|UNITED STATES                     
|----------------------------------
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            

__________

FORM 10-Q__________

|                                                         |  |                                                                                         
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|[X]                                                      |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                         |  |                                                                                         
|For the quarterly period ended April 5, 2003            
|                                                         |  |                                                                                         
|OR                                                      
|                                                         |  |                                                                                         
|[_]                                                      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                         |  |                                                                                         
|For the transition period from ___________ to __________
|                                                         |  |                                                                                         
|1-6112                                                  
|(Commission File Number)                                
|__________                                              
|                                                         |  |                                                                                         
|NORTEK, INC.                                            
|(Exact name of registrant as specified in its charter)  
|__________                                              

|                                                     |  |                    
|---------------------------------------------------- |  | -------------------
|Delaware                                             |  | 05-0314991         
|(State or other jurisdiction of                      |  | (I.R.S. Employer   
|incorporation or organization)                       |  | Identification No.)
|                                                     |  |                    
|50 Kennedy Plaza, Providence, RI                     |  | 02903-2360         
|(Address of principal executive offices)             |  | (Zip Code)         
|                                                    
|(401) 751-1600                                      
|(Registrants telephone number, including area code)
|__________                                          

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

|Indicate by check
      mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
|------------------------------------------------------------------------------------------------------------------
|Yes [X]   No [_]                                                                                                  

|The number of shares of Common Stock outstanding as of May 15, 2003 was 100.
|----------------------------------------------------------------------------

|NORTEK, INC. AND SUBSIDIARIES       
|------------------------------------
|CONDENSED CONSOLIDATED BALANCE SHEET

|                                                       | April 5, | Dec. 31,
|------------------------------------------------------ | -------- | --------
|
|(Amounts in thousands)                                
|(Unaudited)                                           
|
|Assets                                                 |          |         
|Current Assets:                                        |          |         
|Unrestricted                                           |          |         
|Cash and cash equivalents                              |          |         
|Marketable securities available for sale               |          |         
|Restricted                                             |          |         
|Cash, investments and marketable securities at cost,   |          |         
|which approximates market                              |          |         
|Accounts receivable, less allowances                   |          |         
|of $15,399,000 and $13,132,000                         |          |         
|Inventories                                            |          |         
|Raw materials                                          |          |         
|Work in process                                        |          |         
|Finished goods                                         |          |         
|
|                                                       |          |         
|
|
|Prepaid expenses                                       |          |         
|Other current assets                                   |          |         
|Prepaid income taxes                                   |          |         
|
|Total current assets                                   |          |         
|
|
|Property and Equipment, at Cost:                       |          |         
|Land                                                   |          |         
|Buildings and improvements                             |          |         
|Machinery and equipment                                |          |         
|
|                                                       |          |         
|Less accumulated depreciation                          |          |         
|
|Total property and equipment, net                      |          |         
|
|
|Other Assets:                                          |          |         
|Goodwill                                               |          |         
|Intangible assets, less accumulated amortization       |          |         
|of $2,869,000 and $34,010,000                          |          |         
|Deferred debt expense                                  |          |         
|Restricted investments and marketable securities held  |          |         
|by pension trusts                                      |          |         
|Other                                                  |          |         
|
|                                                       |          |         
|
|                                                       |          |         
|
|
|Liabilities and Stockholder's Investment               |          |         
|
|Current Liabilities:                                   |          |         
|Notes payable and other short-term obligations         |          |         
|Current maturities of long-term debt                   |          |         
|Accounts payable                                       |          |         
|Accrued expenses and taxes, net                        |          |         
|
|Total current liabilities                              |          |         
|
|
|Other Liabilities:                                     |          |         
|Deferred income taxes                                  |          |         
|Other                                                  |          |         
|
|                                                       |          |         
|
|
|Notes, Mortgage Notes and Obligations                  |          |         
|Payable, Less Current Maturities                       |          |         
|
|
|Stockholder's Investment:                              |          |         
|Common stock, $.01 par value; authorized 100 shares,   |          |         
|100 shares issued and outstanding at April 5, 2003 and |          |         
|December 31, 2002                                      |          |         
|Additional paid-in capital                             |          |         
|Retained earnings                                      |          |         
|Accumulated other comprehensive income (loss)          |          |         
|
|Total stockholder's investment                         |          |         
|
|                                                       |          |         
|

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

|NORTEK, INC. AND SUBSIDIARIES                 
|----------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|(Amounts in thousands)                        

|                                            | For the Periods
|------------------------------------------- | ---------------
|
|
|
|(Unaudited)                                
|
|Net Sales                                   |                
|
|
|Costs and Expenses:                         |                
|Cost of products sold                       |                
|Selling, general and administrative expense |                
|Amortization of intangible assets           |                
|Expenses and charges arising from the       |                
|Recapitalization                            |                
|
|                                            |                
|
|
|Operating earnings (loss)                   |                
|Interest expense                            |                
|Investment income                           |                
|
|Earnings (loss) from continuing operations  |                
|before provision (benefit) for income taxes |                
|Provision (benefit) for income taxes        |                
|
|Earnings (loss) from continuing operations  |                
|Earnings from discontinued operations       |                
|
|Net earnings (loss)                         |                
|

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

|NORTEK, INC. AND SUBSIDIARIES                 
|----------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|(Amounts in thousands)                        

|                                                    | For the Periods
|--------------------------------------------------- | ---------------
|
|
|
|(Unaudited)                                        
|
|Cash Flows from operating activities:               |                
|Net earnings (loss) from continuing operations      |                
|Earnings from discontinued operations               |                
|
|Net earnings (loss)                                 |                
|
|
|Adjustments to reconcile net earnings (loss)        |                
|to cash:                                            |                
|Depreciation and amortization expense               |                
|Non-cash write-off of inventory                     |                
|Non-cash interest expense (including $4,100,000     |                
|from amortization of the Bridge Facility            |                
|commitment fees and expenses)                       |                
|Deferred federal income tax provision (credit)      |                
|Effect of the Recapitalization, net                 |                
|Changes in certain assets and liabilities, net of   |                
|effects from acquisitions and dispositions:         |                
|Accounts receivable, net                            |                
|Inventories                                         |                
|Prepaids and other current assets                   |                
|Net assets of discontinued operations               |                
|Accounts payable                                    |                
|Accrued expenses and taxes                          |                
|Long-term assets, liabilities and other, net        |                
|
|Total adjustments to net earnings (loss)            |                
|
|Net cash used in operating activities               |                
|
|
|Cash Flows from investing activities:               |                
|Capital expenditures                                |                
|Net cash paid for a business acquired               |                
|Purchase of investments and marketable securities   |                
|Proceeds from the sale of investments and           |                
|marketable securities                               |                
|Change in restricted cash and investments           |                
|Other, net                                          |                
|
|Net cash used in investing activities               |                
|
|Cash Flows from financing activities:               |                
|Change in borrowings, net                           |                
|Dividend paid to Nortek Holdings                    |                
|Contribution of capital from Nortek Holdings        |                
|Net cash transfers to Nortek Holdings               |                
|Other, net                                          |                
|
|Net cash provided by (used in) financing activities |                
|
|Net decrease in unrestricted cash and               |                
|cash equivalents                                    |                
|Unrestricted cash and cash equivalents at the       |                
|beginning of the period                             |                
|
|Unrestricted cash and cash equivalents at the       |                
|end of the period                                   |                
|
|
|Supplemental disclosure of cash flow                |                
|information:                                        |                
|Interest paid                                       |                
|
|Income taxes paid, net                              |                
|

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

|NORTEK, INC. AND SUBSIDIARIES                               
|------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S INVESTMENT
|FOR THE PERIOD JANUARY 1, 2002 - MARCH 30, 2002             
|(Dollar amounts in thousands)                               

|                                      |  |  | Addi- |        |  | Accumulated |    
|------------------------------------- |  |  | ----- | ------ |  | ----------- | ---
|
|
|
|(Unaudited)                          
|
|Balance, December 31, 2001            |  |  | $     | 18,829 |  | $           | 814
|Net earnings                          |  |  |       | --     |  |             | -- 
|Other comprehensive loss:             |  | 
|Currency translation adjustment       |  |  |       | --     |  |             | -- 
|
|Comprehensive income                  |  |  | $     | 9,704  | 
|
|1,089 shares of special common stock  |  | 
|converted into 1,089 shares           |  | 
|of common stock                       |  |  |       | 1      |  |             | (1 
|14,833 shares of common stock         |  | 
|issued upon exercise of stock options |  |  |       | 15     |  |             | -- 
|33 shares of treasury stock acquired  |  |  |       | --     |  |             | -- 
|
|Balance, March 30, 2002               |  |  | $     | 18,845 |  | $           | 813
|

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

|NORTEK, INC. AND SUBSIDIARIES                               
|------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S INVESTMENT
|FOR THE PERIOD JANUARY 1, 2003 - JANUARY 9, 2003            
|(Dollar amounts in thousands)                               

|                                  |  |  | Addi- |    |  | Accumulated |   
|--------------------------------- |  |  | ----- | -- |  | ----------- | --
|
|
|
|(Unaudited)                      
|
|Balance, December 31, 2002        |  |  | $     | -- |  | $           | --
|Net loss                          |  |  |       | -- |  |             | --
|Other comprehensive income:       |  | 
|Currency translation adjustment   |  |  |       | -- |  |             | --
|Minimum pension liability, net of |  | 
|tax of $9,906,000                 |  |  |       | -- |  |             | --
|
|Comprehensive loss                |  |  |       | -- |  |             | --
|
|Dividend to Nortek Holdings, Inc. |  |  |       | -- |  |             | --
|Contribution of capital from      |  | 
|Nortek Holdings, Inc.             |  |  |       | -- |  |             | --
|
|Subtotal                          |  |  | $     | -- |  | $           | --
|Effect of the Recapitalization    |  |  |       | -- |  |             | --
|
|Balance, January 9, 2003          |  |  | $     | -- |  | $           | --
|

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

|NORTEK, INC. AND SUBSIDIARIES                               
|------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S INVESTMENT
|FOR THE PERIOD JANUARY 10, 2003 - APRIL 5, 2003             
|(Dollar amounts in thousands)                               

|                                          |  |  | Addi- |    |  | Accumulated |   
|----------------------------------------- |  |  | ----- | -- |  | ----------- | --
|
|
|
|(Unaudited)                              
|
|Balance, January 9, 2003                  |  |  | $     | -- |  | $           | --
|Net income                                |  |  |       | -- |  |             | --
|Other comprehensive income:               |  | 
|Currency translation adjustment           |  |  |       | -- |  |             | --
|Unrealized appreciation in the fair value |  | 
|of marketable securities                  |  |  |       | -- |  |             | --
|
|Comprehensive income                      |  |  |       | -- |  |             | --
|
|Balance, April 5, 2003                    |  |  | $     | -- |  | $           | --
|

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

|NORTEK, INC. AND SUBSIDIARIES            
|-----------------------------------------
|NOTES TO UNAUDITED CONDENSED CONSOLIDATED
|FINANCIAL STATEMENTS                     
|APRIL 5, 2003 AND MARCH 30, 2002         

|(A) | The
unaudited  condensed  consolidated  financial  statements  (the  "Unaudited
Financial  Statements")  presented  have been  prepared by Nortek,  Inc. and include
the accounts of Nortek,  Inc.,  and all of its  wholly-owned  subsidiaries  (the
"Company") after  elimination of intercompany  accounts and transactions,
without audit and, in the opinion of  management,  reflect all  adjustments of a normal
recurring  nature  necessary  for a fair  statement  of the interim  periods  presented.
Although  certain  information  and  footnote  disclosures  normally  included in
financial  statements  prepared in accordance with accounting  principles  generally
accepted in the United  States have been  omitted,  the Company  believes  that the
disclosures  included  are  adequate  to make the  information  presented  not
misleading.  In 2002,  the  Company sold certain subsidiaries of its wholly-owned
subsidiary,  Ply Gem Industries,  Inc. ("Ply Gem").  The sale of these
subsidiaries and their related  operating results have been excluded from earnings from
continuing  operations and are classified as discontinued  operations for all periods
presented (see Note  H).  Certain  amounts  in the prior  year's  Unaudited  Financial
Statements  have been  reclassified  to  conform to the current year  presentation.  It
is suggested that these Unaudited  Financial  Statements be  read in conjunction  with
the  consolidated  financial  statements and the notes included in the Company's  latest
annual  report  on Form  10-K  and its  latest  Current  Reports  on Form  8-K as  filed
with the  Securities and Exchange Commission ("SEC").
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November 20, 2002,  the Company  reorganized  into a holding  company  structure  and
each  outstanding  share of capital  stock of the Company was  converted  into an
identical  share of capital stock of Nortek  Holdings,  Inc. ("Nortek
Holdings"),  a Delaware corporation formed in 2002, with Nortek Holdings becoming
the successor company and the Company  becoming a wholly-owned  subsidiary of
Nortek Holdings (the  "Nortek Holdings  Reorganization").  On January 9, 2003,
Nortek  Holdings,  the parent company of Nortek,  was acquired by certain  affiliates
and designees of Kelso & Company L.P.  ("Kelso") and certain  members  of the
Company's  management  (the  "Management  Investors") in accordance  with the
Agreement and Plan of  Recapitalization  by and among Nortek,  Inc.,  Nortek Holdings,
Inc. and K Holdings,  Inc. ("K Holdings")  dated as of June 20, 2002, as
amended,  (the  "Recapitalization  Agreement")  in a  transaction  valued at
approximately $1.6 billion,  including all of the Company's  indebtedness (the
"Recapitalization").  (See  Note B.)
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Beginning
on January 9, 2003,  the Company and Nortek  Holdings  accounted for the
Recapitalization  as a  purchase in accordance  with the provisions of Statement of
Financial  Accounting  Standards  ("SFAS") No.  141,  "Business
Combinations"  ("SFAS No.  141"),  which  results in a new  valuation  for
the assets and  liabilities  of  Nortek  Holdings  and its  subsidiaries  based  upon
fair  values  as of the date of the  Recapitalization.  As allowed under SEC Staff
Accounting  Bulletin No. 54, "Push Down Basis of Accounting  Required in Certain
Limited  Circumstances",  the Company has reflected all applicable purchase
accounting  adjustments  recorded by Nortek Holdings in the Company's  Consolidated
Financial  Statements for all SEC  filings  covering  periods  subsequent  to  the
Recapitalization  ("Push  Down  Accounting").  Push  Down  Accounting  requires
the  Company to  establish a new basis for its assets and  liabilities  based on the
amount  paid for its  ownership  at  January  9,  2003.  Accordingly,  Nortek  Holdings'
ownership  basis  (including  the fair value of options  rolled over by the  Management
Investors) is reflected in Nortek's  Consolidated  Financial  Statements beginning upon
completion of the  Recapitalization.  In order to apply  Push Down Accounting,  Nortek
Holdings' purchase price of approximately  $468,737,000 was allocated to the  assets and
liabilities  based on their relative fair values and  approximately  $440,837,000 was
reflected  in the Company's  Stockholder's  Investment as the value of Nortek Holdings'
ownership in the Company upon  completion  of  the  Recapitalization.  Immediately  prior
to  the  Recapitalization,  the  Company's  Stockholder's  Investment  was  approximately
$156,702,000.  Purchase  price  allocations  are subject to  refinement  until  all
pertinent  information  is  obtained.  As  of  January  10,  2003,  the  Company
preliminarily  allocated the excess  purchase price over the net assets  acquired in the
Recapitalization  based on its estimates of the fair value of assets and liabilities as
follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | Excess purchase price of the
|--------------------------------- | ----------------------------
|
|
|Inventories                       |                             
|Property, plant and equipment     |                             
|Intangible assets                 |                             
|Goodwill                          |                             
|Indebtedness                      |                             
|Prepaid and deferred income taxes |                             
|Pension                           |                             
|
|Total                             |                             
|

| | During
the period from January 10, 2003 to April 5, 2003,  the Company  reflected approximately  $5,400,000  of  excess  purchase  price
allocated  to  inventory as a non-cash charge to  cost  of  goods  sold,  approximately  $2,900,000  of lower  depreciation  expense  in
cost of  sales,  $1,500,000  of  additional  amortization  expense of intangible  assets
and $1,400,000 of lower interest expense from the amortization  of premium  allocated to
indebtedness as compared to the Company's  historical  basis of accounting  prior  to the
Recapitalization.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has estimated the fair value of its assets and liabilities,  including
intangible  assets and  property,  plant and equipment,  as of the  Recapitalization,
utilizing information available at the time  that the  Company's  Unaudited  Financial
Statements  were  prepared and these  estimates  are subject to  refinement  until  all
pertinent  information  has  been  obtained.  The  Company  is in the  process  of
obtaining outside third party appraisals of its intangible assets and property, plant and
equipment.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
impact of these fair value  estimates has been reflected in the Company's  statement of
operations for  the period ended April 5, 2003.  Should the intangible asset or property,
plant and equipment  appraisals  result in  differences  in the average  amortizable  or
depreciable  lives of these assets or in the fair  value amount of the estimates, the
following estimated changes in annual operating earnings would occur:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | Increase (decrease) in operating earnings
|------------------------------------ | -----------------------------------------
|
|
|
|If lives are one year greater        |                                          
|If lives are one year less           |                                          
|If fair value is $10,000,000 greater |                                          
|If fair value is $10,000,000 less    |                                          

| | The
period from  January 1, 2003 to January 9, 2003 and the period from  January 10, 2003 to
April 5, 2003  combined,  contain  95 days while the first  quarter of 2002  contained
90 days.  Accordingly,  operating  results for 2003 include  approximately  $1,000,000
of  additional  interest  expense as compared to 2002  since the  Company  accrues
interest  expense  based on the number of days  contained  in each  reporting  period.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | On
January 8, 2003, at a special meeting of stockholders of Nortek  Holdings,  the
stockholders  approved  the following  amendments to the certificate of incorporation
(the  "Stockholder  Approval"),  which were  required in order to complete the Recapitalization:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- A new  class of common  stock,  Class A Common  Stock,  par value  $1.00 per  share,  of Nortek
                    Holdings was created consisting of 19,000,000 authorized shares.
- At the time that the amendment to the  certificate  of  incorporation  became  effective,  each
                    share of common  stock,  par value $1.00 per share and special  common  stock,  par value $1.00
                    per  share  outstanding,  was  reclassified  into  one  share  of a new  class  of  mandatorily
                    redeemable  common stock,  Class B Common Stock,  par value $1.00 per share, of Nortek Holdings
                    consisting of 14,000,000 authorized shares.
- Class B Common Stock was required to be  immediately  redeemed for $46 per share in cash upon
                    completion of the Recapitalization.
- The authorized  number of shares of Series B Preference  Stock,  par value $1.00 per share, was
                    increased to 19,000,000 authorized shares.

| | Following
the  Stockholder  Approval,  common  stock and  special  common  stock  held by the
Management  Investors  were  exchanged for an equal number of newly created  shares of
Series B Preference  Stock.  In  addition,  certain  options to purchase  shares of
common and special  common stock held by the Management  Investors  were  exchanged  for
fully  vested  options to purchase an equal  number of shares of the newly  created
Class A Common  Stock.  The  remaining  outstanding  options,  including  some held by
Management  Investors,  were  cancelled in exchange  for the right to receive a single
lump sum cash payment  equal to  the product of the number of shares of common  stock or
special  common  stock  underlying  the option and  the amount by which the  redemption
price of $46 per share exceeded the per share  exercise  price  of the option.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 9, 2003,  in  connection  with the  Recapitalization,  Kelso  purchased  newly
issued shares of  Series B Preference  Stock for  approximately  $355,923,000  and
purchased  shares of Series B Preference  Stock held by the Management  Investors for
approximately  $18,077,000.  Newly issued Class A Common Stock  of  approximately
$3,262,000  was purchased by designated  third  parties.  Shares of Series B Preference
Stock held by the  Management  Investors  that were not  purchased by Kelso were
converted  into an equal  number of shares of Class A Common Stock.  In addition,  the
Company  declared and  distributed  to Nortek  Holdings  a  dividend  of  approximately
$120,000,000  and  distributed  approximately  $27,900,000  for  reimbursement of fees
and expenses of Kelso,  which were paid out of the Company's  unrestricted  cash and
cash  equivalents on hand and were permissible  under the most  restrictive  covenants
with respect to the  indentures  of the  Company's 8 7/8% Senior  Notes due 2008,  9 1/4%
Senior  Notes due 2007, 9 1/8% Senior  Notes due 2007 and 9 7/8% Senior Subordinated
Notes due 2011 (the "Existing Notes").
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Nortek
Holdings  used the proceeds  from the  purchase by Kelso and designated third parties of the newly  issued  Series B
Preference  Stock and Class A Common Stock and the dividend from Nortek to redeem Nortek
Holdings' Class B Common Stock  and to cash out options to purchase common and special
common stock totaling approximately $479,185,000. Kelso also purchased from certain Management Investors 392,978 shares
 of Series B Preference Stock for approximately $18,077,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the  Recapitalization,  K Holdings received a bridge financing letter
from a lender for  a senior  unsecured  term loan facility not to exceed  $955,000,000
(the "Bridge  Facility").  The Bridge  Facility was intended to be used to
fund,  if  necessary,  any change in control  offers the Company might  have made in
connection with the  Recapitalization.  The Company did not use this Bridge Facility
because  the structure of the  Recapitalization  did not require the Company to make any
change of control  offers.  The  commitment  letter  expired on January 31, 2003.  As a
result,  the Company's  consolidated  interest  expense  for the period  from  January
10, 2003 to April 5, 2003  includes  approximately  $4,100,000  of  interest expense from
the amortization of the Bridge Facility commitment fees and related expenses.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
January 2003,  Nortek Holdings filed for the  deregistration of its shares of common and
special common  stock under the  Securities  Exchange Act of 1934.  Nortek  Holdings'
shares of common and special common  stock are no longer publicly  traded.  The Company
will continue to file periodic  reports with the SEC as  required by the respective
indentures of the Company's Existing Notes.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
the terms of one of the Company's  supplemental  executive  retirement  plans
("SERP"),  the Company  was required to make one-time cash payments to
participants  in such plan in  satisfaction of obligations  under that plan when the
Recapitalization  was  completed.  Accordingly,  the Company made a distribution  of
approximately  $75,100,000  to the  participants  in the plan from  funds  included  in
the  Company's  Consolidated  Balance  Sheet at  December  31,  2002 and  classified  in
long-term  assets in  restricted  investments and marketable  securities  held by pension
trusts and transferred to one of the  participants  a life insurance  policy with
approximately  $10,300,000 of cash surrender  value to satisfy a portion of the SERPs obligation to such
participant.  The  termination  and settlement of the obligation of this
SERP resulted  in a curtailment loss on January 9, 2003.  (See Note F.)
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
total amount of transaction  fees and related costs incurred by the Company and Kelso
associated with  the  Recapitalization  was  approximately  $47,348,000,  including the
$27,900,000  noted above, of which  approximately  $10,500,000  of advisory  fees and
expenses  was paid to Kelso & Company L.P. A portion of  these fees and  expenses  was
recorded  by the Company in selling,  general and  administrative  expense,  since they
were obligations of the Company prior to the  Recapitalization.  Approximately
$12,848,000 was  recorded as expense on January 9, 2003 since these fees and  expenses
became  obligations  of the Company  upon consummation of the  Recapitalization.
Approximately  $6,600,000 of expense was previously  recorded  by the Company in the year
ended December 31, 2002.  (See Note F.)
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following  reflects the pro forma effect of the  Recapitalization  for the periods
presented  through  January 9, 2003.  The period  ending April 5, 2003  reflects the
actual  operating  results of the Company  post-Recapitalization for the period from
January 10, 2003 to April 5, 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | Actual | Pro Forma
|------------------------------------------ | ------ | ---------
|
|
|(Amounts in thousands)                    
|
|Net sales                                  |        |          
|Operating earnings                         |        |          
|Earnings (loss) from continuing operations |        |          

| | The
unaudited pro forma condensed  consolidated  summary of operations for the periods
presented has been  prepared  by  adjusting  the  Company's  historical  summary  of
operations  to  give  effect  to  the  Recapitalization  as if it had occurred on
January 1, 2002.  Fees,  expenses and charges  resulting from  the  Recapitalization,
including  the  $6,600,000  noted above (see Note F), have been  excluded from the  above
pro forma  financial  data since this pro forma data assumes that the  Recapitalization
occurred on  January 1, 2002. The information  contained in this unaudited pro forma
condensed  consolidated  summary  of  operations  has  been  prepared  utilizing
information  available  at the  time  that  the  Company's  Consolidated  Financial
Statements  were  prepared  and is  subject  to  refinement  until all  pertinent
information  has been  obtained.  The unaudited  pro forma  condensed  consolidated
summary of operations  reflects the Company's  estimate of the effect of fair value
adjustments for inventory,  property,  plant  and  equipment,  intangible  assets,
pension,  debt and financing  costs and their  related  deferred tax  attributes.  The
excess of the  purchase  price  over the  historical  basis of net assets and these fair
value  adjustments  was  recorded  as  goodwill.  Property,  plant and  equipment,
intangible  assets and  certain other assets and  liabilities  and related tax attributes
have been adjusted to fair value in the  Company's  consolidated  balance  sheet on April
5, 2003 based on  Company  estimates.  Certain  pertinent  information  related to the
fair value of these items has not yet been  obtained or  completed.  Pertinent
information  not yet  obtained or  completed  includes,  among other  items,  third
party  appraisals  of  intangible  assets and  property,  plant and  equipment,  certain
pension  valuations  and their  related  deferred tax attributes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the  second  quarter  of 2002,  approximately  $4,400,000  was  charged to  operating
earnings  and is  included in selling,  general and  administrative  expenses relating to
incentive earned by certain of the  Company's  officers  under the Company's 1999 Equity
Performance  Plan. In the third quarter of 2002, the  Company  also  incurred
approximately  $2,100,000  in  connection  with  its  re-audit  of the  Company's
Unaudited Financial Statements for the three years ended December 31, 2001.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | SFAS
No.  143,  "Accounting  for Asset  Retirement  Obligations"  ("SFAS  No.
143")  addresses  financial  accounting and reporting for  obligations  associated
with the retirement of tangible  long-lived  assets  and the associated  asset retirement
costs.  SFAS No. 143 requires that the fair value of a liability for  an asset
retirement  obligation  be  recognized  in the period in which it is  incurred  if a
reasonable  estimate of fair value can be made.  The  associated  asset  retirement
costs are  capitalized as part of  the carrying amount of the long-lived  asset.  SFAS
No. 143 is effective for financial  statements  issued  for fiscal years  beginning
after June 15, 2002 with early adoption  permitted.  The Company adopted SFAS  No. 143 on
January 1, 2003.  Adoption  of this  accounting  standard  was not  material  to the
Company's  Unaudited Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SFAS
No. 145,  "Rescission  of FASB  Statements  No. 4, 44 and 64,  Amendment of FASB
Statement No. 13 and  Technical  Corrections"  ("SFAS No.  145"),  was
issued in April 2002 and addresses the reporting of gains  and losses  resulting from the
extinguishment  of debt,  accounting for  sale-leaseback  transactions and  rescinds or
amends other  existing  authoritative  pronouncements.  SFAS No. 145 requires that any
gain or  loss on  extinguishment  of debt  that  does not  meet the  criteria  of APB 30
for  classification  as an  extraordinary  item shall not be  classified  as
extraordinary  and shall be included  in  earnings  from  continuing  operations.  The
provisions  of this  statement  related  to the  extinguishment  of debt are  effective
for  financial  statements  issued in fiscal  years  beginning  after May 15,  2002 with
early  application  encouraged.  The  Company  adopted  SFAS No.  145 on  January  1,
2003 and  adoption  of this  accounting  standard was not material to the results
presented in the  Unaudited  Financial Statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
January 1, 2003, the Company adopted SFAS No. 146,  "Accounting for Costs
Associated with Exit  or Disposal  Activities"  ("SFAS No.  146"),  which
addresses  the  accounting  and  reporting  for costs  associated  with exit or disposal
activities,  nullifies  Emerging  Issues Task Force  ("EITF") Issue No.  94-3,
"Liability  Recognition  for  Certain  Employee  Termination  Benefits  and Other
Costs to Exit an  Activity  (including  Certain  Costs  Incurred  in  a
Restructuring)"  ("EITF  94-3")  and  substantially  nullifies  EITF
Issue No.  88-10,  "Costs  Associated  with Lease  Modification  or
Termination"  ("EITF  88-10").  SFAS No. 146 requires that a liability for
a cost associated  with an exit or disposal  activity  be  recognized  when the
liability is incurred.  Under EITF 94-3, a liability for an exit cost as defined  in EITF
94-3 was  recognized  at the date of an entity's  commitment  to an exit plan.  The
provisions of  SFAS No. 146 are effective for exit or disposal  activities  that are
initiated  after  December 31, 2002.  The adoption of SFAS No. 146 did not have a
material effect on the Company's Unaudited  Financial Statements.  (See  Note M.)
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December  31,  2002,  the FASB  issued  SFAS No.  148,  "Accounting  for
Stock-Based  Compensation  -  Transition  and  Disclosure"  ("SFAS  No.
148").  SFAS No.  148  amends  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation"  ("SFAS No.  123") to provide  alternative  methods of
transition  to SFAS No.  123's fair value method of accounting  for  stock-based
employee  compensation.  SFAS No. 148 also amends  the disclosure  provisions of SFAS No.
123 and APB Opinion No. 28,  "Interim  Financial  Reporting"  ("APB  No.
28"). The Company  accounts for stock-based  compensation  in accordance with APB
No. 25,  "Accounting  for Stock Issued to Employees"  ("APB No. 25").
The Company has provided the required  disclosures  under  SFAS No. 148 in Note K.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November  2002,  the FASB  issued  Interpretation  No.  45,  "Guarantor's
Accounting  and  Disclosure  Requirements for Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). Along  with new
disclosure  requirements,  FIN 45 requires  guarantors to recognize,  at the inception of
certain  guarantees,  a liability for the fair value of the obligation  undertaken in
issuing the  guarantee.  This  differs  from the  current  practice to record a liability
only when a loss is  probable  and  reasonably  estimable.  The  recognition and
measurement  provisions of FIN 45 are applicable on a prospective  basis  to guarantees
issued or modified after December 31, 2002. The Company  adopted the disclosure
provisions  of FIN 45 as of December 31, 2002 and adopted the entire  interpretation  on
January 1, 2003.  Adoption of  FIN 45 was not material to the Company's Unaudited  Financial Statements (see Note L).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Interest
expense for the first  quarter of 2002  includes a non-cash  reduction  in  interest
expense of  approximately  $450,000  related to the  Company's  interest  rate collar
agreement.  The  interest  rate  collar agreement was terminated in August 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | On
January  17,  2003,  the  Company  acquired  Elan  Home  Systems  L.L.C.
("Elan")  for  approximately  $17,400,000 in cash and a $1,500,000  note
payable to the sellers.  Elan  manufactures  and sells consumer  electronic  equipment
that controls  whole-house  entertainment,  communication and automation systems for  new
residential  construction  and retrofit  markets.  For the year ended December 31, 2002,
Elan reported  net sales of  approximately  $21,300,000  (unaudited).  Pro forma results
related to this  acquisition have  not been presented as the effect is not material.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | For
the nine days ended January 9, 2003, the Company incurred certain charges in connection
with the Recapitalization.  These charges were as follows:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|Curtailment loss upon termination of a SERP  |  |  | $ | 70,142,000 | 
|-------------------------------------------- |  |  | - | ---------- | 
|Recapitalization fees, expenses and other    |  |  |   | 12,848,000 | 
|Compensation expense from the settlement and |  | 
|cancellation of stock options                |  |  |   | 4,710,000  | 
|
|                                             |  |  | $ | 87,700,000 | 
|

|(G) | At
May 15, 2003,  there was no amount  available  for the payment of cash  dividends,  stock
purchases or  other  restricted  payments as defined under the terms of the  Company's
most  restrictive  debt covenant  related to such payments.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(H) | On
November 22, 2002,  the Company's Ply Gem subsidiary  sold the capital  stock of its subsidiary  Richwood Building  Products,  Inc.
("Richwood") for approximately  $8,500,000 of  net cash  proceeds  and
recorded a pre-tax  loss of  approximately  $3,000,000  in the fourth  quarter of  2002.
The operating  results of Richwood were  previously  included in Windows,  Doors and
Siding Products  in the  Company's  segment  reporting.  As required by SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142) the Company  allocated  approximately  $4,200,000 of goodwill to Richwood in  connection
with the  determination  of the loss on sale based upon  the  relative  fair value of
Richwood to the total fair value of the Windows,  Doors and Siding  operating  segment.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
April 2, 2002,  Ply Gem sold the capital stock of its subsidiary  Hoover  Treated Wood
Products,  Inc.  ("Hoover")  for  approximately  $20,000,000  of  net  cash
proceeds  and  recorded  a  pre-tax  gain  of  approximately  $5,400,000 in the second
quarter of 2002. The operating  results of Hoover were  previously  included in Other in
the Company's segment  reporting.  Approximately  $8,500,000 of the cash proceeds was
used to pay down  outstanding  debt under the Company's Ply Gem credit  facility in the
second  quarter of  2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
sale of these  subsidiaries and their related  operating results have been excluded from
earnings from  continuing operations and are classified as discontinued operations for
all periods presented.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following is a summary of the results of discontinued operations for the three months
ended March  30, 2002:
| | ----------------------------------------------------------------------------------------------------------------

|                                      | Three Months Ended
|------------------------------------- | ------------------
|
|(Amounts in thousands)               
|(Unaudited)                          
|
|Net Sales                             |                   
|
|
|Earnings before income taxes          |                   
|Income tax provision                  |                   
|
|Earnings from discontinued operations |                   
|
|
|Depreciation and amortization expense |                   
|

|(I) | The
Company  has  three  reportable  segments:  the  Residential  Building  Products
Segment;  the  Air  Conditioning and Heating Products  Segment;  and the Windows,  Doors
and Siding Products  Segment.  In the  tables below,  Other includes  corporate related
items,  intersegment  eliminations and certain income and  expense items not allocated to
reportable segments.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November  22,  2002,  the Company sold the capital  stock of  Richwood.  On April 2,
2002,  the Company  sold the capital  stock of Hoover.  The results of Richwood,  which
were  previously  part of the Windows,  Doors and Siding Products Segment and Hoover,
which were previously part of the Other Segment,  have been  excluded from earnings from
continuing  operations and classified  separately as  discontinued  operations  for all
periods  presented (see Note H).  Accordingly  the segment  information  presented  below
excludes Richwood and Hoover for all periods.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company evaluates  segment  performance  based on operating  earnings before  allocations
of corporate  overhead costs. The income statement impact of all purchase  accounting
adjustments,  including  goodwill  and  intangible  asset  amortization,  is included in
the operating  earnings of the  applicable  segment.  Intersegment net sales and
eliminations were not material for any of the periods presented.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Summarized
financial  information for the Company's  reportable  segments is presented in the tables
that  follow for the periods presented:
| | --------------------------------------------------------------------------------------------------------------------------------------------

|                                            | For the Periods
|------------------------------------------- | ---------------
|
|
|
|(Amounts in thousands)                     
|(Unaudited)                                
|
|Net Sales:                                  |                
|Residential Building Products               |                
|Air Conditioning and Heating Products       |                
|Windows, Doors and Siding Products          |                
|
|Consolidated net sales                      |                
|
|
|Operating Earnings (Loss) *:                |                
|Residential Building Products               |                
|Air Conditioning and Heating Products       |                
|Windows, Doors and Siding Products          |                
|
|Subtotal                                    |                
|Unallocated:                                |                
|Expenses and charges arising from the       |                
|Recapitalization                            |                
|Strategic sourcing expense                  |                
|Other, net                                  |                
|
|Consolidated operating earnings (loss)      |                
|Interest expense                            |                
|Investment income                           |                
|
|Earnings (loss) from continuing operations  |                
|before provision (benefit) for income taxes |                
|
|
|Depreciation and Amortization Expense:      |                
|Residential Building Products               |                
|Air Conditioning and Heating Products       |                
|Windows, Doors and Siding Products          |                
|Other                                       |                
|
|Consolidated depreciation and amortization  |                
|expense                                     |                
|
|
|Capital Expenditures:                       |                
|Residential Building Products               |                
|Air Conditioning and Heating Products       |                
|Windows, Doors and Siding Products          |                
|Other                                       |                
|
|Consolidated capital expenditures           |                
|

|* | During the period  from  January  10,  2003 to April 5, 2003,
              the  Company  reflected approximately  $5,400,000  of excess  purchase  price  allocated to
              inventory as a non-cash charge to cost of products  sold.  Approximately  $3,400,000 was allocated to the  Residential  Building  Products  Segment,
              approximately  $600,000  was  allocated  to the Air  Conditioning  and Heating  Products  Segment and
              approximately $1,400,000 was allocated to the Windows, Doors and Siding Products Segment.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(J) | The
Company  provides income taxes on an interim basis based upon the estimated  annual
effective  income  tax rate. The following  reconciles the federal  statutory income tax
rate to the estimated  effective tax  rate of approximately 39.2%, 27.1% and 38.6% for
the periods presented:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                              | For the Periods
|------------------------------------------------------------- | ---------------
|
|
|
|
|
|Income tax provision  (benefit) at the federal statutory rate |                
|Net Change from federal statutory rate:                       |                
|State income tax provision, net of federal income tax effect  |                
|Change in tax reserves, net                                   |                
|Tax effect resulting from foreign activities                  |                
|Tax effect of  the Recapitalization                           |                
|Other, net                                                    |                
|
|Income tax provision (benefit) at estimated effective rate    |                
|

|(K) | The
Company  accounts for stock options  granted to employees using the intrinsic value
method pursuant to  the  provisions  of APB Opinion No. 25, under which no  compensation
cost has been  recognized  since the  options were granted with  exercise  prices equal
to the fair market value of the common stock at the date  of grant.  Accordingly,  the
table below presents pro forma  information for the periods  presented if the  fair value
method of SFAS No. 123 had been  applied  for each of those  periods.  The Company  estimates
the  fair value of each option grant as of the date of the grant using the Black-Scholes
option-pricing  model  based upon the indicated assumptions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Upon
completion of the  Recapitalization  on January 9, 2003, all existing options became
fully vested and  all  options  for  shares  of  common  stock  and  special  common
stock of  Nortek  Holdings,  that were  rolled-over by the Management  Investors,  were
exchanged for stock options to purchase an equal number of  shares of Class A Common
Stock of Nortek  Holdings at the same price per share.  Accordingly,  the period  from
January 1, 2003 to January 9, 2003 in the table that follows  includes the pro forma
employee  stock  compensation  expense,  net of  tax,  associated  with  the  accelerated
vesting  of all of the  existing  unvested options in connection with the
Recapitalization.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
pro forma employee  stock  compensation  expense,  net of tax, for the period from
January 10, 2003 to  April 5, 2003 in the table that  follows  represents  the pro forma
impact of approximately 434,000 Class A stock options issued by Nortek  Holdings  during  the period in  accordance with the assumptions
indicated  therein. Approximately  828,000 of  Class B Common stock options issued  by  Nortek  Holdings  during  the  period  have not  been  included  in
the  calculation  as the vesting is  performance-based  and it is uncertain  when, if
ever,  these options will  vest.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                        | For the Periods
|------------------------------------------------------- | ---------------
|
|
|
|(Amounts in thousands except percentages)              
|(Unaudited)                                            
|
|Pro forma expense had SFAS No. 123 been applied:       
|
|Net earnings (loss) from continuing                     |                
|operations, as reported                                 |                
|Pro forma employee stock                                |                
|compensation, net of tax                                |                
|
|Pro forma net earnings (loss) from                      |                
|continuing operations                                   |                
|
|
|Net earnings (loss) , as reported                       |                
|Pro forma employee stock                                |                
|compensation, net of tax                                |                
|
|Pro forma net earnings (loss)                           |                
|
|Pro forma weighted average                              |                
|fair  value of options as of the grant date             |                
|
|
|Assumptions for options entered into during the period:
|
|Risk-free interest rate                                 | Between        
|                                                        |                
|Expected life                                           |                
|Expected volatility                                     |                
|Expected dividend yield                                 |                

|(L) | The
Company and its  subsidiaries  have  guaranteed  certain  obligations  of various  third
parties that  aggregate  approximately  $36,600,000  at April 5, 2003.  Approximately
$29,200,000  relates to Ply Gem's  guarantee  of rental  payments  through  June 30, 2016
under a facility  leased by SNE  Enterprises,  Inc.  ("SNE"),  which was sold
on September  21, 2001.  The buyer of SNE has provided  certain  indemnifications  and
other  rights  to Ply Gem for any  payments  that it  might  be  required  to make
pursuant  to this  guarantee.  Should the buyer of SNE cease making  payments  then Ply
Gem may be required to make  payments  on its  guarantee.  Approximately  $3,100,000
relates to Ply Gem's  guarantee of lease payments  through  approximately  March 18, 2008
for truck and  equipment  leases  entered  into by SNE.  Should the buyer of  SNE cease
making  payments on this lease,  Ply Gem may be  required  to make  payments on its
guarantee.  Approximately  $4,300,000  relates to  guarantees  of the  remaining
principal  and interest  balances of  mortgages  of  a  third-party  on  certain
buildings,  one  of  which  houses  the  Company's  corporate  headquarters.  These
guarantees  expire on December 31, 2020 and are payable in the event of  non-payment  of
the mortgage.  These guarantees are  collateralized  by the buildings to which the
mortgages relate and  any liability to the Company would first be reduced by the
Company's  pro-rata share of proceeds  received  on the sale of the buildings.  The
Company does not anticipate  incurring any loss under these  guarantees  and  accordingly
has not  recorded  any  liabilities  at  April  5,  2003 in the  accompanying  unaudited
condensed  consolidated  balance sheet in accordance with accounting  principles
generally accepted in the  United States.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has  indemnified  third  parties for  certain  matters in a number of
transactions  involving  dispositions  of  former  subsidiaries.  The  Company  has
recorded  liabilities  in  relation  to  these  indemnifications of approximately
$26,900,000 at April 5, 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company  sells a number of products and offers a number of  warranties  including  in
some  instances,  extended  warranties.  The  specific  terms and  conditions  of these
warranties  vary  depending  on the  product  sold and  country  in which the  product is
sold.  The  Company  estimates  the costs that may be  incurred  under its  warranties,
with the exception of extended  warranties,  and records a liability for  such costs at
the time of sale.  Proceeds  received from extended  warranties  are amortized over the
life  of the  warranty  and  reviewed to ensure  that the  liability  recorded  is equal
to or greater  than the  estimated  future  costs.  Factors  that affect the  Company's
warranty  liability  include the number of  units  sold,  historical  and  anticipated
rates of  warranty  claims,  cost per  claim  and new  product  introduction.  The
Company  periodically  assesses  the  adequacy  of its  recorded  warranty  claims and
adjusts the amounts as necessary.  Changes in the Company's  combined  short-term  and
long-term  warranty  liabilities during the periods presented are as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                      | Post-Recapitalization | Pre-Recapitalization
|----------------------------------------------------- | --------------------- | --------------------
|
|
|(Amounts in thousands)                               
|(Unaudited)                                          
|
|Balance, beginning of period                          |                       |                     
|Warranties provided during period                     |                       |                     
|Settlements made during period                        |                       |                     
|Changes in liability estimates, including expirations |                       |                     
|
|Balance, end of period                                |                       |                     
|

| | 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. Product  liability,  environmental  and  other
legal  proceedings  also include  matters with respect to  businesses  previously  owned,
including  litigation  concerning a commercial  airline fatal  accident.  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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
former  subsidiary  of the Company is a  defendant  in a number of lawsuits  alleging
damage  caused by  alleged  defects in certain  pressure  treated wood products.  A
subsidiary of the Company has indemnified  the buyer of the former  subsidiary for all
known  liabilities  and future claims relating to such matters  and  retained  the rights
to all  potential  reimbursements  related to  insurance  coverage.  Many of the
lawsuits have been resolved by dismissal or settlement  with amounts being paid out of
insurance  proceeds  or other third party  recoveries.  The Company and the former
subsidiary  continue to  vigorously  defend  the remaining  suits.  Certain  defense and
indemnity  costs are being paid out of insurance  proceeds and  proceeds  from a
settlement  with  suppliers  of material  used in the  production  of the  treated  wood
products.  The  Company  and the former  subsidiary  have  engaged in  coverage
litigation  with  certain  insurers and have settled  coverage  claims with several of
the  insurers.  The Company  believes that the  remaining  coverage  disputes will be
resolved on a  satisfactory  basis and  additional  coverage will be  available.  In
reaching  this  belief,  the Company  analyzed  insurance  coverage  and the status of
the  coverage  litigation,  considered  the  history  of  settlements  with  primary  and
excess  insurers  and  consulted with counsel.  The Company has recorded  liabilities of
approximately  $9,006,000 and $8,440,000  at April  5,  2003 and  December  31,  2002,
respectively,  for the  estimated  costs  to  resolve  these  outstanding  matters.  The
Company has also  recorded  receivables  at April 5, 2003 and December 31, 2002  of
approximately  $5,876,000 and $5,011,000,  respectively,  for the estimated recoveries
which are deemed  probable of collection related primarily to insurance litigation
matters discussed above.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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  or
covered by  insurance,  will not have a material  adverse  effect on the  consolidated
financial  position or results of operations  of the Company.  It is  possible,  however,
that  future  results  of  operations  for any  particular  future  period  could  be
materially  affected  by changes in our  assumptions  or  strategies  related  to these
contingencies  or  changes out of the Company's control.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(M) | Effective
January 1, 2003, the Company adopted SFAS No. 146 which
addresses  the  accounting  and  reporting  for costs  associated  with exit or disposal
activities, nullifies EITF  94-3 and  substantially  nullifies  EITF 88-10.  SFAS No. 146 requires that a liability for
a cost associated  with an exit or disposal  activity  be  recognized  when the
liability is incurred.  Under EITF 94-3, a liability for an exit cost as defined  in EITF
94-3 was  recognized  at the date of an entity's  commitment  to an exit plan.  The
provisions of  SFAS No. 146 are effective for exit or disposal  activities  that are
initiated  after  December 31, 2002.  The adoption of SFAS No. 146 did not have a
material effect on the Company's Unaudited  Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company records  restructuring  costs primarily in connection with operations acquired or
facility closings which management plans to eliminate in order to improve future
operating  results of the Company.  During  the fourth quarter of 2002, the Company
provided  approximately  $1,000,000  for  liabilities  related to  restructuring  and
closing  costs of  certain  subsidiaries  within  its  Residential  Building  Products
Segment.  During the period from January 10, 2003 to April 5, 2003, the Company
recognized  restructuring  charges  primarily  associated with plant closings in the Air
Conditioning  and Heating Products  ("HVAC")  and Windows, Doors and Siding
Products Segments.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Within
the Windows,  Doors and Siding Products  Segment,  the Company expects to incur
additional  future  restructuring costs of  approximately  $500,000 related to  restructuring  plans
which began to be implemented  prior to  April 5, 2003.  Total future  restructuring
costs in the Windows,  Doors and Siding Products  Segment are  expected to approximate
$1,000,000 related to restructuring which began to be implemented prior to April 5, 2003.
  Within the HVAC Segment,  the Company expects to incur no additional  restructuring costs
and total restructuring costs were approximately  $183,000 related to restructuring plans which
began to be implemented prior to April  5, 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following  table  sets  forth  restructuring  activity  in  the  accompanying  unaudited
condensed  consolidated  statement of operations  for the periods  presented.  These
costs are included  primarily in  selling,  general and administrative  expenses,  net in
the accompanying  unaudited condensed consolidated  statement of operations of the
Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | Employee |  | Total
|------------------------------ | -------- |  | -----
|
|
|(Amounts in thousands)        
|(Unaudited)                   
|
|Balance at December 31, 2001   |          |  | $    
|Payments and asset write downs |          |  |      
|
|Balance at March 30, 2002      |          |  | $    
|
|
|Balance at December 31, 2002   |          |  | $    
|Other adjustments              |          |  |      
|
|Balance at January 9, 2003     |          |  | $    
|Provision                      |          |  |      
|Payments and asset write downs |          |  |      
|
|Balance at April 5, 2003       |          |  | $    
|

| | Employee
separation  expenses are comprised of severance,  vacation, outplacement and retention bonus  payments.
Other  restructuring  costs include expenses  associated with terminating other
contractual  arrangements, costs to prepare facilities for closure and write-offs related to equipment
 sales and disposals attributable to a restructuring which occurred prior to December 31, 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NORTEK, INC. AND SUBSIDIARIES                               
|------------------------------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS                        
|OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE FIRST QUARTER ENDED APRIL 5, 2003                   
|AND THE FIRST QUARTER ENDED MARCH 30, 2002                  

|The
Company is a diversified  manufacturer of residential and commercial building products,
operating within three  principal segments:  the Residential  Building Products Segment,
the Air Conditioning and Heating Products Segment  and the Windows,  Doors and Siding
Products Segment.  In the results of operations  presented below, Other includes
corporate  related  items,  intersegment  eliminations  and certain  income and expense
not allocated to reportable  segments.  Through its principal  segments,  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  ("DIY") 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
Residential  Building  Products  Segment  manufactures  and  distributes  built-in
products  primarily for the  residential new construction and DIY and professional
remodeling and renovation  markets.  The principal  products  sold by the segment
include kitchen range hoods,  built-in  exhaust fans (such as bath fans and fan,
heater and  light  combination  units) and indoor air quality  products.  The Air
Conditioning  and Heating  Products  Segment  manufactures and sells heating,
ventilating and air conditioning  systems ("HVAC") for custom-designed
commercial  applications and for  residential,  light commercial and  manufactured
structures.  The Windows,  Doors and Siding  Products Segment,  principally manufactures
and distributes:  (i) vinyl siding,  skirting,  soffit and accessories,  (ii) vinyl and
aluminum clad windows,  (iii) vinyl patio and steel entry doors and  sunrooms,  (iv)
vinyl  fencing,  railing and decking,  (v) composite  decking and railing and (vi)
aluminum trim coil,  soffit and  accessories  for  use in the residential construction
and DIY and professional renovation markets.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
November 20, 2002,  the Company  reorganized  into a holding  company  structure and each
outstanding  share of  capital  stock of the Company was  converted  into an identical
share of capital  stock of Nortek  Holdings,  Inc.  ("Nortek  Holdings"),  a
Delaware  corporation  formed in 2002, with Nortek Holdings  becoming the successor
public  company  and  the  Company  becoming  a  wholly-owned  subsidiary  of  Nortek
Holdings  (the  "Nortek  Holdings  Reorganization").  On January 9, 2003,
Nortek  Holdings,  the parent  company of Nortek,  was  acquired by certain  affiliates
and designees of Kelso & Company L.P.  ("Kelso") and certain  members of
the Company's  management  (the  "Management  Investors") in accordance with
the Agreement and Plan of Recapitalization  by and among Nortek,  Inc.,  Nortek
Holdings,  Inc.  and K  Holdings,  Inc.  ("K  Holdings")  dated  as of June
20,  2002,  as  amended,  (the  "Recapitalization  Agreement")  in a
transaction  valued  at  approximately  $1.6  billion,  including  all of the  Company's
indebtedness (the  "Recapitalization").  (See Liquidity and Capital Resources
and Note B of the Notes to the unaudited condensed consolidated financial statements
(the Unaudited Financial Statements) included elsewhere herein).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Beginning
on January 9, 2003, the Company and Nortek Holdings accounted for the  Recapitalization
as a purchase in  accordance  with the  provisions  of Statement  of  Financial
Accounting  Standards  ("SFAS")  No. 141,  "Business  Combinations"
("SFAS No.  141"),  which  results in a new  valuation  for the  assets  and
liabilities  of Nortek  Holdings  and its  subsidiaries  based upon fair values as of the
date of the  Recapitalization.  As allowed  under  SEC Staff Accounting  Bulletin No. 54,
"Push Down Basis of Accounting  Required in Certain Limited  Circumstances",
the Company has  reflected  all  applicable  purchase  accounting  adjustments  recorded
by Nortek  Holdings in the  Company's  Consolidated  Financial  Statements  for  all  SEC
filings  covering  periods  subsequent  to  the  Recapitalization  ("Push Down
Accounting").  Push Down  Accounting  requires  the Company to establish a new basis
for its assets  and  liabilities  based on the  amount  paid for its  ownership  at
January 9, 2003.  Accordingly,  Nortek Holdings'  ownership basis (including the fair
value of options rolled over by the Management  Investors) is  reflected in Nortek's
Consolidated  Financial  Statements  beginning upon completion of the  Recapitalization.
In  order to apply Push Down Accounting,  Nortek Holdings'  purchase price of
approximately  $468,737,000 was allocated  to the assets and liabilities based on their
relative fair values and  approximately  $440,837,000 was reflected in  the Company's
Stockholder's  Investment as the value of Nortek Holdings'  ownership in the Company upon
completion  of the Recapitalization.  Immediately prior to the  Recapitalization,  the
Company's  Stockholder's  Investment was  approximately  $156,702,000.  Purchase price
allocations are subject to refinement until all pertinent  information  is obtained.  As
of January 10, 2003, the Company  preliminarily  allocated the excess  purchase price
over the net  assets  acquired in the  Recapitalization  based on its  estimates of the
fair value of assets and  liabilities  as  follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | Excess purchase price of the
|--------------------------------- | ----------------------------
|
|
|Inventories                       |                             
|Property, plant and equipment     |                             
|Intangible assets                 |                             
|Goodwill                          |                             
|Indebtedness                      |                             
|Prepaid and deferred income taxes |                             
|Pension                           |                             
|
|Total                             |                             
|

|During
the period from January 10, 2003 to April 5, 2003,  the Company  reflected approximately  $5,400,000 of excess purchase price
allocated to inventory as a non-cash charge to cost of  goods sold,  approximately  $2,900,000 of  lower depreciation  expense in
cost of sales,  $1,500,000 of additional  amortization  expense of intangible assets  and
$1,400,000 of lower interest  expense from the  amortization  of premium  allocated to
indebtedness as compared  to the Company's historical basis of accounting prior to the
Recapitalization.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company has estimated the fair value of its assets and liabilities,  including
intangible assets and property,  plant and equipment,  as of the  Recapitalization,
utilizing  information available at the time that the Company's  Unaudited  Financial
Statements  were prepared and these  estimates are subject to refinement  until all
pertinent  information  has been obtained.  The Company is in the process of obtaining
outside third party  appraisals of its  intangible assets and property, plant and
equipment.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
impact of these fair value  estimates  has been  reflected in the  Company's  statement
of  operations  for the  period ended April 5, 2003.  Should the  intangible  asset or
property,  plant and equipment  appraisals  result in  differences  in the average
amortizable  or  depreciable  lives of these assets or in the fair value amount of the
estimates, the following estimated changes in annual operating earnings would occur:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | Increase (decrease) in operating earnings
|------------------------------------ | -----------------------------------------
|
|
|
|If lives are one year greater        |                                          
|If lives are one year less           |                                          
|If fair value is $10,000,000 greater |                                          
|If fair value is $10,000,000 less    |                                          

|The
period  from  January  1, 2003 to  January  9, 2003 and the  period  from  January  10,
2003 to April 5, 2003  combined,  contain 95 days while the first quarter of 2002
contained 90 days.  Accordingly,  operating  results for  2003  include  approximately
$1,000,000  of  additional  interest  expense as  compared  to 2002 since the Company
accrues interest expense based on the number of days contained in each reporting period.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
January 17, 2003,  the Company  acquired Elan Home Systems  L.L.C.  ("Elan").
The  acquisition of Elan has been  accounted  for under the  purchase  method of
accounting.  Accordingly,  the  results of Elan are  included in the  Company's
consolidated results since the date of its acquisition. (See Note E of the Notes to the
Unaudited Financial Statements included elsewhere herein.)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
April 2, 2002, the Company's  wholly-owned  subsidiary,  Ply Gem  Industries,  Inc.
("Ply Gem") sold the capital  stock of its subsidiary  Hoover Treated Wood
Products,  Inc.  ("Hoover") and on November 22, 2002, Ply Gem sold the  capital
stock of its subsidiary  Richwood Building  Products,  Inc.  ("Richwood").
The results of Richwood, which were previously part of the Windows, Doors and Siding Products
Segment and Hoover, which were previously part of the Other Segment, have been excluded from
earnings from continuing operations and classified separately as discontinued operations for
all periods presented.  Accordingly the segment information that follows excludes
Richwood and Hoover for all periods.(See Note H of the Notes to the  Unaudited Financial Statements included elsewhere
herein).
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company's  discussion  and analysis of its financial  condition  and results of
operations  are based upon the  Company's Unaudited  Financial  Statements which  have been prepared
in accordance with accounting  principles  generally  accepted in the United States.
Certain of  the Company's  accounting  policies  require the application of judgment in
selecting the  appropriate  assumptions  for  calculating  financial  estimates.  By
their  nature,  these  judgments  are subject to an inherent  degree of  uncertainty.
The Company  periodically  evaluates the judgments  and  estimates  used for its critical
accounting  policies to ensure that such  judgments  and  estimates  are  reasonable  for
its  interim and  year-end  reporting  requirements.  These judgments and estimates are
based on the Company's historical  experience,  current trends and  information
available from other sources,  as appropriate.  If different  conditions result from
those assumptions  used in the Company's  judgments,  the results  could be materially
different  from the Company's  estimates.  The  Company's critical accounting policies
include:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- Revenue Recognition and Related Expenses
- Inventory Valuation
- Prepaid Income Tax Assets and Deferred Tax Liabilities
- Goodwill
- Pensions and Post Retirement Health Benefits
- Insurance Liabilities
- Contingencies

|Further
detail regarding the Company's  critical  accounting  policies can be found in the
consolidated  financial  statements and the notes  included in the Company's  latest
annual report on Form 10-K as filed with the Securities  and Exchange Commission
("SEC").
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Results of  Operations and Liquidity and Capital  Resources sections
which follow contain  various tables  that are intended to assist the reader in
reconciling current results with the prior period.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### Results of Operations

|The
combined  first  quarter 2003 pre- and  post-Recapitalization  periods have been
compared to the first quarter  2002 for purposes of  management's  discussion and
analysis of the results of operations.  Any  references,  below,  to the first quarter of
2003 shall refer to the combined  periods.  Material  fluctuations in operations
resulting  from the effect of purchase accounting have been highlighted.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | Pre-Recapitalization | Post-Recapitalization | Combined Three
|-------------------------------------- | -------------------- | --------------------- | --------------
|
|
|(Dollar amounts in thousands)         
|
|Net sales:                             |                      |                       |               
|Residential Building Products          |                      |                       | $             
|Air Conditioning and Heating Products  |                      |                       |               
|Windows, Doors and Siding Products     |                      |                       |               
|
|Consolidated net sales                 |                      |                       | $             
|
|
|Operating earnings (loss) *:           |                      |                      
|Residential Building Products          |                      |                       | $             
|Air Conditioning and Heating Products  |                      |                       |               
|Windows, Doors and Siding Products     |                      |                       |               
|
|Subtotal                               |                      |                       | $             
|Unallocated:                           |                      |                      
|Expenses and charges arising from the  |                      |                      
|Recapitalization                       |                      |                       |               
|Strategic sourcing expense             |                      |                       |               
|Other, net                             |                      |                       |               
|
|Consolidated operating earnings (loss) |                      |                       | $             
|
|
|Depreciation and amortization expense: |                      |                      
|Residential Building Products          |                      |                       |               
|Air Conditioning and Heating Products  |                      |                       |               
|Windows, Doors and Siding Products     |                      |                       |               
|Other                                  |                      |                       |               
|
|                                       |                      |                       | $             
|
|
|Operating earnings (loss) margin:      |                      |                      
|Residential Building Products          |                      |                       |               
|Air Conditioning and Heating Products  |                      |                       |               
|Windows, Doors and Siding Products     |                      |                       |               
|Consolidated                           |                      |                       |               
|
|Depreciation and amortization          |                      |                      
|expense as a % of net sales:           |                      |                      
|Residential Building Products          |                      |                       |               
|Air Conditioning and Heating Products  |                      |                       |               
|Windows, Doors and Siding Products     |                      |                       |               
|Consolidated                           |                      |                       |               

|* | During the period from January 10, 2003
   to April 5, 2003,  the Company  reflected approximately  $5,400,000 of excess  purchase  price  allocated to  inventory as a non-cash
   charge to cost of products  sold.  Approximately
   $3,400,000 was allocated to the Residential Building Products Segment,  approximately  $600,000 was allocated to
   the Air Conditioning and Heating  Products  Segment and  approximately  $1,400,000 was allocated to the Windows,
   Doors and Siding Products Segment.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
tables  that follow  present the  unaudited  net sales from  continuing  operations,
operating  earnings  from  continuing  operations and  depreciation  and  amortization
expense from  continuing  operations for the Company's  principal  segments  for the
combined  period ended April 5, 2003 and the period ended March 30, 2002,
the  dollar  amount and  percentage  change of such  results as  compared  to the prior
comparable  period and the  percentage to net sales of operating  earnings and
depreciation  and  amortization  expense for the combined period ended April 5,
2003 and the period ended March 30, 2002:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       |  | Change in Earnings in the
|-------------------------------------- |  | -------------------------
|
|
|
|(Dollar amounts in thousands)         
|
|Net sales:                             |  |                          
|Residential Building Products          |  |                          
|Air Conditioning and Heating Products  |  |                          
|Windows, Doors and Siding Products     |  |                          
|
|Consolidated net sales                 |  |                          
|
|
|Operating earnings (loss):             |  |                          
|Residential Building Products          |  |                          
|Air Conditioning and Heating Products  |  |                          
|Windows, Doors and Siding Products     |  |                          
|
|Subtotal                               |  |                          
|Unallocated:                           |  |                          
|Expenses and charges arising from the  |  |                          
|Recapitalization                       |  |                          
|Strategic sourcing expense             |  |                          
|Other, net                             |  |                          
|
|Consolidated operating earnings (loss) |  |                          
|
|
|Depreciation and amortization expense: |  |                          
|Residential Building Products          |  |                          
|Air Conditioning and Heating Products  |  |                          
|Windows, Doors and Siding Products     |  |                          
|Other                                  |  |                          
|
|                                       |  |                          
|
|
|Operating earnings (loss) margin:      |  |                          
|Residential Building Products          |  |                          
|Air Conditioning and Heating Products  |  |                          
|Windows, Doors and Siding Products     |  |                          
|Consolidated                           |  |                          
|
|Depreciation and amortization          |  |                          
|expense as a % of net sales:           |  |                          
|Residential Building Products          |  |                          
|Air Conditioning and Heating Products  |  |                          
|Windows, Doors and Siding Products     |  |                          
|Consolidated                           |  |                          

|(1) | The three  month  period  ended  April 5, 2003
       represents  the  combined  pre- and  post-Recapitalization
       periods  of  January  1,  2003  through  January  9,  2003 and  January  10,  2003  through  April 5,  2003,
       respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* | not meaningful
|- | --------------

|The
combined  first  quarter 2003 pre- and  post-Recapitalization  periods have been
compared to the first quarter  2002 for purposes of  management's  discussion and
analysis of the results of operations.  Any  references,  below,  to the first quarter of
2003 shall refer to the combined  periods.  Material  fluctuations in operations
resulting  from the effect of purchase accounting have been highlighted.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  | Pre-Recapitalization | Post-Recapitalization | Combined Three
|------------------------------------------------- | -------------------- | --------------------- | --------------
|
|
|(Dollar amounts in millions)                     
|
|Net sales                                         |                      |                       | $             
|Cost of products sold                             |                      |                       |               
|Selling, general and administrative expenses, net |                      |                       |               
|Amortization of intangible assets                 |                      |                       |               
|Expenses and charges arising from the             |                      |                      
|Recapitalization                                  |                      |                       |               
|
|Operating earnings (loss)                         |                      |                       |               
|Interest expense                                  |                      |                       |               
|Investment income                                 |                      |                       |               
|
|Earnings (loss) before provision (benefit) for    |                      |                      
|income taxes                                      |                      |                       |               
|Provision (benefit) for income taxes              |                      |                       |               
|
|Net earnings (loss)                               |                      |                       | $             
|

|                                                  | Pre-Recapitalization | Post-Recapitalization | Combined Three
|------------------------------------------------- | -------------------- | --------------------- | --------------
|
|
|
|Net sales                                         |                      |                       |               
|Cost of products sold                             |                      |                       |               
|Selling, general and administrative expenses, net |                      |                       |               
|Amortization of intangible assets                 |                      |                       |               
|Expenses and charges arising from the             |                      |                      
|Recapitalization                                  |                      |                       |               
|
|Operating earnings (loss)                         |                      |                       |               
|Interest expense                                  |                      |                       |               
|Investment income                                 |                      |                       |               
|
|Earnings (loss) before provision (benefit) for    |                      |                      
|income taxes                                      |                      |                       |               
|Provision (benefit) for income taxes              |                      |                       |               
|
|Earnings (loss)                                   |                      |                       |               
|

|The
tables  that  follow set forth,  for the  periods  presented,  (a)  certain  unaudited
consolidated  operating  results,  (b) the  change  in the  amount  and the  percentage
change of such  results  as  compared  to the prior  comparable  period,  (c) the
percentage  which  such  results  bear to net  sales,  and  (d)  the  change  of such
percentages  as compared to the prior  comparable  period.  The results of  operations
for the first quarter ended  April 5, 2003 are not  necessarily  indicative  of the
results of  operations  to be expected for any other interim  period or the full year.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  |  | Change in Earnings in the
|------------------------------------------------- |  | -------------------------
|
|
|
|(Dollar amounts in millions)                     
|
|Net sales                                         |  |                          
|Cost of products sold                             |  |                          
|Selling, general and administrative expenses, net |  |                          
|Amortization of intangible assets                 |  |                          
|Expenses and charges arising from the             |  |                          
|Recapitalization                                  |  |                          
|
|Operating earnings (loss)                         |  |                          
|Interest expense                                  |  |                          
|Investment income                                 |  |                          
|
|Earnings (loss) from continuing operations        |  |                          
|before provision (benefit) for income taxes       |  |                          
|Provision (benefit) for income taxes              |  |                          
|
|Earnings (loss) from continuing operations        |  |                          
|Earnings from discontinued operations             |  |                          
|
|Net earnings (loss)                               |  |                          
|

|(1) | The three month period ended April 5, 2003
    represents the combined pre- and post-Recapitalization periods of
    January 1, 2003 through January 9, 2003 and January 10, 2003 through April 5, 2003, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* | not meaningful
|- | --------------

|                                                 | Percentage of Net Sales | Change in Percentage
|------------------------------------------------ | ----------------------- | --------------------
|
|
|
|
|Net sales                                        |                         |                     
|Cost of products sold                            |                         |                     
|Selling, general and administrative expenses,net |                         |                     
|Amortization of intangible assets                |                         |                     
|Expense and charges arising from the             |                         |                     
|Recapitalization                                 |                         |                     
|
|Operating earnings (loss)                        |                         |                     
|Interest expense                                 |                         |                     
|Investment income                                |                         |                     
|
|Earnings (loss) from continuing operations       |                         |                     
|before provision (benefit) for income taxes      |                         |                     
|Provision (benefit) for income taxes             |                         |                     
|
|Earnings (loss) from continuing operations       |                         |                     
|Earnings from discontinued operations            |                         |                     
|
|Net earnings (loss)                              |                         |                     
|

|Combined
consolidated  net sales  increased  approximately  $41,800,000  or 9.8% for the first
quarter of 2003 as  compared to the first  quarter of 2002.  The effect of changes in
foreign  currency  exchange  rates  accounted for  approximately  $8,300,000  of the
increase in net sales in the first quarter of 2003.  Net sales  increased for the  first
quarter of 2003 as compared to the first  quarter of 2002 as a result of  acquisitions,
price  increases and  higher net sales volume.  The acquisition of Elan in January of
2003  contributed  approximately  $4,900,000 of the  total  increase in net sales for the
first quarter of 2003 as compared to the first  quarter of 2002.  Excluding the  effect of
the  acquisition  and  changes in foreign  currency  exchange  rates,  consolidated  net
sales  increased  approximately  $28,600,000  or 6.7% from the first  quarter  of 2003 as
compared  to the first  quarter  of 2002 as  follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                        | Net sales
|------------------------------------------------------- | ---------
|
|
|Net sales for the period Jan. 1, 2003 to Jan. 9, 2003   |          
|Net sales for the period Jan. 10, 2003 to April 5, 2003 |          
|
|Total combined net sales                                |          
|Net sales for the period Jan. 1, 2002 to Mar. 30, 2002  |          
|
|Net increase                                            |          
|Effect of the acquisition of Elan                       |          
|Effect of changes in foreign currency exchange rates    |          
|
|Increase                                                |          
|

|This
increase is summarized by segment as follows:
|--------------------------------------------------

|                                      | Increase in net sales
|------------------------------------- | ---------------------
|
|
|Residential Building Products         |                      
|Air Conditioning and Heating Products |                      
|Windows, Doors and Siding Products    |                      
|
|                                      |                      
|

|Overall,
increases  in sales  levels in the first  quarter of 2003  reflect the ongoing  stability
of the housing  construction  and remodeling  markets and our expanded  branding
effort in our line of air  conditioning  and  heating  products,  partially  offset by
adverse  weather  conditions  in the  Northeast  and Midwest,  the general  slowdown in
commercial  construction  activity and the continued  softness in the manufactured
housing market. The  first  quarter  ended April 5, 2003  includes  95 days while the
first  quarter  ended  March 30, 2002  includes 90  days.  For the first  quarter  ended
April 5, 2003 and the first  quarter  ended March 30, 2002,  the Company's net  sales to
customers serving the manufactured housing markets,  principally consisting of air
conditioners,  furnaces  and vinyl siding and skirting products,  constituted
approximately 7.5% and 9.2%,  respectively,  of the Company's  consolidated  net sales.
The increase in net sales volume in the  Residential  Building  Products  Segment was, in
part, the result of new products and the ongoing stability in the residential  housing
construction and remodeling  markets.  Increased  sales  volume of  bathroom  exhaust
fans and  garage  door  openers  was also a factor in the  increase in this segment.  The
increase in net sales in the Air  Conditioning  and Heating  Products  Segment,  was
principally  due to continued  growth  resulting from this  segment's  brand-name
strategy  resulting in increased  sales volume of HVAC  products to the  residential
site built market.  In the first  quarter of 2003,  the segment  benefited  from the
recent  introduction  of our  Westinghouse®  and Maytag® brands.  These  increases were
partially  offset by the general  slowdown in commercial  construction  activity,  which
reduced the level of shipments of the  Company's  commercial  HVAC  products  and  lower
sales to the  manufactured  housing  market in this  segment  as  continued  softness is
being  experienced  by this  industry.  The trend of lower levels of orders and shipments
of  commercial  HVAC  products is  expected to continue  throughout  2003.  The  increase
in net sales in the  Windows,  Doors and Siding Products  Segment was principally due to
continued  stability in new residential  construction and  remodeling  activity,
increased sales prices and volume of vinyl siding products,  and increased volume of
windows  by the Segment's  Canadian  operations.  These  increases were  partially
offset by lower sales volume of domestic  window  products,  in part,  due to adverse
weather  conditions  in the first quarter of 2003 in the Northeast and  Midwest.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Cost
of products sold of  $346,100,000,  as a percentage of net sales,  increased from
approximately  73.2% in the  first  quarter of 2002 to  approximately  73.8% in the first
quarter of 2003.  Cost of products sold for the first  quarter of 2003  includes
approximately  $2,600,000  of cost of products  sold from the  acquisition  of Elan,  an
increase of approximately  $6,800,000 related to the effect of changes in foreign currency exchange rates,  a
non-cash charge of approximately  $5,400,000,  related to the  amortization  of excess
purchase  price  allocated  to  inventory  and  approximately  $2,900,000 of lower
depreciation  expense as a result of the fair value  adjustment to property, plant and equipment.
Excluding  the  effect of the  acquisition  (which  has a lower cost of sales as a
percentage  of net sales than the  overall  group of businesses owned prior to the
acquisition),  changes in foreign currency exchange rates, the write-off of  excess
purchase  price  allocated  to  inventory  and lower  depreciation  expense  as a result
of the fair  value  adjustment to property, plant and equipment,  cost of products  sold was
approximately  $334,200,000  or  approximately  73.3% as a  percentage  of net sales
during the first  quarter of 2003 as  compared  to 73.2% in the first  quarter of 2002 as
follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                 | Cost of products sold
|-------------------------------------------------------------------------------- | ---------------------
|
|
|Cost of products sold for the period Jan. 1, 2003 to Jan. 9, 2003                |                      
|Cost of products sold for the period Jan. 10, 2003 to April 5, 2003              |                      
|
|Total combined cost of products sold                                             |                      
|Effect of the acquisition of Elan                                                |                      
|Effect of changes in foreign currency exchange rates                             |                      
|Effect of the write-off of excess purchase price for inventory                   |                      
|Effect of the  reduction  in  depreciation  expense on  property  and  equipment |                      
|resulting from fair value adjustments                                            |                      
|
|                                                                                 |                      
|

|Material
costs  represented  approximately  44.4% and 44.0% of net sales for the first quarter of
2003 compared to  the first quarter of 2002,  respectively.  Material costs as a percent
of net sales  increased in the first quarter  of 2003  compared to the first  quarter of
2002  primarily  due to the  increase in the cost of PVC resin and steel  beginning in
the second half of 2002.  This increase was partially  offset by decreases in product
costs  including  lower costs  achieved from the  Company's  strategic  sourcing
initiative.  The increase in the  percentage in the  first quarter of 2003 as compared to
the first quarter of 2002,  included the effect of higher raw material  costs,  primarily
PVC resin, in the Windows,  Doors and Siding  Products  Segment for the first quarter of
2003 as compared  to the first  quarter  of 2002.  PVC resin  costs have  steadily
increased  since the second  half of 2002 and the  Company  expects  this trend to
continue  through  2003. A number of  manufacturers  of other  products  (including
building  products  that the Company  does not  manufacture  or sell)  compete  with the
Company for the  available  supply of PVC resin. The manufacturing  process for PVC resin
suppliers,  utilizes ethylene,  which is refined from  either  oil or  natural  gas.  As
a result of these  and  other  factors,  the  price of PVC  resin is  subject  to
volatility.  In the first  quarter of 2003,  both the price of oil and  natural gas were
near all time highs due to  a number of factors,  including  shortness  of supply,
strong  demand and the  conflict in Iraq.  The Company also  realized  slightly  higher
prices on steel  products for the first quarter of 2003 as compared to the first quarter
of 2002. These increases were partially offset by reductions  realized in the cost of
certain  purchased  materials  and component parts, in part, due to strategic sourcing initiatives
and manufacturing  cost reduction  measures  implemented in  2002.  In  addition,
increased  sales  volume of HVAC  products to  residential  site built  customers  in the
Air  Conditioning and Heating Products  Segment,  without a proportionate  increase in
cost was also a factor.  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, material costs and changes in productivity levels.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Selling,
general and administrative  expense ("SG&A") was $83,700,000 in the first quarter of
2003 and $75,160,000  in the first quarter of 2002.  SG&A as a percentage of net sales increased  from  approximately  17.6% in the  first
quarter  of 2002 to  approximately  17.9% in the first  quarter  of 2003.  SG&A  expense in the first  quarter of 2003 includes
approximately  $1,500,000 of  direct expenses and third party fees associated with the
Company's  strategic  sourcing  initiative,  approximately  $1,600,000  of  SG&A  expense  from the  acquisition  of Elan and an  increase of
approximately  $1,300,000  related to the effect of changes in foreign  currency exchange rates.  The direct
expenses  and third  party fees  associated  with the  Company's  strategic  sourcing
initiative  are set forth  separately  in the  segment  data.  Excluding the effect of
(a) expenses related to the Company's  strategic  sourcing  initiative in the first
quarter  of 2003, (b) the acquisition of Elan (which has a higher level of SG&A as  a percentage of net sales than the overall group
of businesses  owned prior to the  acquisition) and (c) the effect  of changes in foreign
currency  exchange rates in the first quarter of 2003,  SG&A  was  approximately  $79,300,000  or  approximately  17.4% as a
percentage  of net sales  during the first  quarter of 2003 as compared to  17.6% in the
first quarter of 2002 as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Selling, general and
|---------------------------------------------------- | --------------------
|
|
|
|
|SG&A for the period Jan. 1, 2003 to Jan. 9, 2003     |                     
|SG&A for the period Jan. 10, 2003 to April 5, 2003   |                     
|
|Total combined SG&A                                  |                     
|Effect of the acquisition of Elan                    |                     
|Strategic sourcing initiative fees and expenses      |                     
|Effect of changes in foreign currency exchange rates |                     
|
|                                                     |                     
|

|The
decrease in the percentage is due, in part, to lower  compensation  and benefit  expenses
of certain members of  management subsequent to the Recapitalization.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Amortization
of intangible  assets, as a percentage of net sales,  increased from  approximately  0.4%
in the first  quarter  of 2002 to  approximately  0.6% in the first  quarter  of 2003
principally  as a result of  approximately  $1,500,000 of increased  amortization  in
relation to the increase from the estimated amount of fair value  adjustment  to  intangible
assets arising from the Recapitalization.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Expenses
and charges  arising  from the  Recapitalization,  as a  percentage  of net sales were
18.7% in the first  quarter of 2003.  See  Liquidity and Capital  Resources  and Notes B, F
and I of the Notes to the Unaudited Financial Statements
included elsewhere herein, for further discussion of these expenses and charges.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Consolidated
operating earnings decreased by approximately  $89,100,000 from earnings of approximately
$37,700,000  in the first  quarter of 2002 to a loss of  approximately  $51,400,000  in
the first quarter of 2003 as a result of  the factors discussed above.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Consolidated
operating earnings,  in the first quarter of 2003, have been reduced by depreciation and
amortization  expense  (other than  amortization  of deferred  debt  expense and debt
premium  and  discount)  of  approximately  $9,929,000  and  $11,094,000  for the  first
quarter  of 2003 and 2002,  respectively. Consolidated operating  earnings for the first quarter of 2003 includes
  approximately  $1,500,000  of
additional  amortization  expense of intangible  assets,  approximately  $5,400,000 of
write-off of  excess purchase price allocated to inventory and $2,900,000 of lower
depreciation  expense of property, plant and equipment as a result of the fair value adjustments arising from the Recapitalization.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Excluding
the effect of (a)  approximately  $87,700,000 of fees and expenses  associated with the
Recapitalization  of the Company in the first quarter of 2003,  (b)  approximately
$1,500,000 of direct expense and third party fees  associated  with  the  Company's
strategic  sourcing  initiative  incurred  in the  first  quarter  of  2003,  (c)
approximately  $700,000 of operating  earnings  contributed by the  acquisition of Elan,
(d) the non-cash charge of  approximately  $5,400,000 related to the write-off of excess
purchase price allocated to inventory,  (e) $2,900,000  of lower  depreciation  expense
as a result  of the fair  value  adjustment  to  property, plant and equipment, (f)  approximately
$1,500,000 of increased  amortization  in relation to the increase  from the estimated amount of
fair value adjustment to intangible  assets and (g)  approximately  $300,000 of
increased  operating  earnings from the effect of changes in  foreign  currency  exchange
rates  in the  first  quarter  of 2003,  operating  earnings  increased  approximately
$3,100,000  from  approximately  $37,700,000  in the first quarter of 2002 to
$40,800,000  in the first quarter of  2003 as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                 | Operating earnings
|---------------------------------------------------------------- | ------------------
|
|
|Operating earnings for the period Jan. 1, 2003 to Jan. 9, 2003   |                   
|Operating earnings for the period Jan. 10, 2003 to April 5, 2003 |                   
|
|Total combined operating earnings                                |                   
|Fees and expenses arising from the Recapitalization              |                   
|Strategic sourcing initiative fees and expenses                  |                   
|Effect of the acquisition of Elan                                |                   
|Effect of the write-off of excess purchase price for inventory   |                   
|Effect of the reduction in depreciation expense                 
|on property and equipment resulting from fair value adjustments  |                   
|Amortization expense on fair value of intangible assets          |                   
|Effect of changes in foreign currency exchange rates             |                   
|
|                                                                 |                   
|Operating earnings for the period Jan. 1, 2002 to March 30, 2002 |                   
|
|Increase                                                         |                   
|

|This
increase is summarized by segment as follows:
|--------------------------------------------------

|                                      | Increase (decrease) in
|------------------------------------- | ----------------------
|
|
|
|Residential Building Products         |                       
|Air Conditioning and Heating Products |                       
|Windows, Doors and Siding Products    |                       
|
|Subtotal                              |                       
|Other                                 |                       
|
|                                      |                       
|

|The
increase in operating  earnings in the  Residential  Building  Products  Segment was
primarily as a result of  increased sales volume,  principally  bathroom  exhaust fans,
due to continued  stability of new home  construction  and remodeling  markets and
increased sales of garage door openers.  The increase in operating  earnings in the Air
Conditioning  and Heating  Products  Segment in 2003 was principally due to increased
sales volume of HVAC products  to customers  serving the  residential  site built market
without a  proportionate  increase in costs and expenses,  partially  offset by a
decrease in operating  earnings of  certain product lines due to the general  slowdown in
the  commercial  construction  and  manufactured  housing  markets.  The decrease in
operating  earnings in the Windows,  Doors and Siding  Products  Segment in 2003 was
primarily as a result of an increase in raw materials,  primarily  PVC resin,  partially
offset by higher sales prices and volume of vinyl siding  products,  as compared to 2002.
The  operating results of this Segment for the first quarter of 2003 also included
approximately  $500,000 of severance  and other costs associated with the closure of a
manufacturing  facility and approximately  $1,300,000 of costs and  expenses of expanded
distribution including adding new customers.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Operating
earnings of foreign  operations,  consisting  primarily of the results of  operations  of
the  Company's  Canadian and European  subsidiaries,  were  approximately  5.0% and 8.6%
of operating  earnings  (before  corporate  overhead)  in the first  quarter of 2003 and
2002,  respectively.  Sales and earnings  derived  from  international  markets are
subject to, among others, the risks of currency fluctuations.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Interest
expense  in the first  quarter of 2003  increased  approximately  $3,800,000  or
approximately  15.8% as  compared to the first quarter of 2002,  primarily  due to
approximately  $4,100,000  of interest  expense from the  amortization of the Bridge
Facility  commitment fees and related  expenses.  Interest  expense in the first quarter
of 2002  includes a non-cash  reduction in interest  expense of  approximately  $450,000
related to the  Company's  interest rate collar  agreement,  which was  terminated in
August 2002.  The period from January 1, 2003 to January  9, 2003 and the period from
January 10, 2003 to April 5, 2003  combined,  contain 95 days while the first  quarter
of  2002  contained  90  days.  Accordingly,  operating  results  for  2003  include
approximately  $1,000,000  of  additional  interest  expense as compared to 2002 since
the Company accrues interest expense based on the number of  days contained in each
reporting  period.  The increase in interest  expense was partially  offset by
approximately  $1,400,000 of lower interest  expense from the  amortization of premium
arising from the fair value  adjustment on  the date of the  Recapitalization  allocated
to  indebtedness  as compared to the  Company's  historical  basis of  accounting  prior
to the  Recapitalization  and reflects the effect of a net reduction in debt.  In 2002,
interest  expense  included  approximately  $850,000 of non-cash  amortization  of
deferred  debt expense and original  issue  discount.  (See  Notes  A, B and D of the
Notes  to the  Unaudited Financial  Statements  included
elsewhere herein.)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Investment
income  decreased  approximately  $1,200,000  or 70.6% in the first  quarter of 2003 as
compared to the  first quarter of 2002  primarily as a result of lower average  invested
balances in the first quarter of 2003 primarily as a  result of the funds  utilized  in the
Recapitalization.  Included  in  investment  income in the first  quarter of  2002 was
approximately  $650,000  related to restricted  investments  and  marketable  securities
held by pension  trusts  (including  related  party  amounts)  which  funds  were
distributed  to  participants  on the date of the  Recapitalization.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
income tax benefit from continuing  operations was  approximately  $20,100,000 for the
first quarter of 2003 as  compared to a tax  provision  from  continuing  operations  of
approximately  $5,900,000  for the first quarter of  2002.  The  income  tax  rates in
both  years  differed  from  the  United  States  Federal  statutory  rate of 35%
principally  as a result of the effect of  non-deductible  expenses,  foreign  income tax
on foreign source income,  state  income  tax  provisions,  and in 2003 due to the
Recapitalization.  (See  Notes A, B and J of the Notes to the  Unaudited Financial Statements included elsewhere herein.)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Earnings
from discontinued  operations was  approximately  $1,200,000 for the first quarter of
2002. The table that  follows  presents a summary of the operating  results of
discontinued  operations for the three months ended March  30,  2002.  (See  Note H of
the  Notes  to the  Unaudited Financial  Statements  included elsewhere herein.)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | Three Months Ended
|------------------------------------- | ------------------
|
|(Amounts in thousands)               
|(Unaudited)                          
|
|Net Sales                             |                   
|
|
|Earnings before income taxes          |                   
|Income tax provision                  |                   
|
|Earnings from discontinued operations |                   
|
|
|Depreciation and amortization expense |                   
|

|SFAS
No. 143,  "Accounting for Asset Retirement  Obligations" ("SFAS No.
143") addresses  financial  accounting and  reporting for obligations  associated
with the retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be  recognized  in the  period  in which it is  incurred  if a  reasonable
estimate  of fair  value  can be made.  The  associated  asset  retirement  costs are
capitalized as part of the carrying amount of the long-lived  asset.  SFAS  No. 143 is
effective  for financial  statements  issued for fiscal years  beginning  after June 15,
2002 with early  adoption  permitted.  The Company  adopted SFAS No. 143 on January 1,
2003.  Adoption of this  accounting  standard  was not material to the Company's
Unaudited Financial Statements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|SFAS
No. 145,  "Rescission of FASB  Statements  No. 4, 44 and 64,  Amendment of FASB
Statement No. 13 and Technical  Corrections"  ("SFAS No. 145"),  was
issued in April 2002 and addresses the reporting of gains and losses resulting  from the
extinguishment of debt,  accounting for sale-leaseback  transactions and rescinds or
amends other existing  authoritative  pronouncements.  SFAS No. 145  requires  that any
gain or loss on  extinguishment  of debt that does  not  meet  the  criteria  of APB 30
for  classification  as an  extraordinary  item  shall  not be  classified  as
extraordinary  and shall be included in earnings from  continuing  operations.  The
provisions  of this  statement  related to the  extinguishment  of debt are  effective
for financial  statements  issued in fiscal years  beginning  after May 15,  2002 with
early  application  encouraged.  The Company  adopted  SFAS No. 145 on January 1, 2003
and  adoption of this  accounting  standard  was not  material  to the  results
presented  in the Unaudited Financial Statements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Effective
January 1, 2003,  the  Company  adopted  SFAS No. 146,  "Accounting  for Costs
Associated  with Exit or  Disposal  Activities"  ("SFAS No. 146"),  which
addresses the accounting and reporting for costs  associated  with  exit or disposal
activities,  nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,
"Liability  Recognition  for Certain Employee  Termination  Benefits and Other Costs
to Exit an Activity  (including  Certain Costs Incurred  in a Restructuring)"
("EITF 94-3") and substantially  nullifies EITF Issue No. 88-10, "Costs
Associated with Lease  Modification  or  Termination"  ("EITF  88-10").
SFAS No. 146 requires that a liability for a cost associated with  an exit or disposal
activity be  recognized  when the  liability is incurred.  Under EITF 94-3, a liability
for an  exit cost as  defined in EITF 94-3 was  recognized  at the date of an  entity's
commitment  to an exit  plan.  The  provisions of SFAS No. 146 are  effective for exit or
disposal  activities  that are initiated  after  December 31,  2002.  The adoption of
SFAS No. 146 did not have a material  effect on the  Company's Unaudited Financial Statements.
(See  Note M of the Notes to the Unaudited Financial Statements
included elsewhere herein.)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
December 31, 2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition and  Disclosure" ("SFAS No. 148"). SFAS No. 148
amends SFAS No. 123,  "Accounting for Stock-Based  Compensation"  ("SFAS
No. 123") to provide  alternative  methods of  transition  to SFAS No. 123's fair
value  method of  accounting  for  stock-based  employee  compensation.  SFAS No. 148
also amends the  disclosure  provisions  of SFAS No. 123 and APB  Opinion No. 28,
"Interim  Financial  Reporting" ("APB No. 28"). The Company  accounts
for stock-based  compensation  in  accordance  with APB No. 25,  "Accounting  for
Stock  Issued to  Employees"  ("APB No.  25").  The  Company has  provided
the  required  disclosures  under  SFAS  No.  148 in  Note  K of the  Notes  to the
Unaudited Financial Statements included elsewhere herein.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In
November 2002, the FASB issued  Interpretation No. 45, "Guarantor's  Accounting and
Disclosure  Requirements for  Guarantees,  Including  Indirect  Guarantees  of
Indebtedness  of Others"  ("FIN 45").  Along with new  disclosure
requirements,  FIN 45 requires  guarantors to recognize,  at the inception of certain
guarantees,  a liability for  the fair value of the  obligation  undertaken in issuing
the guarantee.  This differs from the current  practice to  record a  liability  only
when a loss is  probable  and  reasonably  estimable.  The  recognition  and  measurement
provisions of FIN 45 are  applicable on a prospective  basis to guarantees  issued or
modified  after  December 31,  2002.  The  Company  adopted the  disclosure  provisions
of FIN 45 as of December  31, 2002 and adopted the entire  interpretation  on January 1,
2003.  Adoption of FIN 45 was not material to the  Company's  Consolidated  Financial
Statements.  (See  Note L of the  Notes  to the  Unaudited Financial  Statements  included  elsewhere herein.)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### Liquidity and Capital
Resources

|On
January 8, 2003,  at a special  meeting of  stockholders  of Nortek  Holdings,  the
stockholders  approved  the  following  amendments to the certificate of  incorporation
(the  "Stockholder  Approval"),  which were required in order to complete the Recapitalization:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- A new class of common stock,  Class A Common  Stock,  par value $1.00 per share,  of Nortek  Holdings
             was created consisting of 19,000,000 authorized shares.
- At the time that the amendment to the certificate of incorporation  became  effective,  each share of
             common  stock,  par value  $1.00  per  share and  special  common  stock,  par value  $1.00 per share
             outstanding,  was reclassified into one share of a new class of mandatorily  redeemed common stock,
             Class B Common  Stock,  par value  $1.00 per  share,  of Nortek  Holdings  consisting  of  14,000,000
             authorized shares.
- Class B Common  Stock  was  required  to be  immediately  redeemed  for $46 per  share in cash upon
             completion of the Recapitalization.
- The  authorized  number of shares  of Series B  Preference  Stock,  par value  $1.00 per  share,  was
             increased to 19,000,000 authorized shares.

|Following
the  Stockholder  Approval,  common stock and special common stock held by the Management
Investors were  exchanged for an equal number of newly created shares of Series B
Preference  Stock.  In addition,  certain options  to purchase  shares of common and
special  common stock held by the  Management  Investors were exchanged for fully  vested
options to purchase an equal number of shares of the newly  created  Class A Common
Stock.  The  remaining  outstanding  options,  including  some held by Management
Investors,  were  cancelled in exchange for the right to  receive a single  lump sum cash
payment  equal to the  product of the number of shares of common  stock or special
common stock  underlying the option and the amount by which the  redemption  price of $46
per share exceeded the per share exercise price of the option.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
January 9, 2003,  in  connection  with the  Recapitalization,  Kelso  purchased  newly
issued shares of Series B  Preference  Stock for  approximately  $355,923,000  and
purchased  shares of Series B Preference  Stock held by the  Management  Investors  for
approximately  $18,077,000.  Newly  issued  Class  A  Common  Stock  of  approximately
$3,262,000 was purchased by designated  third parties.  Shares of Series B Preference
Stock held by the Management  Investors  that  were not  purchased  by Kelso  were
converted  into an equal  number  of shares of Class A Common  Stock.  In  addition,  the
Company  declared  and  distributed  to Nortek  Holdings  a dividend  of  approximately
$120,000,000  and distributed  approximately  $27,900,000 for  reimbursement  of fees and
expenses of Kelso,  which  were paid out of the Company's  unrestricted  cash and cash
equivalents on hand and were permissible under the most  restrictive  covenants  with
respect to the indentures of the Company's 8 7/8% Senior Notes due 2008, 9 1/4% Senior
Notes due 2007, 9 1/8% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due
2011 (the "Existing Notes").
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Nortek
Holdings used the proceeds from the purchase by Kelso and designated third parties of the newly issued Series B
Preference  Stock and  Class  A Common  Stock and the  dividend  from  Nortek to redeem
Nortek  Holdings'  Class B Common  Stock and to cash out  options to purchase common and
special common stock totaling approximately $479,185,000. Kelso also purchased from certain Management Investors
392,978 shares of Series B Preference Stock for approximately $18,077,000.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In
connection with the  Recapitalization,  K Holdings received a bridge financing letter
from a lender for a senior  unsecured  term loan  facility  not to exceed  $955,000,000
(the  "Bridge  Facility").  The  Bridge  Facility  was  intended to be used to
fund, if necessary,  any change in control  offers the Company might have made in
connection  with  the  Recapitalization.  The  Company  did  not  use  this  Bridge
Facility  because  the  structure  of  the  Recapitalization  did not require the Company
to make any change of control offers.  The commitment  letter expired  on January 31,
2003.  As a result,  the  Company's  consolidated  interest  expense for the period from
January 10,  2003 to April 5, 2003 includes  approximately  $4,100,000 of interest
expense from the  amortization of the Bridge  Facility commitment fees and related
expenses.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In
January 2003,  Nortek  Holdings  filed for the  deregistration  of its shares of common
and special common stock  under the  Securities  Exchange  Act of 1934.  Nortek
Holdings'  shares of common and special  common stock are no  longer  publicly  traded.
The Company  will  continue  to file  periodic  reports  with the SEC as required by the
respective indentures of the Company's Existing Notes.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Under
the  terms of one of the  Company's  supplemental  executive  retirement  plans
("SERP"),  the  Company  was  required to make one-time cash payments to
participants  in such plan in  satisfaction  of obligations  under that  plan when the
Recapitalization  was  completed.  Accordingly,  the Company made a  distribution  of
approximately  $75,100,000  to the  participants  in the plan from funds included in the
Company's  Consolidated  Balance Sheet at  December 31, 2002 and classified in long-term
assets in restricted  investments and marketable  securities held by  pension trusts and
transferred to one of the  participants a life insurance policy with  approximately
$10,300,000  of cash surrender value to satisfy a portion of the SERPs obligation to such  participant.
  The termination and settlement of  the  obligation  of this SERP resulted in
a  curtailment  loss on January 9, 2003.  (See Notes B and F of the Notes  to the
Unaudited Financial Statements included elsewhere herein.)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
total  amount of  transaction  fees and related  costs  incurred by the Company and Kelso
associated  with the  Recapitalization  was  approximately  $47,348,000,  including the
$27,900,000  noted above, of which  approximately  $10,500,000  of advisory  fees and
expenses  was paid to Kelso & Company L.P. A portion of these fees and expenses  was
recorded by the Company in selling,  general and  administrative  expense,  since they
were  obligations of the  Company  prior to the  Recapitalization.  Approximately
$12,848,000  was  recorded  as  expense on January 9, 2003  since  these fees and
expenses  became  obligations  of the Company  upon  consummation  of the
Recapitalization.  Approximately  $6,600,000 of expense was  previously  recorded by the
Company in the year ended  December 31, 2002.  (See Notes B and F of the Notes to the
Unaudited Financial Statements included elsewhere  herein.)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company is highly  leveraged and expects to continue to be highly  leveraged for the
foreseeable  future.  The  Company  had  consolidated  debt at  April  5,  2003,  of
approximately  $1,012,225,000  (including  approximately  $13,137,500  of  unamortized
debt premium)  consisting of (i)  $10,980,000  of short-term  borrowings  and current
maturities  of  long-term  debt,  (ii)  $43,659,000  of  notes,  mortgage  notes  and
other  indebtedness,  (iii)  $213,040,000  of 8 7/8% Senior Notes due 2008 ("8 7/8%
Notes"),  (iv)  $315,190,000 of 9 1/8% Senior Notes due 2007  ("9 1/8%
Notes"),  (v)  $178,743,000  of 9 1/4% Senior Notes due 2007 ("9 1/4%
Notes") and (vi)  $250,613,000  of 9  7/8% Senior Subordinated Notes due 2011
("9 7/8% Notes").
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
indentures  and other  agreements  governing the Company and its  subsidiaries'
indebtedness  (including  the  indentures for the 8 7/8% Notes, the 9 1/8% Notes, the 9
1/4% Notes and the  9 7/8%  Notes,  as well  as,  the  credit  agreement  for the  Senior
Secured  Credit  Facility)  contain  certain  restrictive  financial and operating
covenants  including  covenants  that restrict the ability of the Company and  its
subsidiaries to complete acquisitions,  pay dividends,  incur indebtedness,  make
investments,  sell assets and  take certain other corporate actions.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|At
April 5, 2003, the Company had consolidated  unrestricted  cash, cash  equivalents and
marketable  securities of  approximately  $90,183,000  as  compared to  approximately
$294,804,000  at December  31,  2002.  The  decrease in  unrestricted  cash was
primarily  due to the  dividend  and  payment  of fees  and  expenses  associated  with
the  Recapitalization  (see Note B of the Notes to the Unaudited Financial  Statements included  elsewhere  herein)  and  seasonal  increases  in  working
capital.  The  Company's  debt  to  equity  ratio  was  approximately  2.2:1 at April 5,
2003 as compared to  approximately  3.1:1 at December 31, 2002.  The change in the  ratio
was  primarily  due  to  an  increase  in  stockholder's  investment,  primarily  as  a
result  of  the  Recapitalization,  which  contributed  approximately  $284,135,000  to
equity  and was  partially  offset by a fair  market value adjustment with a net increase
in indebtedness of approximately $18,000,000.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company's  ability to pay  interest  on or to  refinance  its  indebtedness  depends on
the  Company's  future  performance,  working  capital  levels and  capital  structure
which are subject to general  economic,  financial,  competitive,  legislative,
regulatory  and  other  factors  which  may be  beyond  its  control.  There  can be no
assurance  that the Company will  generate  sufficient  cash flow from the  operation of
its  subsidiaries  or that  future  financings will be available on acceptable terms or
in amounts  sufficient to enable the Company to service  or refinance its indebtedness,
or to make necessary capital expenditures.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company has  evaluated  and expects to continue to evaluate  possible  acquisition
transactions  and  possible  dispositions  of certain of its  businesses on an ongoing
basis and at any given time may be engaged in discussions  or negotiations with respect
to possible acquisitions or dispositions.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|EBITDA
from operations is operating earnings from continuing operations plus depreciation and
amortization  expense (other than amortization of deferred debt expense and debt premium
and discount) and the non cash  write-off of the portion of the excess purchase price
from acquisitions allocated to inventories.  For the  periods January 1, 2003 through
January 9, 2003, January 10, 2003 through April 5, 2003 and the three months  ended March
30, 2002, the Company had consolidated earnings (loss) before depreciation, amortization,
non cash  write-off of the portion of the excess purchase price from acquisitions
allocated to inventories, interest, net  and income taxes (EBITDA) of
approximately $(85,865,000), $49,779,000, and $48,842,000, respectively.  Adjusted
EBITDA excludes expenses and charges arising from the Recapitalization.  For the periods
January 1, 2003 through  January 9, 2003, January 10, 2003 through April 5, 2003 and the
three months ended March 30, 2002, the Company  had Adjusted EBITDA of approximately
$1,835,000, $49,779,000, and $48,842,000, respectively.  EBITDA is presented  as it is a
common analytical measurement utilized by investors to assess the Companys
performance.  The  Companys common stock is no longer publicly traded.  In
accordance with the indentures of the Companys Existing  Notes, the Company is
required to continue to file periodic reports with the SEC.  Numerous covenants contained
in the indentures to the Existing Notes require financial measurements involving a cash
flow measure similar to  EBITDA.  In addition, EBITDA is presented as it allows
bondholders to assess the Companys ability to service and  incur indebtedness.  We
also believe that EBITDA, when considered with other information, is useful to investors
to analyze current results since it reflects operating results before depreciation,
amortization and other  non-cash items, which items are based on historical cost and
varying depreciable lives. Since each of the  Companys segments, its competitors
and other investment opportunities available to bondholders all have differing
historical cost structures, EBITDA is another measurement available to investors,
particularly bondholders, to  make investment decisions.  EBITDA should not be considered
as an alternative to earnings from continuing  operations, net earnings or cash flow
measures as determined in accordance with accounting principles generally  accepted in
the United States.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
following  table presents a  reconciliation  from  operating  earnings,  which is the
most directly  comparable  financial  measure under  accounting  principles  generally
accepted in the United States,  to EBITDA and Adjusted  EBITDA for the periods presented:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | For the Periods
|------------------------------------- | ---------------
|
|
|
|
|Operating earnings (loss)             |                
|Depreciation expense                  |                
|Amortization of intangible assets     |                
|Non cash charge of purchase price     |                
|allocated to inventory                |                
|
|EBITDA                                |                
|Expenses and charges arising from the |                
|Recapitalization                      |                
|
|Adjusted EBITDA                       |                
|

|Accordingly,
the Company expects to meet its cash flow  requirements  through fiscal 2003 from cash
generated from  operations,  existing  cash and cash  equivalents,  and, if necessary,
the  utilization  of the  Company's  Senior  Secured  Credit  Facility and mortgage,
capital  lease or other  financings.  As of  April  5,  2003,  approximately  $28,545,000
of  letters  of credit  had been  issued as  additional  security  for  approximately
$28,100,000  of  industrial  revenue  bonds and capital  leases  outstanding  (included
in notes,  mortgage  notes and  obligations  payable in the  accompanying  condensed
consolidated  balance sheet at April 5, 2003),  relating to several of the  Company's
manufacturing facilities.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company and its subsidiaries have entered into a number of operating lease  obligations,
purchase  obligations  and have  guaranteed  certain  obligations of various third
parties.  No significant  changes in these  obligations  have  occurred  since  December
31, 2002.  See the  Company's  annual  report on Form 10-K at December 31, 2002 for
amounts outstanding at December 31, 2002.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Unrestricted
cash and  cash  equivalents  decreased  from  approximately  $294,804,000  at  December
31,  2002 to  approximately  $70,165,000  at April 5,  2003.  At April 5,  2003
marketable  securities  available  for sale were  approximately  $20,018,000 which
consisted primarily of federal agency discount notes,  commercial paper,  treasury  bills
and money  market  instruments.  At December  31, 2002,  the Company did not have any
marketable  securities  available for sale.  During the fourth quarter of 2002, all
marketable  securities  available for sale matured and  the  proceeds  were  invested  in
short-term  investments.  The  Company  has  classified  as  restricted  in  the
accompanying  condensed  consolidated  balance sheet certain  investments  and marketable
securities  that are not  fully  available for use in its  operations.  At April 5, 2003,
approximately  $5,636,000 (of which  $4,346,000 is  included in current  assets) of cash,
investments  and  marketable  securities is held primarily as collateral for  insurance
and letter of credit requirements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Capital
expenditures  were  approximately  $5,993,000  in the first  quarter  of 2003  compared
to  approximately  $4,294,000 in the first quarter of 2002.  Capital  expenditures were
approximately  $28,500,000 for the year ended  December 31, 2002 and are expected to be
between $40,000,000 and $50,000,000 in 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|At
May 15,  2003,  there was no amount  available  for the  payment of cash  dividends,
stock  purchases  or other  restricted  payments as defined under the terms of the
Company's  most  restrictive  Indenture.  (See Note G of the  Notes to the Unaudited
Financial Statements included elsewhere herein.)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company's  working  capital  and  current  ratio  decreased  from  approximately
$451,085,000  and  2.5:1,  respectively,  at  December  31,  2002 to  approximately
$327,752,000  and 2.0:1,  respectively,  at April 5, 2003  principally as a result of the
factors described below.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Accounts
receivable  increased  approximately  $34,051,000 or approximately  15.1%,  between
December 31, 2002 and  April 5, 2003, while net sales increased  approximately
$32,198,000 or approximately  7.4% in the first quarter of  2003 as compared to the
fourth  quarter of 2002. The  acquisition of Elan in the first quarter of 2003
contributed  $2,617,000 and $4,874,000 to the increase in accounts  receivable and net
sales,  respectively.  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
April 5, 2003 as compared to December 31, 2002.  The Company has  not  experienced  any
significant  overall  changes in credit terms,  collection  efforts,  credit  utilization
or  delinquency in accounts receivable in 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Inventories
increased  approximately  $44,563,000 or approximately  25.3%,  between December 31, 2002
and April 5,  2003.  Approximately  $8,067,000  of the increase was as a result of the
net  remaining fair market value adjustment of inventories at April 5, 2003 arising
from the  Recapitalization.  The  acquisition of Elan  contributed an  additional
approximate $4,234,000 to the increase in inventories.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Accounts
payable increased  approximately  $43,026,000 or approximately  34.0%, between December
31, 2002 and April  5, 2003.  The acquisition of Elan  contributed approximately
$1,036,000 to this increase.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Changes
in certain working capital accounts, as noted above, between December 31, 2002 and April
5, 2003, differ  from the changes reflected in the Companys Condensed Consolidated
Statement of Cash Flows for such period as a  result of the specific items mentioned in
the three preceding paragraphs and from other non-cash items, including  among others,
the effect of changes in foreign currency exchange rates.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Unrestricted
cash and cash equivalents  decreased  approximately  $154,501,000 from December 31, 2002
to January 9,  2003 and decreased  approximately  $70,138,000  from January 10, 2003 to
April 5, 2003,  principally as a result of  the following:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  | Condensed Consolidated Cash Flows(*)
|------------------------------------------------- | ------------------------------------
|
|
|
|Operating Activities:                             |                                     
|Cash flow from operations, net                    |                                     
|(Increase) decrease in accounts receivable, net   |                                     
|Increase in inventories                           |                                     
|Decrease in prepaids and other current assets     |                                     
|Increase in accounts payable                      |                                     
|(Decrease) increase in accrued expenses and taxes |                                     
|Investing Activities:                             |                                     
|Purchases of marketable securities                |                                     
|Net cash paid for Elan                            |                                     
|Capital expenditures                              |                                     
|Increase in restricted cash and investments       |                                     
|Financing Activities:                             |                                     
|Increase (decrease) in borrowings, net            |                                     
|Dividend paid and transfers to Nortek Holdings    |                                     
|net of capital contributed                        |                                     
|Other, net                                        |                                     
|
|                                                  |                                     
|

|(*) | Summarized from the Company's Condensed  Consolidated  Statement of Cash Flows for the period January 1, 2003
      to  January  9,  2003 and the  period  January  10,  2003 to  April 5,  2003.  (See the Unaudited Financial Statements included elsewhere herein.)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
impact of changes in foreign  currency  exchange rates on cash was not material and has
been included in other,  net.
|-------------------------------------------------------------------------------------------------------------------------

##### Inflation, Trends and
General Considerations

|The
Company has evaluated and expects to continue to evaluate  possible  acquisition
transactions and the possible  dispositions  of certain of its  businesses on an ongoing
basis and at any given time may be engaged in discussions  or negotiations with respect
to possible acquisitions or dispositions.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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, consumer confidence and unemployment.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### Market Risk

|As
discussed  more  specifically  below,  the  Company is exposed to market  risks  related
to changes in interest  rates,  foreign  currencies  and commodity  pricing.  The Company
does not use  derivative  financial  instruments,  except on a limited  basis,  to hedge
certain  economic  exposures.  The  Company  does not enter into  derivative  financial
instruments or other financial instruments for trading purposes.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|There
have been no  significant  changes in market  risk from the  December  31, 2002
disclosures  included in the  Company's annual report on Form 10-K.
|---------------------------------------------------------------------------------------------------------------------------------------------------------

##### A.  Interest Rate Risk

|The
Company is exposed to market  risk from  changes  in  interest  rates  primarily  through
its  investing  and  borrowing  activities.  In addition,  the  Company's  ability to
finance  future  acquisition  transactions  may be  impacted if the Company is unable to
obtain appropriate financing at acceptable interest rates.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company's  investing  strategy,  to manage  interest rate exposure,  is to invest in
short-term,  highly liquid  investments  and  marketable  securities.  Short-term
investments  primarily  consist of federal  agency  discount  notes, treasury bills and
bank issued money market instruments with original maturities of 90 days or less.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company  manages its borrowing  exposure to changes in interest  rates by optimizing the
use of fixed rate debt  with  extended  maturities.  There have been no  significant
changes in interest  rate risk from the  December 31,  2002 disclosures included in the
Company's annual report on Form 10-K.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### B.  Foreign Currency Risk

|Sales
and earnings derived from international  markets and net assets within international
markets are subject to,  among others,  the risks of currency  fluctuations  primarily
related to changes in the Euro, the Canadian  Dollar  and the British Pound.  In the
first quarter of 2003, the net impact of foreign  currency  changes was not material  to
the Company's  financial  condition or results of operations,  but may not be indicative
of future results.  The  impact of foreign  currency changes related to translation
resulted in an increase in stockholder's  investment of  approximately  $1,096,000 and
$3,237,000  for the periods  January 1, 2003 to January 9, 2003 and January 10, 2003  to
April 5, 2003,  respectively.  The Company manages its exposure to foreign  currency
exchange risk  principally  by trying to minimize the  Company's  net  investment  in
foreign  assets  through the use of  strategic  short and  long-term  borrowings  at the
foreign  subsidiary  level.  The  Company  generally  does not enter into  derivative
financial  instruments  to  manage  foreign  currency  exposure.  At  April 5, 2003,  the
Company  did not have any  significant outstanding foreign currency hedging contracts.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### C.  Commodity Pricing Risk

|The
Company is subject to  significant  market risk with  respect to the pricing of its
principal  raw  materials,  which include,  among others,  steel, copper,  packaging
material,  plastics,  resins, glass, wood and aluminum. If  prices of these raw materials
were to increase  dramatically,  the Company may not be able to pass such  increases  on
to its  customers  and,  as a result,  gross  margins  could  decline  significantly.
The  Company  manages its  exposure to commodity  pricing risk by  continuing  to
diversify  its product mix,  strategic  buying  programs and  vendor partnering.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The
Company generally does not enter into derivative financial  instruments to manage
commodity-pricing  exposure.  At April 5, 2003, the Company did not have any material
outstanding commodity forward contracts.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
March 5, 2002, the United States  government  imposed  tariffs and quotas on a wide range
of steel imports for a  three-year  period.  Many of the  Company's  products  are made
from  steel or contain  steel  parts and the import  tariffs  impact  certain  of  these
purchases  made by the  Company.  While  the  Company  enters  into  contracts
periodically  which set the price of steel  purchases,  not all purchases are covered by
contract and the contracts  do not extend  through the period the quotas and tariffs are
imposed.  Price changes  resulting from the imposition  of these quotas and tariffs began
to have an  unfavorable  impact on gross  profit,  net earnings and cash flows of  the
Company over the second half of 2002.  (See  discussion  in Results of  Operations - Cost
of products  sold and  operating earnings contained elsewhere herein.)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### Forward-Looking Statements

|This
document contains  forward-looking  statements within the meaning of the Private
Securities  Litigation Reform  Act of 1995.  When used in this  discussion  and
throughout  this  document,  words,  such as "intends",  "plans",
"estimates",  "believes",  "anticipates"  and
"expects"  or  similar  expressions  are  intended  to  identify
forward-looking  statements.  These  statements  are based on the  Company's  current
plans and  expectations  and  involve risks and uncertainties,  over which the Company
has no control,  that could cause actual future activities  and results of  operations
to be  materially  different  from those set forth in the  forward-looking  statements.
Important  factors  that  could  cause  actual  future  activities  and  operating
results to differ  include  the  availability and cost of certain raw materials,
(including,  among others,  steel,  copper,  packaging  materials,  plastics,  resins,
glass,  wood and  aluminum)  and  purchased  components,  the  level of  domestic  and
foreign  construction and remodeling  activity affecting  residential and commercial
markets,  interest rates,  employment,  inflation,  foreign currency  fluctuations,
consumer spending levels,  exposure to foreign economies,  the rate of  sales growth,
price, and product and warranty 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 update  publicly any
forward-looking  statements,  whether as a result of new  information,  future  events or
otherwise.  All subsequent  written and oral  forward-looking  statements  attributable
to the Company or  persons acting on its behalf are expressly  qualified in their
entirety by these  cautionary  statements.  Readers  are also urged to carefully review
and consider the various disclosures made by the Company,  in this document,  as  well as
the  Company's  periodic  reports on Forms  10-K,  10-Q and 8-K,  filed with the
Securities  and  Exchange  Commission ("SEC").
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

##### Item 4.  Controls and
Procedures

|Within
the 90 days  prior to the date of this  Form  10-Q,  the  Company  carried  out an
evaluation,  under  the  supervision and with the  participation  of the Company's
management,  including the Company's  Chairman and Chief  Executive  Officer  along with
the  Company's  Vice  President,  Controller  and Chief  Financial  Officer  and the
Company's  Corporate  Disclosure and Controls  Committee,  of the  effectiveness of the
design and operation of the  Company's  disclosure  controls and procedures  pursuant to
Exchange Act Rule 13a-14.  Based upon that  evaluation,  the Company's  Chairman and
Chief Executive  Officer along with the Company's Vice President,  Controller and Chief
Financial  Officer  concluded  that the  Company's  disclosure  controls  and  procedures
are  effective in timely  alerting them to material  information relating to the Company
(including its consolidated  subsidiaries)  required  to be included in the  Company's
periodic SEC filings.  There have been no  significant  changes in the  Company's
internal controls or in other factors which could  significantly  affect internal
controls  subsequent to the date  the Company carried out its evaluation.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

#### PART II. OTHER INFORMATION

|Item
4.  Submission of Matters to a Vote of Security Holders
|------------------------------------------------------------

|On March 24, 2003,  the Company held a special  meeting of its sole  stockholder of the Company,  Nortek  Holdings,
Inc.  ("Holdings").  Holdings,  the holder of 100 shares of common stock $0.01 par per share of the Company,  voted
to approve the Amended and Restated  Articles of  Incorporation of the Company.  The Amended and Restated  Articles
of  Incorporation  contained  revisions to remove  provisions  typically found in the Articles of  Incorporation of
companies whose equity  securities were publicly traded and to add provisions found in traditional  subsidiary form
Articles of Incorporation.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 6. Exhibits and Reports on Form 8-K
|----------------------------------------
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|SIGNATURE                                                                                   
|--------------------------------------------------------------------------------------------
|                                                                                            
|                                                                                            
|                                                                                            
|Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
|caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
|                                                                                            
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|May 19, 2003                                                                                
|(Date)                                                                                      

|CERTIFICATION PURSUANT TO                    
|---------------------------------------------
|SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

|                                    |  |                                                                                                            
|----------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|I, Richard L. Bready, certify that:
|                                   
|1)                                  |  | I have reviewed this quarterly report on Form 10-Q of Nortek, Inc. for the period ended                    
|                                    |  | April 5, 2003;                                                                                             
|                                   
|2)                                  |  | Based on my knowledge,  this quarterly  report does not contain any untrue statement of a                  
|                                    |  | material fact or omit to state a material fact necessary to make the statements made, in                   
|                                    |  | light of the  circumstances  under which such  statements  were made,  not  misleading  with               
|                                    |  | respect to the period  covered by this quarterly report;                                                   
|                                   
|3)                                  |  | Based on my  knowledge,  the  financial  statements,  and other  financial  information                    
|                                    |  | included  in this
         quarterly report,  fairly present in all material respects the financial        
|                                    |  | condition,  results of operations
         and cash flows of the registrant as of, and for, the periods    
|                                    |  | presented in this quarterly report;                                                                        
|                                   
|4)                                  |  | The  registrants  other  certifying  officers and I are  responsible  for  establishing  and              
|                                    |  | maintaining
         disclosure  controls  and  procedures  (as  defined  in  Exchange  Act Rules  13a-14  
|                                    |  | and  15d-14)  for the
         registrant and we have:                                                     
|                                   
|                                    |  | (a)  Designed such  disclosure  controls and  procedures to ensure that  material  information             
|                                    |  | relating to the
              registrant,  including  its  consolidated  subsidiaries,  is made known to us
|                                    |  | by others  within those
              entities, particularly during the period in which this quarterly     
|                                    |  | report is being prepared;                                                                                  
|                                   
|                                    |  | (b)  Evaluated the  effectiveness  of the registrants  disclosure  controls and procedures as of          
|                                    |  | a date within
              90 days prior to the filing date of this quarterly report (the Evaluation     
|                                    |  | Date); and                                                                                                
|                                   
|                                    |  | (c)  Presented in this quarterly  report our conclusions  about the  effectiveness  of the                 
|                                    |  | disclosure  controls
              and procedures based on our evaluation as of the Evaluation Date;       
|                                   
|5)                                  |  | The registrants other certifying officers and I have disclosed,  based on our most recent                 
|                                    |  | evaluation,  to
         the  registrants  auditors  and the audit  committee  of  registrants  board of 
|                                    |  | directors  (or  persons
         performing the equivalent function):                                      
|                                   
|                                    |  | (a)  All  significant  deficiencies  in the design or  operation  of internal  controls  which could       
|                                    |  | adversely
              affect the  registrants  ability to record,  process,  summarize and report       
|                                    |  | financial data and have
              identified for the registrants auditors any material weaknesses     
|                                    |  | in internal controls; and                                                                                  
|                                   
|                                    |  | (b)  Any fraud,  whether or not material,  that involves  management or other  employees                   
|                                    |  | who have a significant
              role in the registrants internal controls; and                       
|                                   
|6)                                  |  | The registrants  other  certifying  officers and I have indicated in this                                 
|                                    |  | quarterly report whether or not there were  significant  changes in  internal                              
|                                    |  | controls or in other  factors  that could significantly  affect  internal  controls                        
|                                    |  | subsequent  to the  date of our  most  recent evaluation,  including any                                   
|                                    |  | corrective  actions with regard to  significant  deficiencies and material                                 
|                                    |  | weaknesses.                                                                                                
|                                   
|                                   
|                                   
|                                   
|Dated:  May 19, 2003               
|                                   
|                                   
|                                    |  | /s/ Richard L. Bready                                                                                      
|                                    |  | Richard L. Bready                                                                                          
|                                    |  | Chairman and Chief Executive Officer                                                                       
|                                    |  | Nortek, Inc.                                                                                               

|CERTIFICATION PURSUANT TO                    
|---------------------------------------------
|SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

|                                |  |                                                                                                            
|------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|I, Almon C. Hall, certify that:
|                               
|1)                              |  | I have reviewed this quarterly report on Form 10-Q of Nortek, Inc. for the period ended                    
|                                |  | April 5, 2003;                                                                                             
|                               
|2)                              |  | Based on my knowledge,  this quarterly  report does not contain any untrue statement of a                  
|                                |  | material fact or omit to state a material fact necessary to make the statements made, in                   
|                                |  | light of the  circumstances  under which such  statements  were made,  not  misleading  with               
|                                |  | respect to the period  covered by this quarterly report;                                                   
|                               
|3)                              |  | Based on my  knowledge,  the  financial  statements,  and other  financial  information                    
|                                |  | included  in this
         quarterly report,  fairly present in all material respects the financial        
|                                |  | condition,  results of operations
         and cash flows of the registrant as of, and for, the periods    
|                                |  | presented in this quarterly report;                                                                        
|                               
|4)                              |  | The  registrants  other  certifying  officers and I are  responsible  for  establishing  and              
|                                |  | maintaining
         disclosure  controls  and  procedures  (as  defined  in  Exchange  Act Rules  13a-14  
|                                |  | and  15d-14)  for the
         registrant and we have:                                                     
|                               
|                                |  | (a)  Designed such  disclosure  controls and  procedures to ensure that  material  information             
|                                |  | relating to the
              registrant,  including  its  consolidated  subsidiaries,  is made known to us
|                                |  | by others  within those
              entities, particularly during the period in which this quarterly     
|                                |  | report is being prepared;                                                                                  
|                               
|                                |  | (b)  Evaluated the  effectiveness  of the registrants  disclosure  controls and procedures as of          
|                                |  | a date within
              90 days prior to the filing date of this quarterly report (the Evaluation     
|                                |  | Date); and                                                                                                
|                               
|                                |  | (c)  Presented in this quarterly  report our conclusions  about the  effectiveness  of the                 
|                                |  | disclosure  controls
              and procedures based on our evaluation as of the Evaluation Date;       
|                               
|5)                              |  | The registrants other certifying officers and I have disclosed,  based on our most recent                 
|                                |  | evaluation,  to
         the  registrants  auditors  and the audit  committee  of  registrants  board of 
|                                |  | directors  (or  persons
         performing the equivalent function):                                      
|                               
|                                |  | (a)  All  significant  deficiencies  in the design or  operation  of internal  controls  which could       
|                                |  | adversely
              affect the  registrants  ability to record,  process,  summarize and report       
|                                |  | financial data and have
              identified for the registrants auditors any material weaknesses     
|                                |  | in internal controls; and                                                                                  
|                               
|                                |  | (b)  Any fraud,  whether or not material,  that involves  management or other  employees                   
|                                |  | who have a significant
              role in the registrants internal controls; and                       
|                               
|6)                              |  | The registrants  other  certifying  officers and I have indicated in this                                 
|                                |  | quarterly report whether or not there were  significant  changes in  internal                              
|                                |  | controls or in other  factors  that could significantly  affect  internal  controls                        
|                                |  | subsequent  to the  date of our  most  recent evaluation,  including any                                   
|                                |  | corrective  actions with regard to  significant  deficiencies and material                                 
|                                |  | weaknesses.                                                                                                
|                               
|                               
|                               
|                               
|Dated:  May 19, 2003           
|                               
|                               
|                                |  | /s/ Almon C. Hall                                                                                          
|                                |  | Almon C. Hall                                                                                              
|                                |  | Vice President, Controller and Chief Financial Officer                                                     
|                                |  | Nortek, Inc.