements include the accounts of Nortek, Inc. and 
all  of  its significant wholly-owned subsidiaries (the "Company" or  "Nortek") 
after elimination of intercompany accounts and transactions. Certain amounts in 
the  prior years' financial statements have been reclassified to conform to the 
presentation at December 31, 1997.                                              

Use of Estimates                                                                

The  preparation of financial statements in conformity with generally  accepted 
accounting  principles  involves  estimates and  assumptions  that  affect  the 
reported amounts of assets and liabilities and disclosure of contingent  assets 
and  liabilities  as of the date of the financial statements and  the  reported 
amounts  of  income  and expense during the reporting periods.  Actual  results 
could vary from the amounts derived from such estimates and assumptions.        

Cash, Investments and Marketable Securities                                     

Cash  equivalents consist of short-term highly liquid investments with original 
maturities of three months or less which are readily convertible into cash.     

The Company has classified as restricted (in current assets in the accompanying 
consolidated balance sheet) certain investments and marketable securities  that 
are  not  fully  available for use in its operations.  At  December  31,  1997, 
approximately  $6,348,000  of cash, investments and marketable  securities  has 
been pledged as collateral for insurance and other requirements.                

Disclosures About Fair Value of Financial Instruments                           

The  following methods and assumptions were used to estimate the fair value  of 
each  class  of financial instruments for which it is practicable  to  estimate 
that value:                                                                     

Cash and Cash Equivalents--                                           
     The  carrying amount approximates fair value because of the short  maturity
of those instruments.                                                 

Marketable Securities--                                               
     The  fair value of marketable securities is based on quoted market  prices.
     At  December 31, 1997, the fair value of marketable securities approximated
the amount on the Company's consolidated balance sheet.               

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

Long-Term Debt--                                                      
     At  December  31,  1997,  the  fair value  of  long-term  indebtedness  was
     approximately   $14,000,000 higher than the amount, before  original  issue
discount, on the Company's consolidated balance sheet. (See Note 5.)  

Inventories                                                                     

Inventories  in the accompanying consolidated balance sheet are valued  at  the 
lower  of  cost  or  market.  At  December 31,  1997  and  1996,  approximately 
$53,817,000 and $53,933,000 of total inventories, respectively, were valued  on 
the  last-in,  first-out  method (LIFO). Under the first-in,  first-out  method 
(FIFO) of accounting, such inventories would have been approximately $5,041,000 
and  $6,015,000 greater at December 31, 1997 and 1996, respectively. All  other 
inventories were valued under the FIFO method.                                  

Sales Recognition                                                               

The  Company  recognizes  sales  upon the  shipment  of  its  products  net  of 
applicable  provisions for discounts and allowances. The Company also  provides 
for  its  estimate  of warranty and bad debts at the time of sale  as  selling, 
general and administrative expense.                                             

Foreign Currency Translation                                                    

The  financial  statements  of  subsidiaries  outside  the  United  States  are 
generally  measured  using the local currency as the functional  currency.  The 
Company  translates the assets and liabilities of its foreign  subsidiaries  at 
the exchange rates in effect at year-end. Net sales and expenses are translated 
using  average exchange rates in effect during the year. Gains and losses  from 
foreign  currency translation are credited or charged to cumulative translation 
adjustment   included   in  stockholders'  investment   in   the   accompanying 
consolidated  balance  sheet.  Transaction gains  or  losses  are  recorded  in 
selling, general and administrative expense and have not been material.         

Depreciation and Amortization                                                   

Depreciation  and  amortization of property and equipment  are  provided  on  a 
straight-line  basis over the estimated useful lives, which  are  generally  as 
follows:                                                                        

Buildings and improvements                             10-35 years      
Machinery and equipment, including leases               3-15 years      
Leasehold improvements                               term of lease      

Expenditures   for  maintenance  and  repairs  are  expensed   when   incurred. 
Expenditures  for  renewals and betterments are capitalized.  When  assets  are 
sold,  or  otherwise  disposed,  the  cost  and  accumulated  depreciation  are 
eliminated and the resulting gain or loss is recognized.                        

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

Goodwill                                                                        

The  Company has classified as goodwill the cost in excess of fair value of the 
net  assets  (including  tax  attributes) of  companies  acquired  in  purchase 
transactions.  Goodwill is being amortized on a straight-line  method  over  40 
years.  Amortization  charged to operations amounted to $5,319,000,  $2,940,000 
and  $2,489,000  for 1997, 1996 and 1995, respectively. At each  balance  sheet 
date, the Company evaluates the realizability of goodwill based on expectations 
of non-discounted cash flows and operating income for each subsidiary having  a 
material  goodwill  balance.  Based on its most recent  analysis,  the  Company 
believes that no material impairment of goodwill exists at December 31, 1997.   

Earnings Per Share                                                              

In  1997,  the  Company adopted the provisions of SFAS No.  128,  Earnings  Per 
Share.  This  statement  was issued by the FASB in February  1997,  establishes 
standards for computing and presenting earnings per share (EPS) and applies  to 
entities  with  publicly  held  common stock or potential  common  stock.  This 
statement replaces the presentation of primary EPS with a presentation of basic 
EPS. It requires dual presentation of basic and diluted EPS on the face of  the 
statement  of  operations for all entities with complex capital structures  and 
requires  a reconciliation of the numerators and denominators of the basic  and 
diluted  EPS  computations. This statement also requires a restatement  of  all 
prior-period EPS data presented.                                                

Basic  earnings per share amounts have been computed using the weighted average 
number  of  common and common equivalent shares outstanding during  each  year. 
Special  Common  Stock  is  treated  as  the  equivalent  of  Common  Stock  in 
determining earnings per share results. Diluted earnings per share amounts have 
been computed using the weighted average number of common and common equivalent 
shares and the dilutive potential common shares outstanding during each year.   

A reconciliation between basic and diluted earnings per share is as follows:    

                               For the years ending December 31,
                               ---------------------------------
                              1997       1996     1995
                              --------   -------- --------
                            (In thousands, except per share amounts)

Earnings from continuing operations   $26,400   $23,700  $17,500      

Basic EPS:                                                            
Basic common shares               9,605    10,485   12,445
                                 ======    ======   ======
Basic EPS                        $ 2.75    $ 2.26   $ 1.41
                                 ======    ======   ======
Diluted EPS:                                                          
Basic common shares               9,605    10,485   12,445
Plus: Impact of stock options                             
     (Note 6)                       250       156      124
                                  -----    ------   ------
Diluted common shares             9,855    10,641   12,569
                                 ======    ======   ======
  Diluted EPS                    $ 2.68    $ 2.23   $ 1.39
                                 ======    ======   ======

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

Comprehensive Income                                                            

In  June  1997,  the  FASB issued SFAS No. 130, Reporting Comprehensive  Income 
which  will be effective for the Company's financial statements issued for  the 
fiscal year ending December 31, 1998. This statement establishes standards  for 
reporting  and  display  of comprehensive income and its components  (revenues, 
expenses,  gains  and  losses).  Components of  comprehensive  income  are  net 
earnings  and  all other changes that are currently reflected  in  Stockholders 
Investment.  This statement requires that an enterprise (a) classify  items  of 
other  comprehensive income by their nature in a financial  statement  and  (b) 
display  the accumulated balance of other comprehensive income separately  from 
retained  earnings and additional paid-in capital in the equity  section  of  a 
statement of financial position.                                                

Segment Information                                                             

In  June 1997, the FASB issued SFAS No. 131, Disclosures About Segments  of  an 
Enterprise  and Related Information which will be effective for  the  Company's 
financial  statements  for  the  fiscal year ending  December  31,  1998.  This 
statement  establishes standards for reporting information  about  segments  in 
annual and interim financial statements. This statement introduces a new  model 
for  segment  reporting,  called  the  "management  approach."  The  management 
approach  is  based  on  the  way the chief operating decision-maker  organizes 
segments  within  a  Company  for  making  operating  decisions  and  assessing 
performance. Reportable segments are based on products and services, geography, 
legal structure and management structure.                                       

2.  Acquisitions and Businesses Sold                                            

Acquisitions are accounted for as purchases and, accordingly, have been         
included in the Company's consolidated results of operations since the          
acquisition date. Purchase price allocations are subject to refinement until all
pertinent information regarding the acquisitions is obtained.                   

On  August  26,  1997, a wholly owned subsidiary of the Company  completed  the 
acquisition  of Ply Gem Industries, Inc. ("Ply Gem") in a tender  offer  for  a 
cash  price  of  $19.50  per outstanding share of common stock.  The  aggregate 
purchase  price,  including  expenses and  settlement  of  stock  options,  was 
approximately $444,300,000. Prior to accepting for payment the tendered  shares 
of  Ply  Gem on August 26, 1997, the Company sold $310,000,000 principal amount 
of  9  1/8% Senior Notes due September, 2007 (the "9 1/8% Notes") at  a  slight 
discount  (see  Note  5).  The Company used a portion of  these  net  proceeds, 
together  with  available cash, to purchase the shares  of  Ply  Gem,  fund  an 
approximate  $45,000,000  payment  to terminate  Ply  Gem's  existing  accounts 
receivable securitization program and pay certain fees and expenses.            

Since  the acquisition date, the Company has realized, and expects to  continue 
to  realize, cost savings as a result of the acquisition. These savings  result 
from  several  actions, including: (i) the elimination of  expenses  associated 
with  Ply Gem's New York headquarters;  (ii)  the consolidation into Nortek  of 
certain  of  Ply Gem's corporate functions such as accounting, legal  and  risk 
management;  and  (iii)   the  identification  and  rationalization  of  under- 
performing product lines. Pro Forma earnings (see below) have been adjusted for 
the  pro  forma effect of those estimated cost reductions directly attributable 

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to   the  acquisition.  These  expected  pre-tax  savings  total  approximately 
$4,000,000  for the period from January 1, 1997 to the date of acquisition  for 
the  year  ended December 31, 1997 and approximately $7,800,000  for  the  year 
ended December 31, 1996. As Adjusted earnings (see below) have been adjusted to 
include cost reductions directly attributable to the acquisition and additional 
estimated cost savings and operating efficiencies which management expects will 
result  from  the  acquisition. These additional  pre-tax  cost  savings  total 
approximately $14,100,000 and approximately $13,500,000 for the periods January 
1, 1997 to the date of acquisition for the year ended December 31, 1997 and the 
year  ended  December 31, 1996, respectively. The actual cost savings  achieved 
since  the  acquisition  of Ply Gem are reflected in the  Company's  historical 
consolidated  operating  results for the period from the  acquisition  date  to 
December  31, 1997.  Pro Forma earnings also include approximately  $13,300,000 
of  net  after-tax  charges (approximately $22,200,000  before  income  taxes), 
recorded  by  Ply  Gem during the perio from January 1, 1997 through August 25, 
1997, to provide  certain valuation reserves and to conform accounting policies 
to the Company's. These  non-recurring charges have been excluded from the As   
Adjusted results.                                                               

The  following presents the approximate unaudited Pro Forma and As Adjusted net 
sales,  operating  earnings, earnings from continuing  operations  and  diluted 
earnings per share of the Company for all periods presented and gives pro forma 
effect to the acquisition of Ply Gem, the sale of $310,000,000 principal amount 
of  9 1/8% Notes, the extension of credit under the Ply Gem credit facility  to 
refinance  certain  existing  indebtedness and the  termination  of  Ply  Gem's 
accounts  receivable securitization program, the sale of $175,000,000 principal 
amount of 9 1/4% Notes, the refinancing of certain subsidiary indebtedness, and 
reflects  the  estimated  cost  reductions  as  described  above  as  if   such 
transactions  and adjustments had occurred on January 1, 1996 to  the  date  of 
acquisition.  The  Pro Forma and As Adjusted results below include  the  actual 
results of Ply Gem since August 26, 1997 in accordance with the purchase method 
of accounting for an acquisition.                                               

                                  For the Years Ended December 31,
                                  --------------------------------
                                  1997                1996
                                  --------            --------
Pro Forma                       (Amounts in Thousands ,except per share amounts)
                                   (unaudited)

Net sales                              $ 1,650,052         $ 1,616,485          
Operating earnings                          71,100              94,400          
Earnings (loss) from                                                            
continuing operations                      (1,500)              7,700         
Diluted earnings (loss) from                                                    
continuing operations per share            $( .16)              $ .72         

As Adjusted                                                                     

Net sales                              $ 1,650,052         $ 1,616,485          
Operating earnings                         107,300             107,900          
Earnings from                                                                   
continuing operations                      20,900              16,400         
Diluted earnings from                                                           
continuing operations per share            $ 2.12              $ 1.54         

In  computing  the pro forma earnings, earnings have been reduced  by  the  net 
interest  income  on the aggregate cash portion of the purchase  price  of  the 
acquisition  at the historical rate earned by the Company and interest  expense 
on indebtedness incurred in connection with the acquisition, the refinancing and

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

repayment  of  certain indebtedness of Ply Gem. Earnings have been  reduced  by 
amortization of goodwill and reflect net adjustments to depreciation expense as 
a  result  of  an increase in the estimated fair market value of  property  and 
equipment and changes in depreciable lives. Interest expense on the subsidiary  
indebtedness refinanced with funds from the 9 1/4% Notes offering was  excluded 
at  an average interest rate consistent with the indebtedness outstanding which 
was  refinanced  for  all periods presented, net of the  tax  effect.  Interest 
expense  was  included on the 9 1/4% Notes at a rate of approximately  9  1/4%, 
plus amortization of deferred debt expense and debt discount net of tax effect, 
and on the 9 1/8% Notes at a rate of approximately 9 1/8%, plus amortization of 
deferred debt expense and debt discount for the periods presented, net  of  tax 
effect.                                                                         

The  pro forma information presented does not purport to be indicative  of  the 
results  which would have been reported if these transactions had  occurred  on 
January 1, 1996, or which may be reported in the future.                        

In  the  fourth  quarter  of  1995,  several  of  the  Company's  wholly  owned 
subsidiaries  completed  the  acquisition of the  assets,  subject  to  certain 
liabilities,  of Rangaire Company ("Rangaire"), all the capital stock  of  Best 
S.p.A.  and  related  entities ("Best") and all the  capital  stock  of  Venmar 
Ventilation   inc.  ("Venmar").  The  aggregate  purchase   price   for   these 
acquisitions was approximately $36,500,000, consisting of cash of approximately 
$33,400,000  and  future  payments  of approximately  $3,100,000.  The  selling 
shareholders  of  certain  of  these acquisitions are  entitled  to  additional 
purchase  price  payments  of  up  to approximately  $2,000,000,  depending  on 
subsequent operating results of such acquisitions.                              

3.  Cash Flows                                                                  

Interest  paid was $35,921,000, $30,568,000 and $23,203,000 in 1997,  1996  and 
1995, respectively.                                                             

Fair  value  of assets acquired was $672,311,000 and $129,652,000 in  1997  and 
1995,  respectively. Liabilities assumed or created of businesses acquired  was 
$264,892,000  and  $96,224,000 in 1997 and 1995, respectively.  Cash  paid  for 
acquisitions net of cash acquired was $407,419,000 and $27,543,000 in 1997  and 
1995, respectively.                                                             

Cash  proceeds  from businesses sold totaled $1,129,000 in  1995  and  included 
$2,874,000  of proceeds from the sale of preferred stock net of $1,745,000  for 
payments made in relation to businesses sold.                                   

Significant  non-cash  financing and investing  activities  excluded  from  the 
accompanying  consolidated  statement of cash flows include  capitalized  lease 
additions of approximately $500,000 in 1996 and approximately $800,000 in  1995 
and  an increase of approximately $781,000, a decline of approximately $481,000 
and  an  increase  of  approximately $2,969,000 in the  fair  market  value  of 
marketable securities available for sale for 1997, 1996 and 1995, respectively. 

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

4.  Income Taxes                                                                

The  following  is  a  summary of the components of  earnings  from  continuing 
operations before provision for income taxes:                                   

                                      For the Years Ended December 31,
                                       -----------------------
                                      1997     1996       1995
                                      ----     ----       ----
                                      (Amounts in Thousands)

Domestic                                   $37,000  $ 35,100  $ 25,400        
Foreign                                      5,700     3,500     2,700        
                                    ------    ------    ------
                                   $42,700   $38,600   $28,100
                                    ======    ======    ======

The  following  is a summary of the provision (benefit) for income  taxes  from 
continuing  operations included in the accompanying consolidated  statement  of 
operations:                                                                     

                                      For the Years Ended December 31,
                                     -------------------------
                                      1997      1996      1995
                                      ----      ----      ----
                                        (Amounts in Thousands)
Federal income taxes--                                                        
Current                                  $9,000   $15,050    $7,100     
Deferred                                  4,000    (3,000)    1,200     
                                    ------    ------     -----
                                    13,000    12,050     8,300
Foreign                                      1,000     1,300     1,300        
State                                        2,300     1,550     1,000        
                                    ------    ------     -----
                                   $16,300   $14,900   $10,600
                                   =======   =======   =======

Income tax payments, net of refunds, were approximately $7,977,000, $18,611,000 
and $3,739,000 in 1997, 1996 and 1995, respectively.                            

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

The  following  reconciles the federal statutory income tax rate of  continuing 
operations  to the effective tax rate of such earnings of approximately  38.2%, 
38.6% and 37.7% in 1997, 1996 and 1995, respectively.                           

                                          For the Years Ended December 31,
                                         -----------------------
                                         1997      1996     1995
                                         ----      ----     ----
                                        (Amounts in Thousands)
Income tax provision from continuing                                            
operations at the Federal statutory rate       $14,945   $13,510    $9,835      
Net change from statutory                                                       
rate:                                                                         
Change  in  tax  reserves, net                  (1,540)     (481)   (1,100)     
State income taxes, net of                                                      
federal tax effect                              1,520     1,008       650     
Amortization not deductible for                                                 
income tax purposes                             1,827     1,040       868     
Product development income tax                                                  
credit from foreign operations                   (264)     (478)      ---     
Tax effect on foreign income                       (86)       56        79      
Effect of change in foreign tax law               (766)      ---       ---      
Other, net                                         664       245       268      
                                          ------    ------   -------
                                         $16,300   $14,900   $10,600
                                         =======   =======   =======

The tax effect of temporary differences which gave rise to significant portions 
of  deferred  income  tax assets and liabilities as of December  31,  1997  and 
December 31, 1996 are as follows:                                               
                                                  December 31,
                                                   ---------------
                                                  1997      1996
                                                  ----      ----
                                                  (Amounts in Thousands)
Prepaid Income Tax Assets                                                     
Arising From:                                                                 
Net operating losses of Ply Gem                       $6,000   $   ---  
Accounts receivable                                    4,038     1,246  
Inventory                                              7,201      (610) 
Insurance reserves                                     9,624     4,985  
Other reserves, liabilities and                                         
assets, net                                         19,937    14,379
                                                    ------    ------
                                                   $46,800   $20,000
                                                    ======    ======
Deferred (Prepaid) Income Tax (Assets) Liabilities                            
Arising From:                                                                 
Property and equipment, net                           $30,032   $15,400   
Other reserves, liabilities and                                           
(assets), net                                       (19,547)     (608)
Capital loss carryforward                                (655)   (6,462)  
Net operating losses of Ply Gem                       (21,580)      ---   
Valuation allowances                                    7,771    10,238   
Other tax assets                                       (6,043)     (931)  
                                                    ------    ------
                                                  $(10,022)  $17,637
                                                  ========    ======

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

At  December  31, 1997, the Company has approximately $60,800,000 of  net  U.S. 
federal  prepaid  income tax assets which are expected to be  realized  through 
future  operating earnings.  At December 31, 1997, the Company's  wholly  owned 
subsidiary,  Ply Gem, has a net operating loss  carry-forward of  approximately 
$78,800,000 that expires in 2011 and is subject to certain limitations  imposed 
by  the Internal Revenue Code. These losses may only be utilized against future 
income  of the Ply Gem Group and the utilization of these losses is limited  to 
approximately $17,500,000 per year.                                             

5.  Notes, Mortgage Notes and Obligations Payable                               

Short-term  bank  obligations at December 31, 1997  and  1996  consist  of  the 
following:                                                                      
                                                  December 31,
                                                  ------------
                                                  1997      1996
                                                  ----      ----
                                                  (Amounts in Thousands)
Secured revolving lines of credit of                                    
a Canadian subsidiary                            $   ---   $ 2,472  
Secured lines of credit and bank advances                               
of the Company's European subsidiaries            11,318    22,118  
Other obligations                                      452       744    
                                                ------    ------
Short-term Bank Obligations                        $11,770   $25,334    
                                               =======   =======
These  short term bank obligations are secured by approximately $29,600,000  of 
accounts  receivable and inventory. These borrowings have an  average  weighted 
interest rate of approximately 9.475%.                                          

Notes,  mortgage notes and obligations payable in the accompanying consolidated 
balance sheet at December 31, 1997 and 1996 consist of the following:           

                                      December 31,
                                      ------------
                                         1997         1996
                                         ----         ----
                                          (Amounts in Thousands)
9 1/4% Senior Notes due 2007                                                    
("9 1/4% Note"), net of                                                       
unamortized original issue discount                                           
of   $961,000                                $174,039        $  ---       
9 1/8% Senior Notes due 2007                                                    
("9 1/8% Notes"), net of                                                      
unamortized original issue discount                                           
of $2,451,000                                   307,549          ---          
9 7/8% Senior Subordinated Notes                                                
due 2004 ("9 7/8% Notes"), net of                                             
unamortized original issue discount                                           
of $1,259,000 and $1,396,000                    217,241      217,104          
Ply Gem Credit Agreement                         103,940          ---           
Mortgage notes payable                            16,882       20,878           
Other                                             22,158       16,939           
                                      -------      -------
                                      841,809      254,921
Less amounts included in current                                                
liabilities                                       5,969       11,152          
                                      -------      -------
                                     $835,840     $243,769
                                      =======      =======

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

On March 17, 1997, the Company sold $175,000,000 of its 9 1/4% Senior Notes due 
March  15,  2007  ("9  1/4% Notes") at a discount of approximately  $1,011,500, 
which is being amortized over the life of the issue. Net proceeds from the sale 
of  the  9  1/4% Notes, after deducting underwriting commissions and  expenses, 
amounted  to  approximately  $168,945,000, a  portion  of  which  was  used  to 
refinance certain outstanding indebtedness of the Company's subsidiaries. The 9 
1/4% Notes are redeemable at the option of the Company, in whole or in part, at 
any  time  and  from  time to time, on or after March  15,  2002  at  104.625%, 
declining  to  100% on March 15, 2005 and thereafter. On August 26,  1997,  the 
Company  sold $310,000,000 of its 9 1/8% Senior Notes due September 1, 2007  (9 
1/8% Notes) at a discount of approximately $2,505,000, which is being amortized 
over  the  life of the issue. Net proceeds from the sale of the 9  1/8%  Notes, 
after   deducting   underwriting  commissions   and   expenses,   amounted   to 
approximately  $297,269,000. The 9 1/8% Notes are redeemable at the  option  of 
the  Company,  in whole or in part, at any time and from time to  time,  on  or 
after September 1, 2002 at 104.563%, declining to 100% on September 1, 2005 and 
thereafter.  The  Company used a portion of these net proceeds,  together  with 
available cash, to purchase the shares of Ply Gem. (See Note 2).                

The  indenture  governing  the  9 7/8% Notes, the  Company's  most  restrictive 
indenture,  restricts,  among  other things, the  payment  of  cash  dividends, 
repurchase  of  the  Company's capital stock and the making  of  certain  other 
restricted payments, the incurrence of additional indebtedness, the  making  of 
certain investments, mergers, consolidations and sale of assets (all as defined 
in  the indenture). Upon certain asset sales (as defined in the indenture), the 
Company  will be required to offer to purchase, at 100% principal  amount  plus 
accrued  interest  to the date of purchase, 9 7/8% Notes in a principal  amount 
equal  to  any  net cash proceeds (as defined in the indenture)  that  are  not 
invested  in  properties  and assets used primarily  in  the  same  or  related 
business to those owned and operated by the Company at the issue date of the  9 
7/8%  Notes  or at the date of such asset sale and such net cash proceeds  were 
not  applied  to  permanently reduce Senior Indebtedness  (as  defined  in  the 
indenture).  The 9 7/8% Notes are redeemable at the option of the  Company,  in 
whole  or  in part, at any time and from time to time, at 104.214% on March  1, 
1999,  declining  to 100% on March 1, 2002 and thereafter.  At  March  1,  1998 
approximately  $ 6,872,000 was available for the payment of cash  dividends  or 
stock payments under the terms of the Company's Indenture governing the 9  7/8% 
Notes. (See Note 6.)                                                            

The  Company's  Ply Gem subsidiary has a credit facility with  a  syndicate  of 
banks, which provides Ply Gem with a term loan and a letter of credit facility. 
Interest on borrowings is at varying rates based, at Ply Gem's option,  on  (a) 
the  London Interbank Offered Rate (LIBOR) plus a spread or (b) the  higher  of 
(i)  .5%  above the federal funds rate or (ii) the bank's prime rate.  Ply  Gem 
pays  a  facility fee quarterly which fluctuates between .20% and .30%  of  the 
aggregate  principal amount available under the facility. The average  weighted 
interest rate on the credit facility for the period from inception (August  26, 
1997)  to  December 31, 1997 was 6.75%. The credit facility includes  customary 
covenants, including covenants limiting Ply Gem's ability to pledge  assets  or 
incur  liens  on  assets  and maintain certain financial covenants.  Borrowings 
under  this  credit facility are collateralized by the common stock,  inventory 
and accounts receivable of Ply Gem's principal subsidiaries.                    

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

The  Company's  Ply  Gem  subsidiary has $75  million  of  interest  rate  swap 
agreements,  whereby Ply Gem will pay the counterparties interest  at  a  fixed 
rate  of  5.53%  and  the  counterparties will pay the Company  interest  at  a 
floating rate equal to one month LIBOR for a two year period ending December 3, 
1998. At the option of the counterparties, the termination date may be extended 
to  December  3, 1999 upon notice to Ply Gem.  Amounts to be paid  or  received 
under  interest rate swap agreements are accrued as interest rates  change  and 
are  recognized  over  the  life of the swap agreements  as  an  adjustment  to 
interest expense.                                                               

The  Company's  Ply  Gem subsidiary also has $75 million of interest  rate  cap 
agreements  which  entitles Ply Gem to receive from  the  counterparties  on  a 
monthly basis an amount by which the LIBOR interest rate on $75 million of  its 
floating rate debt exceeds 7% during the period December 5, 1998 to December 5, 
1999.  The  cost  of  interest rate cap agreements are  amortized  to  interest 
expense  over  the life of the cap. Payments received as a result  of  the  cap 
agreements reduce interest expense. The unamortized costs of the cap agreements 
are  included in other assets.  The impact of these arrangements has  not  been 
material to the Company's consolidated operating results.                       

Mortgage notes payable of approximately $16,882,000 outstanding at December 31, 
1997  include various mortgage notes and other related indebtedness payable  in 
installments through 2012 and bearing interest at rates ranging from 3.875%  to 
9.3% and are collateralized by property and equipment with an aggregate net book
value of approximately $36,700,000  at December 31, 1997.                       

Other  obligations of approximately $22,158,000  outstanding  at  December  31, 
1997  include  borrowings relating to equipment purchases and other  borrowings 
bearing  interest at rates primarily ranging between 3.5% to 13.0% and maturing 
at  various dates through 2017. Approximately $18,400,000  of such indebtedness 
is collateralized by property and equipment with an aggregate net book value of 
approximately $21,400,000  at December 31, 1997.                                

The  following  is  a  summary  of maturities of  all  of  the  Company's  debt 
obligations, excluding unamortized debt discount, due after December 31, 1997:  

                (Amounts in Thousands)

1999                                     $  8,923                       
2000                                        9,315                       
2001                                        9,512                       
2002                                       92,755                       
Thereafter                                720,006                       
                   -------
                  $840,511
                   =======

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

6.  Common   Stock,   Special  Common  Stock,  Stock   Options   and   Deferred 
Compensation                                                            

Each  share of Special Common Stock has 10 votes on all matters submitted to  a 
stockholder vote, except that the holders of Common Stock, voting separately as 
a  class,  have  the right to elect 25% of the directors to  be  elected  at  a 
meeting,  with  the remaining 75% being elected by the combined  vote  of  both 
classes. Shares of Special Common Stock are generally non-transferable, but are 
freely convertible on a share-for-share basis into shares of Common Stock.      

On  April 1, 1996, the Company extended and amended its shareholder rights plan 
to  March 31, 2006. Under the amended plan, each right previously issued  under 
the  plan  in  effect  to date, or subsequently issued under  the  amended  and 
restated plan, entitles shareholders to buy 1/100 of a share of a new series of 
preference  stock of Nortek at an exercise price of $72 per share,  subject  to 
adjustments for stock dividends, splits and similar events.                     

The  rights, that are not currently exercisable, are attached to each share  of 
Common  Stock  and may be redeemed by the Directors at $.01 per  share  at  any 
time.  After a shareholder acquires beneficial ownership of 17% or more of  the 
Company's  Common  Stock  and  Special Common  Stock,  the  rights  will  trade 
separately  and  become  exercisable  entitling  a  rights  holder  to  acquire 
additional shares of the Company's Common Stock having a market value equal  to 
twice  the  amount  of the exercise price of the right. In  addition,  after  a 
person or group ("Acquiring Company") commences a tender offer or announces  an 
intention  to  acquire 30% or more of the Company's Common  Stock  and  Special 
Common   Stock,   the   rights  will  trade  separately  and,   under   certain 
circumstances, will permit each rights holder to acquire common  stock  of  the 
Acquiring  Company,  having a market value equal to twice  the  amount  of  the 
exercise price of the right.                                                    

At  December 31, 1997, a total of 1,804,134 shares of Common Stock was reserved 
as follows:                                                                     

Stock option plans                           1,036,847    
Conversion of Special Common Stock             767,287    
                                         ---------
                                         1,804,134
                                         =========

At  December 31, 1997, 755,000 shares of Special Common Stock were reserved for 
stock option plans.                                                             

The  Company  has several stock option plans which provide for the granting  of 
options  to  certain  officers,  employees and non-employee  directors  of  the 
Company. Options granted under the plans vest over periods ranging up  to  five 
years and expire ten years from the date of grant. At December 31, 1997, 51,067 
additional  options  are  available for grant under these  plans.  Options  for 
427,915 and 27,500 shares of Common and Special Common Stock became exercisable 
during 1997 and 1996, respectively.                                             

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

The   following  summarizes  the  Common  and  Special  Common   Stock   option 
transactions for the three years ended December 31, 1997:                       
                                                            Weighted
                                                           Average
                               Number      Option Price     Exercise
                            of Shares      Per Share       Price
                             ---------      ---------        -----
Options outstanding at                                                          
December 31, 1994                   494,100     $2.25-$15.69     $ 6.97       
Exercised                           (42,600)      2.25-2.875       2.81       
                             -------      -----------      -----
Options outstanding at                                                          
December 31, 1995                   451,500     $2.25-$15.69     $ 7.36       
Granted                             275,000            14.75      14.75       
Exercised                           (95,200)    2.25-$7.9375       5.07       
Canceled                             (2,500)            8.75       8.75       
                             -------     ------------      -----
Options outstanding at                                                          
December 31, 1996                   628,800     $2.875-15.69     $10.93       
Granted                             435,600       19.5-27.00      22.98       
Exercised                           (71,953)     2.875-15.69       6.66       
Canceled                             (6,667)           22.69      22.69       
                             -------     ------------     ------
Options outstanding at                                                          
December 31, 1997                   985,780     $2.875-27.00     $16.48       
                             =======     ============     ======

22,100 of the 985,780 options outstanding at December 31, 1997 have an exercise 
price of $2.875, with a weighted average contractual life of 2.8 years. All  of 
these  options  are exercisable. 259,747 options have exercise  prices  between 
$7.69  and $9.38 with a weighted average exercise price of $8.75 and a weighted 
average  remaining  contractual life of 6.0 years.  All of  these  options  are 
exercisable.  275,000 options, all of which are exercisable, have  an  exercise 
price  of  $14.75 and a remaining contractual life of 9.0 years. The  remaining 
428,933 options, 152,915 of which are exercisable, have exercise prices between 
$19.50  and  $27.00, with a weighted average exercise price of  $22.976  and  a 
remaining contractual life of 10 years.                                         

The  Company  accounts for stock option plans under APB Opinion No.  25,  under 
which  no compensation cost has been recognized since options are granted  with 
exercise prices equal to the fair market value of the Common Stock at the  date 
of grant. Had compensation cost for these plans been determined consistent with 
SFAS  No.  123, the Company's earnings from continuing operations  and  diluted 
earnings  per  share  from continuing operations would have been  approximately 
$24,100,000  and  $2.45 for 1997 and approximately $23,300,000  and  $2.19  for 
1996,  respectively, and net earnings and diluted net earnings per share  would 
have  been  approximately  $19,000,000 and $1.92  for  1997  and  approximately 
$21,600,000 and $2.03 for 1996, respectively.                                   

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

The  weighted  average grant date fair value of options granted was  $9.82  and 
$6.15  in  1997 and 1996, respectively. The fair value of each option grant  is 
estimated on the date of the grant using the Black-Scholes option pricing model 
with the following assumptions used:                                            

                                   1997                 1996
                                   --------             --------
Risk-free interest rate         Between 5.75% and 6.73%         7%      
Expected life                          5 years               5 years    
Expected volatility                      37%                   33%      
Expected dividend yield                   0%                    0%      

The  Company's  Board of Directors has authorized a program to purchase  up  to 
500,000 shares of the Company's  Common and Special common Stock in open market 
or negotiated transactions, subject to market conditions, cash availability and 
provisions  of  the Company's outstanding debt instruments. As of  February  28 
1998, the Company has purchased approximately 316,500 shares of its Common  and 
Special  Common  Stock  for approximately $9,314,000  under  this  program  and 
accounted for such share purchases as treasury stock.                           

7.  Pension, Retirement and Profit Sharing Plans                                

The  Company and its subsidiaries have various pension, retirement  and  profit 
sharing   plans   requiring  contributions  to  qualified  trusts   and   union 
administered  funds. Pension and profit sharing expense charged  to  operations 
aggregated approximately $6,624,000 in 1997, approximately $4,310,000  in  1996 
and  approximately $828,000 in 1995. The Company's policy is to fund  currently 
the  actuarially determined annual contribution. In the fourth quarter of 1995, 
benefits  related to the Company's existing defined benefit plans were  frozen. 
On  January  1,  1996, the Company adopted a supplemental retirement  plan  for 
certain  officers.  The  actuarial present value of  the  unfunded  accumulated 
benefit obligation and the pension costs of this plan have been included in the 
tables below.                                                                   

The Company's net expense for its defined benefit plans for 1997, 1996 and 1995 
consists of the following components:                                           
                                            Years Ended December 31,
                                           -----------------------
                                            1997       1996       1995
                                            ----       ----       ----
                                          (Amounts in Thousands)

Service costs                                  $  485     $  358     $1,156     
Interest cost                                   2,655      2,226      2,069     
Actual net income on plan assets               (9,157)    (3,944)    (2,640)    
Net amortization and deferred items             7,361      2,218        434     
Net gain from freezing plan benefits              ---        ---       (581)    
                                           -----      -----      -----
Total expense                                 $ 1,344     $  858     $  438     
                                           =====      =====      =====

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

The  following  sets forth the funded status of the Company's  defined  benefit 
plans  and  amounts recognized in the Company's consolidated balance  sheet  at 
December 31, 1997 and 1996:                                                     
                                       Plan Assets
                                       Exceeding
                                       Benefit Obligations
                                       -------------------
                                        1997        1996
                                        ----        ----
                                      (Amounts in Thousands)
Actuarial present value of benefit                                              
obligations at September 30:                                                    
Vested benefits                                  $33,958      $23,945           
Non-Vested benefits                                  585          ---           
Accumulated benefit obligation                    34,543       23,945           
Effect of projected future compensation levels     2,394          ---           
Projected benefit obligation                      36,937       23,945           
                                       ------       ------
Plan assets at fair value at September 30         48,673       28,040           
Plan assets in excess of the projected                                          
benefit obligation                               11,736        4,095          
Unrecognized net gain                             (6,026)        (452)          
                                       ------       ------
                                       $5,710      $ 3,643
                                       ======      =======

                                       Benefit Obligations
                                       Exceeding Plan Assets
                                       ---------------------
                                        1997        1996
                                        ----        ----
                                      (Amounts in Thousands)
Actuarial present value of benefit                                              
obligations at September 30:                                                    
Vested benefits                                  $11,027      $ 5,359           
Non-vested benefits                                  810          520           
                                       ------       ------
Accumulated benefit obligation                    11,837        5,879           
Effect of projected future compensation levels     3,662        2,439           
                                       ------       ------
Projected benefit obligation                      15,499        8,318           
                                       ------       ------
Plan assets at fair value at September 30          3,639          804           
Projected benefit obligation in excess           (11,860)      (7,514)          
Of plan assets                                                          
Unrecognized net loss                              1,707          212           
Unrecognized prior service costs                   7,125        6,335           
Additional minimum liability                      (5,341)      (4,108)          
                                       ------       ------
                                       $(8,369)     $(5,075)
                                       ======       ======

Plan   assets  include  commingled  funds,  marketable  securities,   insurance 
contracts  and  cash and short-term investments. The weighted average  discount 
rate and rate of increase in future compensation levels used in determining the 
actuarial  present  value  of benefit obligations were  7  1/2  percent  and  5 
percent, respectively, in 1997, 1996 and 1995. The expected long-term  rate  of 
return on assets was 8 1/2 percent in 1997, 1996 and 1995.                      

Recognition of a minimum pension liability and an intangible asset for  certain 
plans  resulted  in  a  cumulative  reduction in  the  Company's  stockholders' 
investment  of approximately $124,000, $1,043,000 and $916,000 in  1997,  1996, 
and 1995, respectively.                                                         

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

8.  Commitments and Contingencies                                               

The Company provides accruals for all direct and indirect costs associated with 
the  estimated resolution of contingencies at the earliest date  at  which  the 
incurrence  of a liability is deemed probable and the amount of such  liability 
can be reasonably estimated.                                                    

At  December  31,  1997, the Company and its subsidiaries are  obligated  under 
lease  agreements  for  the  rental of certain real estate  and  machinery  and 
equipment  used  in  its operations. Minimum annual rental  expense  aggregates 
approximately $110,427,000 at December 31, 1997. The obligations are payable as 
follows:                                                                        

1998         $ 18,203,000                                   
1999           15,094,000                                   
2000           11,250,000                                   
2001            8,026,000                                   
2002            6,933,000                                   
Thereafter     50,921,000                                   

Certain  of  these  lease agreements provide for increased  payments  based  on 
changes  in  the consumer price index. Rental expense charged to operations  in 
the   accompanying  consolidated  statement  of  operations  was  approximately 
$8,700,000, $6,725,000, and $6,900,000, for the years ended December 31, 1997,  
1996  and  1995,  respectively. Under certain of these  lease  agreements,  the 
Company and its subsidiaries are also obligated to pay insurance and taxes.     

The  Company is subject to other contingencies, including legal proceedings and 
claims  arising  out  of  its businesses that cover a wide  range  of  matters, 
including, among others, environmental matters, contract and employment claims, 
product  liability,  warranty and modification, adjustment  or  replacement  of 
component  parts of units sold, which may include product recalls. The  Company 
has  used various substances in its products and manufacturing operations which 
have been or may be deemed to be hazardous or dangerous, and the extent of  its 
potential  liability,  if  any,  under  environmental,  product  liability  and 
workers'  compensation statutes, rules, regulations and case  law  is  unclear. 
Further,  due to the lack of adequate information and the potential  impact  of 
present regulations and any future regulations, there are certain circumstances 
in which no range of potential exposure may be reasonably estimated.            

While  it is impossible to ascertain the ultimate legal and financial liability 
with  respect  to  contingent  liabilities,  including  lawsuits,  the  Company 
believes  that the aggregate amount of such liabilities, if any, in  excess  of 
amounts  provided, will not have a material adverse effect on the  consolidated 
financial position or results of operations of the Company.                     

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

9.  Discontinued Operations                                                     

In  the  fourth quarter of 1997, the Company adopted a plan of disposition  for 
its  Plumbing  Products  Group. The following is an unaudited  summary  of  the 
results of discontinued operations for the three years ended December 31, 1997: 

                                            Years Ended December 31,
                                           -----------------------
                                            1997       1996       1995
                                            ----       ----       ----
                                          (Amounts in Thousands)

Net sales                                    $104,467   $128,241   $119,410     
                                        --------   --------   --------

Loss before income taxes                     $ (5,700)  $ (2,600)  $ (3,800)    
Income tax benefit                              2,100        900      1,300     
                                          ------     ------     ------
Loss from discontinued operations              (3,600)    (1,700)    (2,500)    
Reserve for future operating expenses, net of                                   
income tax benefit of $900,000                (1,600)       ---        ---    
                                           -------    -------    -------
Loss from discontinued operations            $ (5,200)  $ (1,700)  $ (2,500)    
                                           =======    =======    =======

Loss from discontinued operations before income taxes includes an allocation of 
corporate   interest  expense  of  approximately  $1,900,000,  $1,700,000   and 
$1,900,000  in  1997,  1996 and 1995, respectively.                             

10.  Operating and Geographic Segment Information and Concentration of Credit   
Risk                                                                  

The  Company  operates  in  one industry segment,  Residential  and  Commercial 
Building Products.  No  single  customer accounts for 10% or more of            
consolidated  net sales.                                                        

The following information by geographic area is presented for 1997 and 1996 for 
the Company's continuing operations:                                            

For the year ended December 31, 1997:                                           
-------------------------------------                                           
                              Pre-Tax Earnings
                                      Net   from continuing   Identifiable
                                  Sales    operations         Assets
                                     -----  ----------------  ------------
                                        (Amounts in Thousands)
Geographic areas:                                                               

Domestic operations                $998,049      $86,491       $976,891 
European operations                  76,564        3,467         60,743 
Other foreign operations             75,700        7,046         57,527 
Eliminations                        (16,184)         ---         (7,986)
                                   -------       ------        -------
                                 1,134,129       97,004      1,087,175
Unallocated                                 ---      (14,023)       217,371     
Interest expense                        ---      (50,210)           --- 
Investment income                       ---        9,929            --- 
                                 ---------       ------     ----------
Consolidated Totals                  $1,134,129      $42,700     $1,304,546     
                                ==========      =======     ==========

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

For the year ended December 31, 1996:                                           
-------------------------------------                                           
                                Pre-Tax Earnings
                                       Net     from continuing  Identifiable
                                    Sales       operations        Assets
                                      -----   ----------------  ------------
                                        (Amounts in Thousands)
Geographic areas:                                                               

Domestic operations                $706,548      $66,514      $303,273  
European operations                  82,363        3,520        73,285  
Other foreign operations             67,503        4,886        64,609  
Eliminations                        (14,857)         ---        (5,663) 
                                  -------       ------       -------
                                  841,557       74,920       435,504
Unallocated                             ---      (13,969)      154,729  
Interest expense                        ---      (28,400)         ---   
Investment income                       ---        6,049          ---   
                                  -------       ------       -------
Consolidated Totals                $841,557      $38,600      $590,233  
                                  =======       ======       =======

Unallocated  assets  consist  primarily of  cash,  investments  and  marketable 
securities and U. S. Federal prepaid income taxes.                              

The  Company  operates  internationally and is exposed  to  market  risks  from 
changes  in  foreign  exchange rates. Financial instruments  which  potentially 
subject  the  Company to concentrations of credit risk consist  principally  of 
temporary  cash  investments  and trade receivables.  The  Company  places  its 
temporary cash investments with high credit quality financial institutions  and 
limits  the  amount  of  credit  exposure to  any  one  financial  institution. 
Concentrations of credit risk with respect to trade receivables are limited due 
to  the  large number of customers comprising the Company's customer  base  and 
their  dispersion across many different geographical regions. At  December  31, 
1997, the Company had no significant concentrations of credit risk.             

11. Net Gain (Loss) on Marketable Securities                                    

At  December  31,  1997 and 1996, the reduction in the Company's  stockholders' 
investment  for  gross  unrealized  losses  was  approximately  $  110,000  and 
$891,000,  respectively. At December 31, 1997, there were no  gross  unrealized 
gains on the Company's marketable securities.                                   

The  Company's unrestricted  marketable securities at December 31, 1997 consist 
primarily of U. S. Government Treasury Notes, certificates of deposit, and bank 
issued  money  market  instruments  of which approximately  $26,006,000  mature 
within  one year; approximately $5,978,000 mature within one to five years  and 
approximately $4,004,000 mature within five to ten years.                       

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

12. Accrued Expenses and Taxes, Net                                             

Accrued expenses and taxes, net, consist of the following at December 31,  1997 
and 1996:                                                                       
                                          December 31,
                                         -----------
                                        1997          1996
                                        ----          ----
                                      (Amounts in Thousands)

Insurance                                       $23,880       $12,205           
Payroll, management incentive and                                               
accrued employee benefits                       37,600        23,136          
Interest                                         22,049         7,749           
Accrued product warranty expense                  9,471         7,770           
Other, net                                       71,001        37,392           
                                      ------        ------
                                    $164,001       $88,252
                                     =======        ======

13. Subsequent Events                                                           

On March 9, 1998, the Company through a wholly-owned subsidiary, entered into an
agreement to purchase NuTone, Inc., a wholly-owned subsidiary of Williams  plc, 
for  approximately  $242,500,000 in cash.  The acquisition is  subject  to  the 
requirements   of  the  Hart-Scott-Rodino  Antitrust  Improvements   Act.    In 
connection with its review of the transaction under the Act, the Federal  Trade 
Commission  ("FTC")  has  issued  a  "second request"  for  certain  additional 
information. The FTC has taken no position with respect to the transaction  and 
there  can  be  no  assurance  that  the  transaction,  as  proposed,  will  be 
consummated. If the acquisition is not consummated, the Company expects that it 
would incur an approximately $3,000,000 ($0.31 per diluted share) net after tax 
charge  to  its  earnings as a result of fees, expenses and  other  acquisition 
related costs.                                                                  

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Nortek, Inc. and Subsidiaries                                                   
Notes to Consolidated Financial Statements                                      
(Continued)                                                                     

14. Summarized Quarterly Financial Data (Unaudited)                             

The following summarizes unaudited quarterly financial data for the years ended 
December 31, 1997 and December 31, 1996:                                        

                        For the Quarters Ended
                        ----------------------
                        March 29    June 28     Sept. 27   Dec. 31
                        --------     ------     --------   -------
                           (In Thousands Except Per Share Amounts)
1997                                                                            
Net sales                     $194,238    $223,795     $300,380   $415,716      
Gross profit                    56,540      64,353       78,872    102,592      
Earnings from continuing                                                        
operations                     4,700       7,700        8,400      5,600    
Earnings per share from                                                         
Continuing operations:                                                      
Basic                            .48         .80          .88        .59    
Diluted                          .47         .78          .86        .57    

Net earnings                     3,700       6,700        7,700      3,100      

Net earnings per share:                                                         
Basic                             .38        .70           .80        .33     
Diluted                           .37        .68           .78        .32     

                    For the Quarters Ended
                        ----------------------
                        March 30    June 29      Sept. 28  Dec. 31
                        --------    -------     --------   -------
                           (In Thousands Except Per Share Amounts)
1996                                                                            
Net sales                      $189,762   $226,737    $215,624   $209,434       
Gross profit                     51,225     63,892      61,687     64,455       
Earnings from continuing                                                        
operations                      3,200      6,000       6,700      7,800     

Earnings per share from                                                         
Continuing operations:                                                      
Basic                             .27        .58         .67        .78     
Diluted                           .27        .57         .66        .77     

Net earnings                      2,400      5,800       6,500      7,300       

Net earnings per share:                                                         
Basic                              .20        .56         .65        .73      
Diluted                            .20        .55         .64        .72      

See  Notes  2 and 9 regarding certain other quarterly transactions included  in 
the operating results in the above table.                                       

Increased  net sales in the third and fourth quarters of 1997, as  compared  to 
1996, reflect, primarily, the effect of the Ply Gem acquisition (see Note 2).   

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Report of Independent Public Accountants                                        

To Nortek, Inc.:                                                                

We have audited the accompanying consolidated balance sheets of Nortek, Inc. (a 
Delaware corporation) and subsidiaries listed in Item 14(a)(1) of this Form 10- 
K  as  of December 31, 1997 and 1996, and the related statements of operations, 
stockholders'  investment and cash flows for each of the  three  years  in  the 
period  ended  December 31, 1997. These financial statements and the  schedules 
referred  to  below  are  the responsibility of the Company's  management.  Our 
responsibility  is  to  express an opinion on these  financial  statements  and 
schedules based on our audits.                                                  

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing 
standards.  Those  standards require that we plan and  perform  the  audits  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 audits provide a reasonable  basis 
for our opinion.                                                                

In  our opinion, the financial statements referred to above present fairly,  in 
all  material respects, the financial position of Nortek, Inc. and subsidiaries 
as of December 31, 1997 and 1996, and the results of their operations and their 
cash flows for each of the three years in the period ended December 31, 1997 in 
conformity with generally accepted accounting principles.                       

Our audit was made for the purpose of forming an opinion on the basic financial 
statements  taken  as  a  whole. The schedules  listed  in  Item  14(a)(2)  are 
presented   for  purposes  of  complying  with  the  Securities  and   Exchange 
Commission's  rules and are not part of the basic financial  statements.  These 
schedules  have been subjected to the auditing procedures applied in the  audit 
of  the  basic  financial statements and, in our opinion, fairly state  in  all 
material  respects  the  financial data required to be  set  forth  therein  in 
relation to the basic financial statements taken as a whole.                    

                                                    /s/Arthur Andersen LLP
                                                    ----------------------
                                                 ARTHUR ANDERSEN LLP

Boston, Massachusetts,                                                          
March 9, 1998                                                                   

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NORTEK, INC.(Parent Company)                                                    
SCHEDULE I                                                                      
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                   
Condensed Balance Sheet                                                         

                                      December 31,
                                     -----------------
                                     1997         1996
                                     ------       ------
Assets                                         (Amounts in thousands)           

Current Assets:                                                                 
Unrestricted                                                                    
Cash and investments at cost which                                          
approximates market                       $91,644      $29,974        
Marketable securities                         35,988       50,688           
Restricted                                                                      
Cash and investments at cost which                                          
approximates market                         3,548        2,104        
Marketable securities                          2,800        3,423           

Notes receivable, accounts receivable, net       4,283        3,422             
Prepaid expenses and other current assets       16,331       18,885             
Net assets of discontinued operations           22,386       24,789             
U.S. Federal income taxes receivable             4,200        3,600             
                                  -------      -------
Total Current Assets                      181,180      136,885        
                                  -------      -------

Property and equipment, at cost                  1,588        1,522             
Less- accumulated depreciation                   1,211        1,090             
                                  -------      -------
Total property and equipment, net             377          432        
                                  -------      -------
Investments and Other Assets:                                                   
Net intercompany balance and investment                                         
in subsidiaries                              681,425      217,974           
Deferred debt expense, net                      20,139        6,519             
Other                                           25,798       14,196             
                                 --------      -------
                                  727,362      238,689
                                 --------      -------
                                 $908,919     $376,006
                                 ========     ========

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

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NORTEK, INC. (Parent Company)                                                   
SCHEDULE I                                                                      
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                   
Condensed Balance Sheet                                                         
(continued)                                                                     
                                      December 31,
                                     ---------------------
                                   1997       1996
                                   ------     ------
                                      (Amounts in thousands)

Liabilities and Stockholders' Investment                                        

Current Liabilities:                                                            
Accounts payable                             $     557  $     619               
Accrued expenses and taxes, net                 49,311     22,578               
                                 ------     ------
Total Current Liabilities                       49,868     23,197               
                                 ------     ------
Other Liabilities:                                                              
Deferred income taxes                            5,300      4,500               
Other                                           26,834     12,410               
                                 ------     ------
                                 32,134     16,910
                                 ------     ------

Senior notes                                   481,588        ---               

Senior subordinated notes                      217,241    217,104               

Commitments and Contingencies (Note 2)                                          

Stockholders' Investment:                                                       

Preference stock, $1 par value; authorized                                      
7,000,000 shares, none issued                ---         ---          
Common Stock, $1 par value; authorized                                          
40,000,000 shares, 16,050,794  and                                    
15,965,585 shares issued                   16,051     15,966          
Special common                                                                  
stock, $1 par value;                                                            
Authorized 5,000,000 shares, 767,287                                  
and 784,169 shares issued                     767        784          
Additional paid-in                                                              
Capital                                    135,345    135,028           
Retained earnings                               58,966     37,766               
Cumulative translation, pension, and                                            
other adjustments                          (5,327)    (3,212)         
Less - treasury common stock at cost,                                           
7,032,497 and 6,599,645 shares          (75,779)   (65,805)       
- treasury special common stock at                                    
cost, 285,304 and 276,910 shares         (1,935)    (1,732)       
Total Stockholders' Investment             128,088    118,795           
                               --------   --------
                               $908,919   $376,006
                               ========   ========

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

10-K405/A 58th Page of 63 TOC 1st Previous Next Bottom Just 58th-57-                                                                            

NORTEK, INC. (Parent Company)                                                   
SCHEDULE I                                                                      
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                   
Condensed Statement of Operations                                               

                           For the Year Ended December 31,
                          --------------------------------------
                          1997          1996          1995
                          ------        ------        ------
                           (In thousands except per share amounts)
Revenues:                                                                       
Charges and allocations to                                                      
Subsidiaries                      $34,498       $33,829     $30,134       
Interest and dividend income           9,073         4,956       5,635          
Net gain on investment securities        200           750       2,000          
Other income                             518           664       2,992          
                           -------       -------     -------
Total revenues                    $44,289       $40,199     $40,761       
                           -------       -------     -------
Expenses:                                                                       
Selling, administrative                                                         
and other, net                     13,605        11,503       9,220       
Interest expense                      43,921        20,912      20,776          
Other expense                            784           731         535          
                           -------       -------     -------
Total expenses                    $58,310       $33,146     $30,531       
                           -------       -------     -------
(Loss) earnings from continuing                                                 
operations, before equity in                                              
subsidiaries' earnings            (14,021)        7,053      10,230       
Equity in subsidiaries earnings                                                 
before income taxes                56,721        31,547      17,870       
                           -------       -------     -------
Earnings from continuing                                                        
operations before provision                                               
for income taxes                   42,700        38,600      28,100       
Provision for income taxes            16,300        14,900      10,600          
                           -------       -------     -------
Earnings from continuing                                                        
operations                         26,400        23,700      17,500       
Loss from discontinued operations     (5,200)       (1,700)     (2,500)         
                           -------       -------     -------
Net earnings                      $21,200       $22,000     $15,000       
                           =======       =======     =======
Earnings (loss) per share                                                       
Continuing operations                                                           
Basic                                  $2.75         $2.26       $1.41          

Diluted                                $2.68         $2.23       $1.39          

Loss from discontinued operations                                               
Basic                                 $(0.54)       $(0.16)     $(0.20)         
                            ------        ------      ------
Diluted                               $(0.53)       $(0.16)     $(0.20)         
                            ------        ------      ------
Net earnings                                                                    
Basic                                  $2.21         $2.10       $1.21          
                             =====         =====       =====
Diluted                                $2.15         $2.07       $1.19          
                             =====         =====       =====
Weighted average number of shares:                                              
Basic                                  9,605        10,485      12,445          
                            ======        ======      ======
Diluted                                9,855        10,641      12,569          
                            ======        ======      ======

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

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NORTEK, INC. (Parent Company)                                                   
SCHEDULE I                                                                      
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                   
Condensed Statement of Cash Flows                                               

                                        For the Years Ended December 31,
                                        --------------------------------
                                          1997       1996         1995
                                         ---------   --------     --------
                                            (Amounts in thousands)
Cash flows from operating activities:                                           

Earnings from continuing operations          $26,400     $23,700     $17,500    
Net loss from discontinued operations         (5,200)     (1,700)     (2,500)   
                                         -------     -------     -------
Net earnings                                  21,200      22,000      15,000    
                                         -------     -------     -------

Adjustments to reconcile net earnings to cash:                                  
Depreciation and amortization                    139         320         275    
Noncash interest expense                       1,421         802       1,018    
Equity in subsidiaries' earning              (56,721)    (31,547)    (17,870)   
Charges and allocations to subsidiaries      (34,498)    (33,829)    (30,134)   
Net transfers from subsidiaries,                                                
principally cash                          57,038      71,889      55,253
Gain on sale of investments and                                                 
 marketable securities                       (200)       (750)     (2,000)
Deferred federal income tax provision                                           
(benefit)                                  4,000      (3,000)      1,200
Deferred federal income tax(benefit)                                            
provision on discontinued operations      (1,000)      1,200         100

Changes in certain assets and liabilities, net                                  
of effects from acquisitions and dispositions                                   
Prepaids and other current assets              1,687      (4,003)      1,393    
Other assets                                  (5,562)       (570)        356    
Net assets of discontinued operations          4,934         817       1,666    
Accrued expenses and taxes                     6,991      (2,704)       (294)   
Long-term liabilities                          4,832         903         (34)   
Other, net                                       277         482      (1,087)   
                                         -------     -------     -------
Total adjustments to net earnings            (16,662)         10       9,842    
                                         -------     -------     -------
Net cash provided by operating activities      4,538      22,010      24,842    
                                         -------     -------     -------
Cash flows from investing activities:                                           
Capital expenditures                             (70)       (123)               
(379)                                                                       
Purchase of investments and marketable                                          
securities                                  (283,918)    (66,901)   (104,762)   
Proceeds from the sale of investments                                           
and marketable securities                297,133      82,242     112,173
Proceeds either received directly or from                                       
subsidiaries relating to businesses                                     
sold or discontinued                         ---         ---       1,129
Cash transferred to subsidiaries or paid                                        
 directly for acquired businesses        (407,419)        ---     (27,543)
Other, net                                    (5,016)     (1,758)       (600)   
                                         -------     -------     -------
Net cash (used in) provided by investing                                        
activities                               (399,290)     13,460     (19,982)
                                        --------     -------     -------

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NORTEK, INC. (Parent Company)                                                   
SCHEDULE I                                                                      
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                   
Condensed Statement of Cash Flows                                               
(Continued)                                                                     

                                        For the Years Ended December 31,
                                        --------------------------------
                                       1997       1996        1995
                                       --------   --------    --------
                                        (Amounts in thousands)

Cash flows from financing activities:                                           
Sale of Notes, net                         466,213        ---         ---       
Purchase of Nortek Common and Special                                           
Common Stock                               (10,177)   (34,822)     (4,665)      
Other, net                                     386        356         105       
                                     -------    --------     -------
Net cash provided by (used in) financing                                        
activities                              456,422    (34,466)     (4,560)   
                                     -------    --------     -------
Net increase in unrestricted cash and                                           
investments                             61,670      1,004         300   
Unrestricted cash and investments at the                                        
beginning of the year                   29,974     28,970      28,670   
                                    -------    -------     -------
Unrestricted cash and investments at the                                        
end of the year                        $91,644    $29,974     $28,970   
                                    =======    =======     =======

Interest paid on indebtedness              $29,581    $21,662     $21,577       
                                    =======    =======     =======

Net income taxes paid                       $7,977    $18,611     $ 3,739       
                                    =======    =======     =======

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

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NORTEK, INC. (Parent Company) 
CONDENSED FINANCIAL INFORMATION OF REGISTRANT 
Notes to Condensed Financial Statements 

1. The accompanying condensed financial statements of Nortek, Inc. ("the        
Registrant") have been prepared in accordance with the reduced disclosure       
requirements permitted by form 10-K, Part IV, Item 14, Schedule I - Condensed   
Financial Information of the Registrant. The consolidated financial statements  
and related notes of Nortek, Inc. and subsidiaries, are included elsewhere      
herein in this form 10-K (Part II, Item 8)and are incorporated herein by        
reference.                                                                      

2. Descriptions of material contingencies, significant provisions of long-term  
debt obligations and commitments of the Registrant are included in Notes 5 and  
8 of Notes to Consolidated Financial Statements, which are incorporated herein  
by reference. The following is a summary of long-term debt of all the           
Registrant's debt obligations, excluding unamortized discount, at December 31,  
1997:                                                                           
(Amounts in thousands)                                    

1998          $      ---                                                
1999                 ---                                                
2000                 ---                                                
2001                 ---                                                
2002                 ---                                                
Thereafter     $ 720,006                                                

3. The Registrant's net investment in subsidiaries is net of the cumulative     
amount of intercompany cash transfers and other transactions.                   

4. Included in the Registrants condensed statement of cash flows for the three  
years ended December 31, 1997 (in net transfers from subsidiaries, principally  
cash) are dividends (declared by subsidiaries' Board of Directors) from         
subsidiaries of $70,000,000 in 1997 and $2,456,900 in 1995. The subsidiaries'   
Board of Directors did not declare any dividends in 1996.                       

5. Certain of the Registrant's subsidiaries have entered into financing         
agreements which contain various restrictive covenants that place limitations   
on the amount of distributions and advances to the Registrant. At December      
31,1997, approximately $381,540,000 (of which approximately $307,045,000 is     
goodwill) of subsidiary net assets, principally Ply Gem, were restricted        
and approximately $117,427,000 principal amount of subsidiary indebtedness was  
outstanding under these financing agreements.                                   

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NORTEK, INC. AND SUBSIDIARIES 
SCHEDULE II 
VALUATION AND QUALIFYING ACCOUNTS 

BALANCE          CHARGED              
                       AT         TO COSTS   CHARGED  DEDUCTIONS   BALANCE
                BEGINNING  ACQUI-      AND  TO OTHER        FROM    AT END
CLASSIFICATION       OF YEAR SITIONS EXPENSES  ACCOUNTS    RESERVES   OF YEAR   
--------------       ------- ------- --------  --------    --------   -------   
                          (Amounts in Thousands)

For the year ended                                                              
December 31, 1995:                                                              

Allowances for doubtful                                                         
accounts and sales                                                            
allowances           $3,225  $  719   $  666    $  368     $(1,539)(a) $ 3,439
                      =====   =====    =====     =====      ======       =====

For the year ended                                                              
December 31, 1996:                                                              

Allowances for doubtful                                                         
accounts and sales                                                            
allowances           $3,439  $  ---   $1,951    $  119     $(1,853)(a) $ 3,656
                      =====   =====    =====     =====      ======       =====

For the year ended                                                              
December 31, 1997:                                                              

Allowances for doubtful                                                         
accounts and sales                                                            
allowances           $3,656  $7,434   $2,303    $  171     $(2,517)(a) $11,047
                     =====   =====    =====     =====      ======      =====

(a) Amounts written off, net of recoveries.                                     

10-K405/A Last Page of 63 TOC 1st Previous Next Bottom Just 63rd-62-                                                                            

Nortek, Inc. and Subsidiaries                                                   

EXHIBIT INDEX 
------------- 

     Exhibits marked with an asterisk are filed herewith. The remainder of the
exhibits  have  heretofore been filed with the Commission and are  incorporated 
herein  by  reference.  Exhibits marked with a double  asterisk  identify  each 
management contract or compensatory plan or arrangement.                        

3.1   Restated Certificate of Incorporation of Nortek, Inc. (Exhibit 2  
to Form 8-K filed April 23, 1987, File No. 1-6112).         

3.2   Amendment to Restated Certificate of Incorporation  of  Nortek,   
         Inc. effective May 10, 1989 (Exhibit 3.2 to Form 10-K filed March 30,
1990, File No. 1-6112).                                     

3.3   By-laws of Nortek, Inc. (as amended through September 19, 1996)   
       (Exhibit 3.3 to Form 10-Q filed November 5, 1996, File No. 1-6112).

4.1   Second Amended and Restated Rights Agreement dated as of  April 1,
     1996 between the Company and State Street Bank and Trust Company,
         as  Rights Agent (Exhibit 1 to Form 8-K filed April 2, 1996, File No.
1-6112).                                                    

4.2   Indenture dated as of February 14, 1994 between the Company and   
         State  Street Bank and Trust Company, as Trustee, relating to  the  9
         7/8%  Senior  Subordinated Notes due 2004 (Exhibit 4.5 to  Form  10-K
filed March 25, 1994, File No. 1-6112).                     

4.3   Indenture dated as of March 17, 1997 between the  Company         
         and  State Street Bank and Trust Company, as Trustee, relating to the
         9.25%  Series A and Series B Senior Notes due March 15, 2007 (Exhibit
      4.2 to Registration Statement No. 333-25505 filed April 18, 1997).

4.4   Indenture dated as of August 26, 1997 between the Company         
         and  State Street Bank and Trust Company, as Trustee, relating to the
         9  1/8%  Series  A  and Series B Senior Notes due September  1,  2007
         (Exhibit  4.1 to Registration Statement No. 333-36711 filed September
30, 1997).                                                  

**10.1   Employment  Agreement between Richard L.  Bready  and  the           
         Company, dated as of January 1, 1984 (Exhibit 10.2 to Form 10-K filed
March 31, 1986, File No. 1-6112).                           

**10.2   Amendment dated as of March 3, 1988 to Employment Agreement          
         between Richard L. Bready and the Company dated as of January 1, 1984
    (Exhibit 19.2 to Form 10-Q filed May 17, 1988, File No. 1-6112).

**10.3   Second  Amendment dated as of November  1,  1990  to                 
         Employment Agreement between Richard L. Bready and the Company  dated
         as of January 1, 1984 (Exhibit 10.3 to Form 10-K filed April 1, 1991,
File No. 1-6112).                                           

**10.4   Employment  Agreement between Richard L.  Bready  and  the           
         Company  dated  as of February 26, 1997 (Exhibit 10.3  to  Form  10-Q
filed May 12, 1997, File No. 1-6112).                       

**10.5   Amendment No. 1 dated June 13, 1997 to Employment Agreement          
         between  Richard L. Bready and the Company dated as of  February  26,
         1997  (Exhibit 10.2 to Form 10-Q filed August 8, 1997,  File  No.  1-
6112).                                                      

**10.6   Deferred Compensation Agreement dated March 7,  1983                 
         between   Richard  L.  Bready  and  the  Company  (Exhibit  10.4   to
Registration Statement No. 33-69778 filed February 9, 1994).

**10.7   Deferred Compensation Agreement dated March 7, 1983 between          
         Almon C. Hall and the Company (Exhibit 10.5 to Registration Statement
No. 33-69778 filed February 9, 1994).                       

**10.8   Deferred Compensation Agreement dated March 7, 1983 between          
         Richard  J.  Harris  and the Company (Exhibit  10.6  to  Registration
Statement No. 33-69778 filed February 9, 1994).             

**10.9   1984  Stock Option Plan, as amended through May  27,  1987           
         (Exhibit  28.2 to Registration Statement No. 33-22527 filed June  15,
1988).                                                      

**10.10   Change in Control Severance Benefit Plan for Key Employees            
         adopted  February  10,  1986, and form of  agreement  with  employees
       (Exhibit 10.19 to Form 10-K filed March 31, 1986, File No. 1-6112).

**10.11   Change in Control Severance Benefit Plan for Key Employees            
         as  Amended  and  Restated June 12, 1997, and form of agreement  with
          employees (Exhibit 10.1 to Form 10-Q filed August 8, 1997, file No. 1-
6112).                                                      

**10.12   1987  Stock  Option  Plan (Exhibit  28.3  to  Registration            
Statement No. 33-22527 filed June 15, 1988).                

**10.13   1997  Equity and Cash Incentive Plan (Exhibit 10.1 to Form 10-Q filed 
May 12, 1997, File No. 1-6112).                             

**10.14   1997 Stock Option Plan for Directors (Exhibit 10.2 to Form 10-Q filed 
May 12, 1997, File No. 1-6112).                             

**10.15   Nortek,  Inc.  Supplemental Executive Retirement Plan dated  July  1, 
         1997  (Exhibit 10.3 to Form 10-Q filed August 8, 1997,  File  No.  1-
6112).                                                      

**10.16   First  Amendment  dated  July 1, 1997 to  Nortek,  Inc.  Supplemental 
          Executive Retirement Plan dated July 1, 1997 (Exhibit 10.4 to Form 10-
Q filed August 8, 1997, File No. 1-6112).                   

**10.17   Form  of  Indemnification  Agreement  between  the  Company  and  its 
         directors  and certain officers (Appendix C to Proxy Statement  dated
         March 23, 1987 for Annual Meeting of Nortek Stockholders, File No. 1-
6112).                                                      

 10.18   Stock  Purchase  and  Sale  Agreement dated  March  9,  1998  between
       Williams Y&N Holdings, Inc. and NTK Sub, Inc. (Exhibit 2 to Form 8-
K/A filed March 18, 1998, File No. 1-6112).                 

*21.1    List of subsidiaries.                                                

*23.1    Consent of Independent Public Accountants.                           

*27.1    Financial Data Schedule.

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-K405/A Filing	Date	First	Last	Other Filings

	2/9/94	63		S-2/A
	2/14/94	63		424B3, 8-K
	3/25/94	63		10-K
	12/31/94	33		10-K, 10-K/A
	12/31/95	20	62	10-K405, 10-K405/A
	1/1/96	39	48
	4/1/96	46	63	8-K
	4/2/96	63		8-A12B/A, 8-K
	9/19/96	63
	11/5/96	63		10-Q
	12/31/96	10	62	10-K405
	1/1/97	39
	2/26/97	63
	3/17/97	23	63
	4/18/97	63		S-4
	5/12/97	63		10-Q
	6/12/97	63
	6/13/97	63
	7/1/97	63
	8/8/97	63		10-Q
	8/25/97	39
	8/26/97	9	63	8-K, 8-K/A
	9/30/97	63		S-4
For The Period Ended	12/31/97	1	62	10-K405
	2/27/98	14
	2/28/98	23
	3/1/98	23	44
	3/9/98	9	63	8-K, 8-K/A
	3/18/98	63		8-K/A
	4/17/98	1
Filed On / Filed As Of	4/20/98	28
	12/3/98	45
	12/5/98	45
	12/31/98	38		10-K405
	3/1/99	44
	12/3/99	45
	12/5/99	45
	3/1/2	44
	3/15/2	44		10-K
	9/1/2	44
	3/15/5	44
	9/1/5	44
	3/31/6	46
	3/15/7	44	63
	9/1/7	44	63

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Nortek Holdings Inc · 10-K405/A · For 12/31/97

Filed On 4/20/98 · SEC File 1-06112 · Accession Number 72423-98-5

Amendment to Annual Report -- [X] Reg. S-K Item 405 · Form 10-KFiling Table of Contents

10-K405/A · Nortek 1997 Amended FormDocument Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Amendment to Annual Report -- [X] Reg. S-K Item 405 · Form 10-K
Filing Table of Contents

10-K405/A · Nortek 1997 Amended Form
Document Table of Contents