**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C.
      20549




**Form
      10-Q**


(Mark
      One)


[X]  QUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE
      ACT OF 1934







**For
      the
      quarterly period ended April 1, 2006**





OR





[
       ]  TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE
      ACT OF 1934


For
      the transition
      period from __________ to __________


Commission
      file
      number: 333-119902





**Nortek,
                Inc.**(exact
                name
                of registrant as specified in its charter)**Delaware**
            **05-0314991**(State
                or
                other jurisdiction of incorporation or organization)
            (IRS
                Employer
                Identification Number)**50
                Kennedy Plaza**
              **Providence,
                Rhode Island**
            **02903-2360**(Address
                of
                principal executive offices)
            (zip
                code)Registrant’s
                Telephone Number, Including Area Code:
              **(401)
                751-1600**Securities
                registered pursuant to Section 12(b) of the Act:**None**







Indicate
      by check
      mark whether registrant (1) has filed all reports required to be filed by
      Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
      12 months (or for such shorter period that the registrant was required to file
      such reports) and (2) has been subject to such filing requirements for the
      past
      90 days.


Yes
      [_]  No
      [X]





Indicate
      by check
      mark whether the registrant is a large accelerated filer, an accelerated filer
      or a non-accelerated filer. See definition of “accelerated filer and large
      accelerated file” in Rule 12b-2 of the Exchange Act). (Check one):





Large
                accelerated filer [_]
            Accelerated
                Filer [_]
            Non-accelerated
                filer [X]





Indicate
      by check
      mark whether the registrant is a shell company (as defined in Rule 12b-2 of
      the
      Exchange Act).  Yes
      [_]  No
      [X]





The
      aggregate
      market value of voting stock held by non-affiliates is zero.





The
      number of
      shares of Common Stock outstanding as of May 5, 2006 was 3,000.





**PART
      I -
      FINANCIAL INFORMATION**





**ITEM
      1.
      FINANCIAL STATEMENTS**





**NORTEK,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEET**


*(Dollar
      amounts
      in thousands)*


**April
                    1,**
                
                **December
                    31,****2006**
                
                **2005****Assets****Current
                    Assets:**Cash
                    and cash
                    equivalents
                
                $
                70,158
                
                $
                77,175Accounts
                      receivable, less allowancesof
                      $6,694 and
                      $6,582
                
                
                302,931
                
                
                272,191Inventories:Raw materials
                
                
                77,762
                
                
                75,159Work in process
                
                
                24,309
                
                
                21,400Finished goods
                
                
                153,748
                
                
                145,753255,819
                
                
                242,312Prepaid
                    expenses
                
                
                11,167
                
                
                10,510Other
                    current
                    assets
                
                
                26,640
                
                
                26,349Prepaid
                    income taxes
                
                
                15,890
                
                
                20,672Total current assets
                
                
                682,605
                
                
                649,209**Property
                    and Equipment, at Cost:**Land
                
                
                10,536
                
                
                8,784Buildings
                    and
                    improvements
                
                
                88,780
                
                
                84,310Machinery
                    and
                    equipment
                
                
                148,758
                
                
                141,112248,074
                
                
                234,206Less
                    accumulated depreciation
                
                
                36,680
                
                
                28,717Total property and equipment, net
                
                
                211,394
                
                
                205,489**Other
                    Assets:**Goodwill
                
                
                1,379,115
                
                
                1,381,350Intangible
                      assets, less accumulated amortizationof
                      $31,581
                      and $27,328
                
                
                114,593
                
                
                114,474Deferred
                    debt
                    expense
                
                
                35,610
                
                
                36,868Long-term
                    portion of receivable from affiliate
                
                
                17,724
                
                
                17,460Restricted
                    investments and marketable securities
                
                
                4,018
                
                
                4,015Other
                    assets
                
                
                7,564
                
                
                7,7111,558,624
                
                
                1,561,878$
                2,452,623
                
                $
                2,416,576**Liabilities
                    and Stockholder’s Investment****Current
                    Liabilities:**Notes
                    payable
                    and other short-term obligations
                
                $
                5,714
                
                $
                4,915Current
                    maturities of long-term debt
                
                
                18,246
                
                
                14,786Accounts
                    payable
                
                
                180,533
                
                
                159,015Accrued
                    expenses and taxes, net
                
                
                181,026
                
                
                196,721Total current liabilities
                
                
                385,519
                
                
                375,437**Other
                    Liabilities:**Deferred
                    income taxes
                
                
                19,187
                
                
                20,381Other
                
                
                168,652
                
                
                166,369187,839
                
                
                186,750**Notes,
                      Mortgage Notes and Obligations**Payable, Less Current
                      Maturities
                
                
                1,354,865
                
                
                1,354,080**Stockholder’s
                    Investment:**Common
                      stock,
                      $0.01 par value, authorized 3,000 shares;3,000 issued and outstanding at April 1, 2006 andDecember
                      31,
                      2005
                
                
                ---
                
                
                ---Additional
                    paid-in capital
                
                
                415,312
                
                
                414,964Retained
                    earnings
                
                
                101,000
                
                
                77,800Accumulated
                    other comprehensive income
                
                
                8,088
                
                
                7,545Total stockholder's investment
                
                
                524,400
                
                
                500,309**Total
                    Liabilities and Stockholder's Investment:**
                
                $
                2,452,623
                
                $
                2,416,576




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


**NORTEK,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS**


**For
                  the three months ended****April
                  1, 2006**
              
              **April
                  2, 2005***(Dollar
                  amounts in thousands)***Net
                  Sales**
              
              $
              534,542
              
              $
              434,118**Costs
                  and Expenses:**Cost of products sold
              
              
              370,468
              
              
              309,459Selling, general and administrative expense
              
              
              95,185
              
              
              79,441Amortization of intangible assets
              
              
              4,221
              
              
              4,333469,874
              
              
              393,233Operating
                  earnings
              
              
              64,668
              
              
              40,885Interest
                  expense
              
              
              (27,976
              )
              
              (24,285
              )Investment
                  income
              
              
              708
              
              
              400Earnings
                  before provision for income taxes
              
              
              37,400
              
              
              17,000Provision
                  for
                  income taxes
              
              
              14,200
              
              
              6,300**Net
                  earnings**
              
              $
              23,200
              
              $
              10,700




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


**NORTEK,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS**


**For
                    the three months ended****April
                    1, 2006**
                
                **April
                    2, 2005***(Dollar
                    amounts in thousands)***Cash
                    Flows from operating activities:**Net
                    earnings
                
                $23,200
                
                $10,700**Adjustments
                        to reconcile net earnings to net cash used in operating
                        activities**:Depreciation
                    and amortization expense, including amortization of purchase
                    price
                    allocated to inventory
                
                
                12,250
                
                
                11,615Non-cash
                    interest expense, net
                
                
                1,312
                
                
                1,363Non-cash
                    stock-based compensation expense
                
                
                83
                
                
                79Loss
                    (gain)
                    on sale of fixed assets
                
                
                134
                
                
                (280
                )Deferred
                    federal income tax provision
                
                
                3,500
                
                
                5,700**Changes
                        in certain assets and liabilities, net of effects from acquisitions
                        and
                        dispositions:**Accounts
                    receivable, net
                
                
                (23,400
                )
                
                (17,313
                )Inventories
                
                
                (10,183
                )
                
                (17,036
                )Prepaids
                    and
                    other current assets
                
                
                775
                
                
                612Accounts
                    payable
                
                
                16,934
                
                
                21,753Accrued
                    expenses and taxes
                
                
                (13,869
                )
                
                (31,664
                )Long-term
                    assets, liabilities and other, net
                
                
                (696
                )
                
                (4,181
                )Total adjustments to net earnings
                
                
                (13,160
                )
                
                (29,352
                )Net cash provided by (used in) operating activities
                
                
                10,040
                
                
                (18,652
                )**Cash
                    Flows from investing activities:**Capital
                    expenditures
                
                
                (12,106
                )
                
                (3,683
                )Net
                    cash paid
                    for businesses acquired
                
                
                (7,900
                )
                
                ---Proceeds
                    from
                    the sale of property and equipment
                
                
                129
                
                
                5,830Change
                    in
                    restricted cash and marketable securities
                
                
                (3
                )
                
                ---Other,
                    net
                
                
                (1,455
                )
                
                (399
                )Net cash (used in) provided by investing activities
                
                
                (21,335
                )
                
                1,748**Cash
                    Flows from financing activities:**Increase
                    in
                    borrowings
                
                
                9,362
                
                
                3,501Payment
                    of
                    borrowings
                
                
                (5,030
                )
                
                (6,595
                )Other,
                    net
                
                
                (54
                )
                
                (208
                )Net cash provided by (used in) financing activities
                
                
                4,278
                
                
                (3,302
                )Net
                    decrease
                    in unrestricted cash and cash equivalents
                
                
                (7,017
                )
                
                (20,206
                )Unrestricted
                    cash and cash equivalents at the beginning of the period
                
                
                77,175
                
                
                94,955Unrestricted
                    cash and cash equivalents at the end of the period
                
                $
                70,158
                
                $
                74,749**Supplemental
                    disclosure of cash flow information:**Interest
                    paid
                
                $
                39,791
                
                $
                36,432Income
                    taxes
                    paid, net
                
                $
                2,390
                
                $
                6,106




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







**NORTEK,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S
      INVESTMENT**


**FOR
      THE
      THREE MONTHS ENDED APRIL 2, 2005**


*(Dollar
      amounts
      in thousands)*


**(Accumulated**
              
              **Accumulated****Additional**
              
              **Deficit)**
              
              **Other****Paid
                  in**
              
              **Retained**
              
              **Comprehensive**
              
              **Comprehensive****Capital**
              
              **Earnings**
              
              **Income
                  (Loss)**
              
              **Income
                  (Loss)****Balance,
                  December 31, 2004**
              
              $
              410,581
              
              $
              (2,700
              )
              $
              9,065
              
              $
              ---Net
                  earnings
              
              
              ---
              
              
              10,700
              
              
              ---
              
              
              10,700Other
                  comprehensive income (loss):Currency translation adjustment
              
              
              ---
              
              
              ---
              
              
              (2,243
              )
              
              (2,243
              )Unrealized decline in the fair value ofmarketable
                    securities
              
              
              ---
              
              
              ---
              
              
              (6
              )
              
              (6
              )Comprehensive
                  income
              
              
              
              
              
              
              
              
              
              
              $
              8,451Capital
                  contribution from parent
              
              
              3,263
              
              
              ---
              
              
              ---Stock-based
                  compensation
              
              
              79
              
              
              ---
              
              
              ---**Balance,
                  April 2, 2005**
              
              $
              413,923
              
              $
              8,000
              
              $
              6,816




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





**NORTEK,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S
      INVESTMENT**


**FOR
      THE
      THREE MONTHS ENDED APRIL 1, 2006**


*(Dollar
      amounts
      in thousands)*




**Accumulated****Additional**
              
              
              
              **Other****Paid
                  in**
              
              **Retained**
              
              **Comprehensive**
              
              **Comprehensive****Capital**
              
              **Earnings**
              
              **Income**
              
              **Income****Balance,
                  December 31, 2005**
              
              $
              414,964
              
              $
              77,800
              
              $
              7,545
              
              $
              ---Net
                  earnings
              
              
              ---
              
              
              23,200
              
              
              ---
              
              
              23,200Other
                  comprehensive income:Currency translation adjustment
              
              
              ---
              
              
              ---
              
              
              543
              
              
              543Comprehensive
                  income
              
              
              
              
              
              
              
              
              
              
              $
              23,743Capital
                  contribution from parent
              
              
              265
              
              
              ---
              
              
              ---Stock-based
                  compensation
              
              
              83
              
              
              ---
              
              
              ---**Balance,
                  April 1, 2006**
              
              $
              415,312
              
              $
              101,000
              
              $
              8,088




*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
        1,
        2006 AND APRIL 2, 2005**


(A) The unaudited
        condensed consolidated financial statements presented herein (the “Unaudited
        Financial Statements”) reflect the financial position, results of operations and
        cash flows of Nortek, Inc. (the “Company” or “Nortek”) and all of its
        wholly-owned subsidiaries. The Unaudited Financial Statements include the
        accounts of Nortek, as appropriate, and all of its wholly-owned subsidiaries,
        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 U.S. generally accepted accounting
        principles have been omitted, the Company believes that the disclosures included
        are adequate to make the information presented not misleading. 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
        May 5, 2006, NTK
        Holdings, Inc. (“NTK Holdings”) filed a registration statement on Form S-1 with
        the SEC for an initial public offering of shares of its common stock (the
        “Offering”) (see Note K).
 
 **Stock-Based
        Compensation of Employees, Officers and Directors**
 
 In
        connection with
        the acquisition of Nortek, Inc. by affiliates of Thomas H. Lee Partners,
        L.P.
        (the “THL Transaction”) on August 27, 2004, certain employees and consultants
        received approximately 21,184 C-1 units and approximately 42,368 C-2 units,
        which represent equity interests in THL-Nortek Investors, LLC (“Investors LLC”)
        that function similar to stock awards. Since the initial distribution of
        the C-1
        and C-2 Units on August 27, 2004, approximately 1,994 and 3,949 additional
        C-1
        Units and C-2 Units, respectively, have been granted to certain of the Company’s
        officers and employees, net of forfeitures. The C-1 units vest pro rata on
        a
        quarterly basis over a three-year period and approximately 10,959 and 9,065
        were
        vested at April 1, 2006 and December 31, 2005, respectively. The total fair
        value of the C-1 units is approximately $1,100,000. Approximately $544,000
        remains to be amortized at April 1, 2006. The C-2 units only vest in the
        event
        that certain performance-based criteria, as defined, are met. As of April
        1,
        2006 and December 31, 2005, there was approximately $1,600,000 of unamortized
        stock-based employee compensation with respect to the C-2 units, which will
        be
        amortized in the event that it becomes probable that the C-2 units or any
        portion thereof will vest. The C-1 and C-2 units were valued using the
        Black-Scholes option pricing model to determine the freely-traded call option
        value based upon information from comparable public companies, which was
        then
        adjusted to reflect the discount period, the minority interest factor and
        the
        lack of marketability factor to arrive at the final valuations.
 
 Prior
        to January 1,
        2006, the Company used the fair value method of accounting for stock-based
        employee compensation in accordance with Statement of Financial Standards
        (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). On
        January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based
        Payment” (“SFAS No. 123R”).
 
 Under
        SFAS No.
        123R, the Company adopted the modified-prospective transition method of
        accounting for stock-based compensation. Under the modified-prospective
        transition method, the Company is required to recognize compensation cost
        for
        share-based payments to employees based on their grant-date fair value beginning
        January 1, 2006. Measurement and attribution of compensation cost for awards
        that were granted prior to, but not vested as of the date SFAS No. 123R was
        adopted are based on the same estimate of the grant-date fair value and the
        same
        attribution method used previously under SFAS No. 123.
 
 The
        adoption of
        SFAS No. 123R did not have a material impact on the Company’s financial position
        or results of operations.
 
 The
        Company
        recorded stock-based compensation charges in selling, general and administrative
        expense of approximately $100,000 for each of the three months ended April
        1,
        2006 and April 2, 2005, respectively, in accordance with SFAS No. 123 and
        SFAS
        No. 123R. A portion of this expense has been allocated to the Company’s
        reporting segments for all periods presented (see Note E) and a portion has
        been
        recorded in Unallocated.
  **Deferred
        Compensation**
 
 Prior
        to the
        acquisition of Nortek by Thomas H. Lee Partners, L.P. (the “Acquisition”),
        certain members of the Company’s management, including certain of the Company’s
        executive officers, held stock options to purchase shares of common stock
        of the
        former Nortek Holdings, Inc. issued to them under the former Nortek Holdings
        2002 Stock Option Plan. These members of the Company’s management, who would
        have been entitled to receive cash payments upon consummation of the Acquisition
        in respect to these options, instead sold a portion of those options to THL
        Buildco, Inc. and surrendered the remainder of these options held by them
        for
        cancellation without immediate payment. In consideration for option
        cancellations without immediate payment, these option holders received an
        equity
        interest in Investors LLC and Nortek Holdings established a deferred
        compensation plan and credited for the account of each of these management
        participants under the plan a number of notional Class A units of Investors
        LLC
        equal in value to the value of the old stock options so cancelled (see Notes
        B
        and K).
 
 In
        connection with
        accounting for the purchase price for the Acquisition, the Company recorded
        a
        deferred tax benefit of approximately $32,550,000 representing the tax benefit
        related to the deferred compensation plan of Nortek Holdings. At April 1,
        2006
        and December 31, 2005, the remaining deferred tax benefit was approximately
        $17,724,000 and $17,460,000 and is classified as a long-term receivable from
        affiliate on the Company’s accompanying unaudited condensed consolidated balance
        sheet.


**Goodwill**





The
      following table
      presents a summary of the activity in goodwill for the three months ended April
      1, 2006 and for the year ended December 31, 2005:





*(Dollar amounts in thousands)***Balance
                as of December 31, 2004**
            **$**
            **1,295,105**Acquisitions
                during the year ended December 31, 2005
            
            91,881Purchase
                accounting adjustments
            
            (4,831
            )Impact
                of
                foreign currency translation
            
            (805
            )**Balance
                as of December 31, 2005**
            
            **1,381,350**Acquisitions
                during the three months ended April 1, 2006
            
            861Purchase
                accounting adjustments
            
            (3,118
            )Impact
                of
                foreign currency translation
            
            22**Balance
                as of April 1, 2006**
            **$**
            **1,379,115**





The
        Company has
        classified as goodwill the cost in excess of fair value of the net assets
        (including tax attributes) of companies acquired in purchase transactions
        (see
        Note C). Approximately $100,000 and $56,100,000 of goodwill associated with
        certain companies acquired during the three months ended April 1, 2006 and
        the
        year ended December 31, 2005, respectively, will be deductible for income
        tax
        purposes. Purchase accounting adjustments relate principally to final revisions
        resulting from the completion of fair value adjustments and adjustments to
        deferred income taxes that impact goodwill.
 
 (B) As of
        April
        1, 2006, approximately $150,700,000 was available for the payment of cash
        dividends, stock purchases or other restricted payments by the Company as
        defined under the terms of the Company’s most restrictive loan agreement, the
        Company’s Senior Secured Credit Facility. Subsequent to the transaction
        discussed below, there will be approximately $122,700,000 available for the
        payment of cash dividends, stock purchases or other restricted payments by
        the
        Company as defined under the terms of the Company’s Senior Secured Credit
        Facility.
 
 Prior
        to
        the completion of the Offering, NTK Holdings is planning on entering into a
        senior unsecured loan facility which will provide for borrowings in an aggregate
        principal amount of $205,000,000. The proceeds of these borrowings, which
        will
        only be available in one drawing, will be utilized to (1) make a cash dividend
        of approximately $174,900,000 to Investors LLC which, in turn, will make
        a
        distribution to the holders of its Class A and Class B membership interests,
        including affiliates of Thomas H. Lee Partners, L.P. and certain members
        of the
        Company’s management, (2) together with cash on hand at Nortek, make a
        distribution of approximately $54,000,000 to participants under the 2004
        Nortek
        Holdings, Inc. Deferred Compensation Plan (including certain of the Company’s
        executive officers) and (3) pay related fees and expenses. Following these
        distributions, the holders of the Class A membership interests in Investors
        LLC
        and the participants in the 2004 Nortek Holdings, Inc. Deferred Compensation
        Plan will not be entitled to any further distributions (see Note
        K).
 
 (C) On February
        22, 2006, the Company, through its wholly-owned subsidiary, Linear LLC
        (“Linear”), acquired the assets and certain liabilities of Furman Sound, Inc.
        (“Furman”) for approximately $3,300,000. Furman is located in Petaluma, CA and
        designs and sells audio and video signal processors, as well as, innovative
        AC
        power conditioning and distribution products.
 
 On
        January 25,
        2006, the Company, through its wholly-owned subsidiary, Mammoth China Ltd.
        (“Mammoth China”), increased its ownership interests in Mammoth (Zhejiang) EG
        Air Conditioning Ltd. (“MEG”) and Shanghai Mammoth Air Conditioning Co., Ltd.
        (“MSH”) to sixty-percent for approximately $2,400,000. The majority ownership
        transaction relating to MSH is still in the process of being finalized with
        the
        Chinese authorities. Prior to January 25, 2006, Mammoth China had a
        forty-percent minority interest in MEG and a fifty-percent interest in
        MSH.
 
 On
        December 9,
        2005, the Company, through Linear, acquired the stock of GTO, Inc. (“GTO”) for
        approximately $28,200,000 in cash, plus contingent consideration of
        approximately $100,000 which was paid in the first quarter of 2006. GTO is
        located in Tallahassee, FL and designs, manufactures and sells automatic
        electric gate openers and access control devices to enhance the security
        and
        convenience of both residential and commercial property fences.
 
 On
        August 26, 2005,
        the Company, through its wholly-owned subsidiary, Elan Home Systems, LLC
        (“Elan”), acquired the assets and certain liabilities of Sunfire Corporation
        (“Sunfire”) for approximately $4,000,000 (utilizing approximately $3,500,000 of
        cash and issuing an unsecured subordinated promissory note in the amount
        of
        approximately $500,000) plus contingent consideration, which may be payable
        in
        future years. Sunfire is located in Snohomish, WA and sells and designs home
        audio and home cinema amplifiers, receivers and subwoofers.
 
 On
        August 8, 2005,
        the Company, through its wholly-owned subsidiary, Nortek (UK) Limited, acquired
        the stock of Imerge Limited (“Imerge”) for approximately $6,100,000 in cash plus
        contingent consideration, which may be payable in future years. Imerge is
        located in Cambridge, United Kingdom and designs, manufactures and sells
        hard
        disk media players and multi-room audio servers.
 
 On
        July 15, 2005,
        the Company, through Linear, acquired the assets and certain liabilities
        of
        Niles Audio Corporation (“Niles”) for approximately $77,700,000. In connection
        with the acquisition of Niles, the Company utilized approximately $67,700,000
        of
        cash and issued an unsecured promissory note in the amount of approximately
        $10,000,000. Niles is located in Miami, FL and sells and designs products
        that
        provide customers with innovative solutions for whole-house distribution
        and
        integration of audio and video systems, including speakers, receivers,
        amplifiers, automation devices, controls and accessories.
 
 On
        June 13, 2005,
        the Company, through its wholly-owned subsidiary Nordyne Inc. (“Nordyne”),
        acquired the assets and certain liabilities of International Marketing Supply,
        Inc. (“IMS”) for approximately $4,600,000, utilizing approximately $4,100,000 of
        cash and issuing an unsecured promissory note in the amount of approximately
        $500,000. IMS is located in Miami, FL and sells heating, ventilation and
        air
        conditioning equipment to customers in Latin America.
 
 On
        April 26, 2005,
        the Company, through Linear, acquired the stock of Panamax for approximately
        $11,800,000 (utilizing approximately $9,550,000 of cash and issuing an unsecured
        promissory note in the amount of approximately $2,250,000) plus contingent
        consideration of approximately $4,500,000 which was paid in the first quarter
        of
        2006. Panamax is located in Petaluma, CA and sells and designs innovative
        power
        conditioning and surge protection products that prevent loss or damage of
        home
        and small business equipment due to power disturbances.
 
 Acquisitions
        contributed approximately $31,500,000, $700,000 and $1,200,000 to net sales,
        operating earnings and depreciation and amortization expense, respectively,
        for
        the three months ended April 1, 2006. With the exception of IMS, which is
        included in the Air Conditioning and Heating Products Segment, all acquisitions
        are included in the Home Technology Products Segment in the Company’s segment
        reporting (see Note E).
 
 During
        each of the
        three months ended April 1, 2006 and April 2, 2005, the Company recorded
        approximately $100,000, respectively, of amortization of excess purchase
        price
        allocated to inventory related to the acquisitions noted above as a non-cash
        charge to cost of goods sold.
 
 On
        April 14, 2006,
        the Company, through two newly formed subsidiaries of its Air Conditioning
        and
        Heating Products Segment, acquired the assets and certain liabilities of
        Huntair, Inc. (“Huntair”) and Cleanpak International, LLC (“Cleanpak”), for a
        combined initial purchase price of approximately $48,000,000 (utilizing
        approximately $40,000,000 of cash borrowed under Nortek’s revolving credit
        facility, including approximately $2,000,000 to fund Huntair and
        Cleanpak’s initial working capital needs, all of which remains outstanding
        at May 5, 2006, and issuing unsecured 6% subordinated notes totaling $10,000,000
        due April 2008) plus contingent consideration. Both Huntair and Cleanpak
        are
        located near Portland, OR and manufacture, market and distribute custom air
        handlers and related products for commercial and cleanroom applications.
 
 The
        estimated total
        potential amount of contingent consideration that may be paid in the future
        for
        these acquisitions is approximately $40,500,000.
 
 Acquisitions
        are
        accounted for as purchases and accordingly have been included in the Company’s
        consolidated results of operations since the acquisition date. For recent
        acquisitions, the Company has made preliminary estimates of the fair value
        of
        the assets and liabilities of the acquired companies, including intangible
        assets and property and equipment, as of the date of acquisition, 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 appraisals of intangible assets and property and equipment and
        finalizing the integration plans for certain of the acquired companies, which
        are expected to be completed by the end of 2006.
 
 Pro
        forma results
        related to these acquisitions have not been presented, as the effect is not
        significant to the Company’s consolidated operating results.
 
 (D) Operating
        results for the three months ended April 1, 2006 include a non-cash foreign
        exchange gain of approximately $100,000 and the operating results for the
        three
        months ended April 2, 2005 include a non-cash foreign exchange loss of
        approximately $500,000 related to intercompany debt not indefinitely invested
        in
        the Company’s subsidiaries.
 
 Operating
        results
        for the three months ended April 2, 2005 includes a gain of approximately
        $1,400,000 from the settlement of certain obligations of former subsidiaries
        (see Note G).
 
 During
        each of the
        three months ended April 1, 2006 and April 2, 2005 the Company recorded a
        pre-tax charge to operations of approximately $100,000, respectively, for
        compensation expense in accordance with SFAS No. 123R and SFAS No. 123,
        respectively, (see Note A).
 
 The
        Company has a
        management agreement with an affiliate of Thomas H. Lee Partners, L.P. providing
        for certain financial and strategic advisory and consultancy services. Nortek
        expensed approximately $600,000 and $500,000 for the three months ended April
        1,
        2006 and April 2, 2005, respectively, related to this management agreement
        in
        the accompanying Unaudited Condensed Consolidated Statement of
        Operations.
  (E) The
        Company is a leading diversified manufacturer of innovative, branded residential
        and commercial products, which is organized within three reporting segments:
        the
        Residential Ventilation Products Segment, the Home Technology Products Segment
        and the Air Conditioning and Heating Products Segment. The Air Conditioning
        and
        Heating Products Segment combines the results of the Company’s residential and
        commercial heating, ventilating and air conditioning (“HVAC”) businesses. In the
        tables below, Unallocated includes corporate related items, intersegment
        eliminations and certain income and expense items not allocated to reportable
        segments.
 
 The
        Company
        evaluates segment performance based on operating earnings before allocations
        of
        corporate overhead costs. Intersegment net sales and intersegment eliminations
        were not material for any of the periods presented. The financial statement
        impact of all purchase accounting adjustments, including intangible asset
        amortization and goodwill, is reflected in the applicable operating segment,
        which are the Company’s reporting units.
 
 During
        2005, the
        Company changed the composition of its reporting segments to reflect the
        Home
        Technology Products Segment separately. In accordance with SFAS No. 131,
        “Disclosures about Segments of an Enterprise and Related Information”, the
        Company has restated prior period segment disclosures to conform to the new
        composition.
 
 Unaudited
        net
        sales, operating earnings and pre-tax earnings for the Company’s segments for
        the three months ended April 1, 2006 and April 2, 2005 were as follows:


**For
                  the three months ended****April
                  1, 2006**
              
              **April
                  2, 2005***(Dollar
                  amounts in thousands)***Net
                  sales:**Residential
                  ventilation products
              
              $
              211,663
              
              $
              197,133Home
                  technology products
              
              
              107,504
              
              
              63,891Air
                  conditioning and heating products
              
              
              215,375
              
              
              173,094Consolidated net sales
              
              $
              534,542
              
              $
              434,118**Operating
                  earnings:**Residential
                  ventilation products (1)
              
              $
              36,056
              
              $
              26,853Home
                  technology products
              
              
              17,307
              
              
              10,840Air
                  conditioning and heating products
              
              
              17,933
              
              
              7,339Subtotal
              
              
              71,296
              
              
              45,032**Unallocated:**Stock-based
                  compensation charges
              
              
              (100
              )
              
              (100
              )Foreign
                  exchange gain (loss) on intercompany debt
              
              
              100
              
              
              (100
              )Gain
                  on legal
                  settlement
              
              
              ---
              
              
              1,400Unallocated,
                  net
              
              
              (6,628
              )
              
              (5,347
              )Consolidated operating earnings
              
              
              64,668
              
              
              40,885Interest
                  expense
              
              
              (27,976
              )
              
              (24,285
              )Investment
                  income
              
              
              708
              
              
              400Earnings before provision for income taxes
              
              $
              37,400
              
              $
              17,000





(1)
            The
                operating
                results of the Residential Ventilation Products Segment for the three
                months ended April 2, 2005 include a non-cash foreign exchange loss
                of
                approximately $400,000 related to intercompany debt not indefinitely
                invested in the Company’s subsidiaries.





Unaudited
      depreciation expense, amortization of intangible assets and purchase price
      allocated to inventory and capital expenditures for the Company’s segments for
      the periods presented below were as follows:




**For
                  the three months ended****April
                  1, 2006**
              
              **April
                  2, 2005***(Dollar
                  amounts in thousands)***Depreciation
                  Expense:**Residential
                  ventilation products
              
              $
              3,180
              
              $
              2,934Home
                  technology products
              
              
              890
              
              
              494Air
                  conditioning and heating products
              
              
              3,681
              
              
              3,198Other
              
              
              172
              
              
              225Consolidated depreciation expense
              
              $
              7,923
              
              $
              6,851**Amortization
                  expense:**Residential
                  ventilation products
              
              $
              1,507
              
              $
              1,940Home
                  technology products (1)
              
              
              2,104
              
              
              1,896Air
                  conditioning and heating products
              
              
              591
              
              
              803Other
              
              
              125
              
              
              125Consolidated amortization expense
              
              $
              4,327
              
              $
              4,764**Capital
                  Expenditures:**Residential
                  ventilation products
              
              $
              4,635
              
              $
              1,934Home
                  technology products
              
              
              1,892
              
              
              513Air
                  conditioning and heating products
              
              
              5,456
              
              
              2,881Other
              
              
              123
              
              
              237Consolidated capital expenditures
              
              $
              12,106
              
              $
              5,565





(1) Includes
      amortization of approximately $100,000 and $400,000 for the three months ended
      April 1, 2006 and April 2, 2005, respectively, of excess purchase price
      allocated to inventory recorded as a non-cash charge to cost of products sold.


As
      noted above,
      during the fourth quarter of 2005 the Company changed the composition of its
      reporting segments. Segment information for the second and third quarter of
      2005
      have been restated and are presented below:


**For
                  the three months ended****July
                  2, 2005**
              
              **October
                  1, 2005****Net
                  sales:**
              
              *(Dollar
                  amounts in thousands)*Residential
                  ventilation products
              
              $
              202,501
              
              $
              198,479Home
                  technology products
              
              
              76,427
              
              
              100,598Air
                  conditioning and heating products
              
              
              219,932
              
              
              223,789Consolidated net sales
              
              $
              498,860
              
              $
              522,866**Operating
                  earnings:**Residential
                  ventilation products
              
              $
              30,978
              
              $
              30,784Home
                  technology products
              
              
              14,968
              
              
              20,589Air
                  conditioning and heating products
              
              
              20,434
              
              
              22,154Subtotal
              
              
              66,380
              
              
              73,527**Unallocated:**Stock-based
                  compensation charges
              
              
              (100
              )
              
              (100
              )Foreign
                  exchange loss on intercompany debt
              
              
              (200
              )
              
              ---Unallocated,
                  net
              
              
              (6,998
              )
              
              (5,847
              )Consolidated operating earnings
              
              
              59,082
              
              
              67,580Interest
                  expense
              
              
              (25,144
              )
              
              (26,544
              )Investment
                  income
              
              
              362
              
              
              264Earnings before provision for income taxes
              
              $
              34,300
              
              $
              41,300**Depreciation
                  Expense:**Residential
                  ventilation products
              
              $
              2,851
              
              $
              2,805Home
                  technology products
              
              
              489
              
              
              601Air
                  conditioning and heating products
              
              
              3,168
              
              
              3,239Other
              
              
              199
              
              
              231Consolidated depreciation expense
              
              $
              6,707
              
              $
              6,876**Amortization
                  expense:**Residential
                  ventilation products
              
              $
              1,937
              
              $
              2,285Home
                  technology products
              
              
              1,527
              
              
              1,552Air
                  conditioning and heating products
              
              
              797
              
              
              797Other
              
              
              124
              
              
              126Consolidated amortization expense
              
              $
              4,385
              
              $
              4,760**Capital
                  Expenditures:**Residential
                  ventilation products
              
              $
              1,861
              
              $
              1,841Home
                  technology products
              
              
              473
              
              
              549Air
                  conditioning and heating products
              
              
              4,796
              
              
              4,316Other
              
              
              19
              
              
              225Consolidated capital expenditures
              
              $
              7,149
              
              $
              6,931


(F)
            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
                38.0%
                and 37.1% for the periods
                presented:





**For
                the three months ended****April
                1, 2006**
            
            **April
                2, 2005**Income
                tax
                provision at the federal statutory rate
            
            
            35.0
            %
            
            35.0
            %Net
                change
                from federal statutory rate:State
                income
                tax provision, net of federal income tax effect
            
            
            1.7
            
            
            2.5Tax
                effect
                resulting from foreign activities
            
            
            0.8
            
            
            (0.7
            )Non-deductible
                expenses
            
            
            0.6
            
            
            0.4Other,
                net
            
            
            (0.1
            )
            
            (0.1
            )Income
                tax
                provision at estimated effective rate
            
            
            38.0
            %
            
            37.1
            %





(G) As of April
      1, 2006, the Company’s former subsidiary, Ply Gem Industries, Inc. (“Ply Gem”),
      has guaranteed approximately $23,100,000 of third party obligations relating
      to
      rental payments through June 30, 2016 under a facility leased by a former
      subsidiary, which was sold on September 21, 2001. The Company has indemnified
      these guarantees in connection with the sale of Ply Gem on February 12, 2004
      and
      has recorded an estimated liability related to this indemnified guarantee of
      approximately $900,000 at April 1, 2006 in accordance with Interpretation No.
      45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees,
      Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). The buyer
      of the former subsidiary has provided certain indemnifications and other rights
      to Nortek for any payments that it might be required to make pursuant to this
      guarantee. Should the buyer of the former subsidiary cease making payments
      then
      the Company may be required to make payments on its
      indemnification.





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, including the indemnified
      guarantee noted above, of approximately $12,000,000 and $12,500,000 at April
      1,
      2006 and December 31, 2005, respectively. Approximately $5,400,000 of short-term
      liabilities and approximately $6,600,000 of long-term liabilities are recorded
      in accrued expenses and other long-term liabilities, respectively, in the
      accompanying unaudited condensed consolidated balance sheet at April 1, 2006
      related to these indemnifications. In February 2005, the Company settled a
      portion of these obligations with a lump sum cash payment resulting in a
      reduction of approximately $1,400,000 in such liabilities, which was recorded
      as
      income in the Company’s unaudited condensed consolidated statement of operations
      for the three months ended April 2, 2005 (see Note D).





The
      Company sells a
      number of products and offers a number of warranties including in some
      instances, extended warranties for which the Company receives proceeds. 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
      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 unaudited combined short-term and long-term warranty liabilities
      during the three months ended April 1, 2006 and April 2, 2005 are as
      follows:





**For
                the three months ended****April
                1, 2006**
            
            **April
                2, 2005***(Dollar
                amounts in thousands)*Balance,
                beginning of period
            
            $
            34,843
            
            $
            30,319Warranties
                provided during period
            
            
            7,349
            
            
            4,424Settlements
                made during period
            
            
            (4,207
            )
            
            (4,171
            )Changes
                in
                liability estimate, including acquisitions
            
            
            189
            
            
            250Balance,
                end
                of period
            
            $
            38,174
            
            $
            30,822





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 and adjustment or replacement of component
      parts of units sold, which include product recalls. Product liability,
      environmental and other legal proceedings also include matters with respect
      to
      businesses previously owned. The Company has used various substances in its
      products and manufacturing operations which have been or may be deemed to be
      hazardous or dangerous, and the extent of its potential liability, if any,
      under
      environmental, product liability and workers’ compensation statutes, rules,
      regulations and case law is unclear. Further, due to the lack of adequate
      information and the potential impact of present regulations and any future
      regulations, there are certain circumstances in which no range of potential
      exposure may be reasonably estimated.





While
      it is
      impossible to ascertain the ultimate legal and financial liability with respect
      to contingent liabilities, including lawsuits, the Company believes that the
      aggregate amount of such liabilities, if any, in excess of amounts provided
      or
      covered by insurance, will not have a material adverse effect on the
      consolidated financial position, results of operations or liquidity of the
      Company. It is possible, however, that future results of operations for any
      particular future period could be materially affected by changes in the
      Company’s assumptions or strategies related to these contingencies or changes
      out of the Company’s control.





(H)
            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
      August of
      2004, the Company accrued approximately $3,400,000 related to severance benefits
      for certain of the Company’s employees at its corporate office. It is expected
      that these severance benefits will be paid through August 2006.




The
      following table
      sets forth restructuring activity in accordance with SFAS No. 146, “Accounting
      for Costs Associated with Exit or Disposal Activities (“SFAS No. 146”) in the
      accompanying unaudited condensed consolidated statement of operations for the
      periods presented. These costs are included in cost of goods sold and selling,
      general and administrative expenses in the accompanying unaudited condensed
      consolidated statement of operations of the Company.





**Employee
                Separation****Expenses**
            
            **Other**
            
            **Total**
              **Restructuring**
              **Costs***(Dollar
                amounts in thousands)***Balance
                at December 31, 2004**
            
            **$**
            **3,150**
            
            **$**
            **30**
            
            **$**
            **3,180**Payments
                and
                asset write downs
            
            
            (454
            )
            
            (30
            )
            
            (484
            )Other
            
            
            (10
            )
            
            ---
            
            
            (10
            )**Balance
                at April 2, 2005**
            
            **$**
            **2,686**
            
            **$**
            **---**
            
            **$**
            **2,686****Balance
                at December 31, 2005**
            
            **$**
            **1,031**
            
            **$**
            **241**
            
            **$**
            **1,272**Payments
                and
                asset write downs
            
            
            (418
            )
            
            (150
            )
            
            (568
            )Other
            
            
            ---
            
            
            (91
            )
            
            (91
            )**Balance
                at April 1, 2006**
            
            **$**
            **613**
            
            **$**
            **---**
            
            **$**
            **613**





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, costs
      to move equipment and products to other facilities and write-offs related to
      equipment sales and disposals.





(I) The Company
      and its subsidiaries have various pension, supplemental retirement plans for
      certain officers, profit sharing and other post retirement benefit plans
      requiring contributions to qualified trusts and union administered
      funds.





Pension
      and profit
      sharing expense charged to operations aggregated approximately $2,300,000 and
      $3,600,000 for the three months ended April 1, 2006 and April 2, 2005,
      respectively. The Company’s policy is to generally fund currently at least the
      minimum required annual contribution of its various qualified defined benefit
      plans. As previously disclosed in the Company’s latest annual report on Form
      10-K as filed with the SEC, the Company expects to contribute approximately
      $13,300,000 to its defined benefit pension plans in 2006. As of April 1, 2006,
      approximately $1,000,000 of contributions have been made and it
      is estimated
      that approximately $2,500,000 will be paid in the second quarter of 2006,
      approximately $7,300,000 will be paid in the third quarter of 2006 and
      approximately $2,500,000 will be paid in the fourth quarter of
      2006.





The
      Company’s
      unaudited net periodic benefit cost for its defined benefit plans for the
      periods presented consist of the following components:





**For
                the three months ended****April
                1, 2006**
            
            **April
                2, 2005***(Dollar
                amounts in thousands)*Service
                cost
            
            $
            337
            
            $
            340Interest
                cost
            
            
            2,215
            
            
            2,259Expected
                return on plan assets
            
            
            (2,245
            )
            
            (2,147
            )Recognized
                actuarial loss
            
            
            4
            
            
            5Net
                periodic
                benefit cost
            
            $
            311
            
            $
            457





The
      Company’s
      unaudited net periodic benefit cost for its subsidiary’s Post Retirement Health
      Benefit Plan for the periods presented consists of the following
      components:





**For
                the three months ended****April
                1, 2006**
            
            **April
                2, 2005***(Dollar
                amounts in thousands)*Service
                cost
            
            $
            101
            
            $
            112Interest
                cost
            
            
            360
            
            
            619Amortization
                of prior service cost
            
            
            (1,033
            )
            
            ---Recognized
                actuarial loss
            
            
            23
            
            
            ---Net
                periodic
                post retirement healthbenefit
                (income) cost
            
            $
            (549
            )
            $
            731





During
        2005, the
        Company notified certain retirees (approximately 199 former employees of
        the
        Company’s subsidiary NuTone, Inc.) that post retirement medical benefits would
        no longer be continued by the Company effective July 31, 2005. Such retirees
        were offered medical benefits through other means at their expense. This
        resulted in a negative plan amendment to the NuTone post retirement medical
        plan
        and the plan reflected a deferred actuarial gain of approximately $22,200,000
        which is being amortized into income by the Company through February
        2011.
 
 On
        June 8, 2005,
        the Company’s collective bargaining agreement with the United Automobile
        Aerospace & Agricultural Implement Workers of America and its Local No. 2029
        expired. That agreement is estimated, as of April 1, 2006, to cover
        approximately 4.3% of the Company’s employees (417 employees), which are located
        at the Cincinnati, OH location of the Company’s subsidiary NuTone, Inc. The
        Company presented its final proposal to the union bargaining committee but
        such
        proposal was not accepted by the union members. On July 16, 2005, the Company
        locked out the union employees at the NuTone Cincinnati, OH facility. On
        September 6, 2005, the Company notified the union bargaining committee that
        negotiations had reached an impasse and that it was unilaterally implementing
        the terms of its final offer. On March 6, 2006, the Company received notice
        that
        the union filed an unfair labor practice charge with the United States National
        Labor Relations Board claiming that the Company had not bargained to impasse
        and
        that, from and after September 6, 2005, it had failed to bargain collectively
        and in good faith. On April 28, 2006, the United States National Labor Relations
        Board dismissed this complaint. The union has until May 11, 2006 to file
        an
        appeal. Among other things, this implemented final offer does not provide
        the
        NuTone union members with post retirement medical benefits. Accordingly,
        under
        this implemented final offer the Company may experience a curtailment gain
        of up
        to approximately $22,600,000, net of tax, including recording the unamortized
        plan amendment related to the retirees noted above.
 
 On
        December 8,
        2003, President Bush signed into law the Medicare Prescription Drug, Improvement
        and Modernization Act of 2003 (“the Act”). The Act expanded Medicare to include,
        for the first time, coverage for prescription drugs. Based upon an analysis
        of
        plan provisions and prescription drug claims experience, it has been determined
        that the potential savings that the NuTone Retiree Medical Plan could realize
        as
        a result of the Act would not warrant the administrative cost necessary to
        recover the federal subsidy, accordingly the Company has not reflected any
        reduction in cost under FASB Staff Position No. FAS 106-2 as of April 1,
        2006 or
        April 2, 2005.




(J) The Company’s
      8 1/2% Senior Subordinated Notes due 2014 (the “8 1/2% Notes”) require interest
      to be paid semi-annually in arrears on March 1 and September 1 of each year.
      The
      8 1/2% Notes are guaranteed by all of the Company’s current and certain future
      domestic subsidiaries (the “Guarantors”), as defined, with the exception of
      certain domestic subsidiaries, as defined, which are excluded from the 8 1/2%
      Note guarantee. The Guarantors are wholly-owned either directly or indirectly
      by
      the Company and jointly and severally guarantee the Company’s obligations under
      the 8 1/2% Notes. None of the Company’s subsidiaries organized outside of the
      United States guarantee the 8 1/2% Notes.





Consolidating
      balance sheets related to the Company, its guarantor subsidiaries and
      non-guarantor subsidiaries as of April 1, 2006 and December 31, 2005 and the
      related consolidating statements of operations and cash flows for the three
      months ended April 1, 2006 and April 2, 2005 are reflected below in order to
      comply with the reporting requirements for guarantor subsidiaries.







**Unaudited
      Condensed Consolidating Statement of Operations**


**For
      the
      three months ended April 1, 2006**




**Guarantor**
              
              **Non-Guarantor**
              
              
              
              **Nortek****Parent**
              
              **Subsidiaries**
              
              **Subsidiaries**
              
              **Eliminations**
              
              **Consolidated***(Dollar
                  amounts in thousands)***Net
                  Sales**
              
              $
              ---
              
              $
              442,926
              
              $
              130,346
              
              $
              (38,730
              )
              $
              534,542**Costs
                  and expenses:**Costs of products sold
              
              
              ---
              
              
              303,644
              
              
              105,554
              
              
              (38,730
              )
              
              370,468Selling, general and administrative expenses
              
              
              6,501
              
              
              72,008
              
              
              16,676
              
              
              ---
              
              
              95,185Amortization of intangible assets
              
              
              125
              
              
              3,518
              
              
              578
              
              
              ---
              
              
              4,2216,626
              
              
              379,170
              
              
              122,808
              
              
              (38,730
              )
              
              469,874Operating
                  (loss) earnings
              
              
              (6,626
              )
              
              63,756
              
              
              7,538
              
              
              ---
              
              
              64,668Interest
                  expense
              
              
              (27,172
              )
              
              (566
              )
              
              (238
              )
              
              ---
              
              
              (27,976
              )Investment
                  income
              
              
              631
              
              
              4
              
              
              73
              
              
              ---
              
              
              708(Loss)
                  income
                  before charges and allocationsto subsidiaries and equity in subsidiaries'earnings (loss) before income taxes
              
              
              (33,167
              )
              
              63,194
              
              
              7,373
              
              
              ---
              
              
              37,400Charges
                  and
                  allocations to subsidiaries andequity in subsidiaries' earnings (loss)before income taxes
              
              
              70,567
              
              
              (12,794
              )
              
              227
              
              
              (58,000
              )
              
              ---Earnings
                    (loss) before provision (benefit)
                    for
                    income taxes
              
              
              37,400
              
              
              50,400
              
              
              7,600
              
              
              (58,000
              )
              
              37,400Provision
                  (benefit) for income taxes
              
              
              14,200
              
              
              18,500
              
              
              2,800
              
              
              (21,300
              )
              
              14,200Net earnings (loss)
              
              $
              23,200
              
              $
              31,900
              
              $
              4,800
              
              $
              (36,700
              )
              $
              23,200


**Unaudited
      Condensed Consolidating Statement of Operations**


**For
      the
      three months ended April 2, 2005**


**Guarantor**
              
              **Non-Guarantor**
              
              
              
              **Nortek****Parent**
              
              **Subsidiaries**
              
              **Subsidiaries**
              
              **Eliminations**
              
              **Consolidated***(Dollar
                  amounts in thousands)***Net
                  Sales**
              
              $
              ---
              
              $
              354,309
              
              $
              103,160
              
              $
              (23,351
              )
              $
              434,118**Costs
                  and expenses:**Costs of products sold
              
              
              ---
              
              
              248,599
              
              
              84,211
              
              
              (23,351
              )
              
              309,459Selling, general and administrative expenses
              
              
              3,931
              
              
              59,951
              
              
              15,559
              
              
              ---
              
              
              79,441Amortization of intangible assets
              
              
              125
              
              
              3,678
              
              
              530
              
              
              ---
              
              
              4,3334,056
              
              
              312,228
              
              
              100,300
              
              
              (23,351
              )
              
              393,233Operating
                  (loss) earnings
              
              
              (4,056
              )
              
              42,081
              
              
              2,860
              
              
              ---
              
              
              40,885Interest
                  expense
              
              
              (23,681
              )
              
              (423
              )
              
              (181
              )
              
              ---
              
              
              (24,285
              )Investment
                  income
              
              
              356
              
              
              4
              
              
              40
              
              
              ---
              
              
              400(Loss)
                  income
                  before charges and allocationsto subsidiaries and equity in subsidiaries'earnings (loss) before income taxes
              
              
              (27,381
              )
              
              41,662
              
              
              2,719
              
              
              ---
              
              
              17,000Charges
                  and
                  allocations to subsidiaries andequity in subsidiaries' earnings (loss)before income taxes
              
              
              44,381
              
              
              (18,062
              )
              
              (519
              )
              
              (25,800
              )
              
              ---Earnings
                  (loss) before provision(benefit) for income taxes
              
              
              17,000
              
              
              23,600
              
              
              2,200
              
              
              (25,800
              )
              
              17,000Provision
                  (benefit) for income taxes
              
              
              6,300
              
              
              8,700
              
              
              700
              
              
              (9,400
              )
              
              6,300Net earnings (loss)
              
              $
              10,700
              
              $
              14,900
              
              $
              1,500
              
              $
              (16,400
              )
              $
              10,700


**Unaudited
      Condensed Consolidating Balance Sheet**


**As
      of April
      1, 2006**


**Guarantor**
                
                **Non-Guarantor**
                
                
                
                **Nortek****Parent**
                
                **Subsidiaries**
                
                **Subsidiaries**
                
                **Eliminations**
                
                **Consolidated***(Dollar
                    amounts in thousands)***ASSETS:****Current
                    Assets:**Unrestricted
                    cash and cash equivalents
                
                $
                40,050
                
                $
                4,687
                
                $
                25,421
                
                $
                ---
                
                $
                70,158Accounts
                    receivable, less allowances
                
                
                ---
                
                
                225,424
                
                
                77,507
                
                
                ---
                
                
                302,931Intercompany
                    receivables (payables)
                
                
                1,321
                
                
                (5,220
                )
                
                3,899
                
                
                ---
                
                
                ---Inventories
                
                
                ---
                
                
                209,253
                
                
                46,566
                
                
                ---
                
                
                255,819Prepaid
                    expenses
                
                
                1,083
                
                
                6,107
                
                
                3,977
                
                
                ---
                
                
                11,167Other
                    current
                    assets
                
                
                2,883
                
                
                1,143
                
                
                22,614
                
                
                ---
                
                
                26,640Prepaid
                    income taxes
                
                
                (900
                )
                
                16,590
                
                
                200
                
                
                ---
                
                
                15,890Total current assets
                
                
                44,437
                
                
                457,984
                
                
                180,184
                
                
                ---
                
                
                682,605**Property
                    and Equipment, at Cost:**Total
                    property and equipment, net
                
                
                1,538
                
                
                143,130
                
                
                66,726
                
                
                ---
                
                
                211,394**Other
                    Long-term Assets:**Investment
                        in
                        subsidiaries and long-term receivable from (to)
                        subsidiaries
                
                
                1,828,159
                
                
                (68,248
                )
                
                (60,238
                )
                
                (1,699,673
                )
                
                ---Goodwill
                
                
                ---
                
                
                1,354,751
                
                
                24,364
                
                
                ---
                
                
                1,379,115Intangible
                    assets, less accumulated amortization
                
                
                1,202
                
                
                91,716
                
                
                21,675
                
                
                ---
                
                
                114,593Long-term
                    portion of receivable from affiliate
                
                
                17,724
                
                
                ---
                
                
                ---
                
                
                ---
                
                
                17,724Other
                    assets
                
                
                42,693
                
                
                3,922
                
                
                577
                
                
                ---
                
                
                47,192Total other long-term assets
                
                
                1,889,778
                
                
                1,382,141
                
                
                (13,622
                )
                
                (1,699,673
                )
                
                1,558,624Total assets
                
                $
                1,935,753
                
                $
                1,983,255
                
                $
                233,288
                
                $
                (1,699,673
                )
                $
                2,452,623**LIABILITIES
                      AND
                      STOCKHOLDER'S****INVESTMENT:****Current
                    Liabilities:**Notes
                    payable
                    and other short-term obligations
                
                $
                ---
                
                $
                ---
                
                $
                5,714
                
                $
                ---
                
                $
                5,714Current
                    maturities of long-term debt
                
                
                8,850
                
                
                7,334
                
                
                2,062
                
                
                ---
                
                
                18,246Accounts
                    payable
                
                
                861
                
                
                106,557
                
                
                73,115
                
                
                ---
                
                
                180,533Accrued
                    expenses and taxes, net
                
                
                21,190
                
                
                122,617
                
                
                37,219
                
                
                ---
                
                
                181,026Total current liabilities
                
                
                30,901
                
                
                236,508
                
                
                118,110
                
                
                ---
                
                
                385,519**Other
                    Liabilities:**Deferred
                    income taxes
                
                
                (11,000
                )
                
                14,687
                
                
                15,500
                
                
                ---
                
                
                19,187Other
                    long-term liabilities
                
                
                73,070
                
                
                83,993
                
                
                11,589
                
                
                ---
                
                
                168,65262,070
                
                
                98,680
                
                
                27,089
                
                
                ---
                
                
                187,839**Notes,
                    Mortgage Notes and Obligations****Payable, Less Current Maturities**
                
                
                1,318,382
                
                
                26,237
                
                
                10,246
                
                
                ---
                
                
                1,354,865Stockholder's
                    investment
                
                
                524,400
                
                
                1,621,830
                
                
                77,843
                
                
                (1,699,673
                )
                
                524,400Total liabilities and stockholder's investment
                
                $
                1,935,753
                
                $
                1,983,255
                
                $
                233,288
                
                $
                (1,699,673
                )
                $
                2,452,623






**Unaudited
      Condensed Consolidating Balance Sheet**


**As
      of
      December 31, 2005**





**Guarantor**
            
            **Non-Guarantor**
            
            
            
            **Nortek****Parent**
            
            **Subsidiaries**
            
            **Subsidiaries**
            
            **Eliminations**
            
            **Consolidated***(Dollar
                amounts in thousands)***ASSETS:****Current
                Assets:**Unrestricted
                cash and cash equivalents
            
            $
            57,211
            
            $
            3,596
            
            $
            16,368
            
            $
            ---
            
            $
            77,175Accounts
                receivable, less allowances
            
            
            ---
            
            
            204,023
            
            
            68,168
            
            
            ---
            
            
            272,191Intercompany
                receivables (payables)
            
            
            3,699
            
            
            (4,652
            )
            
            953
            
            
            ---
            
            
            ---Inventories
            
            
            ---
            
            
            199,164
            
            
            43,148
            
            
            ---
            
            
            242,312Prepaid
                expenses
            
            
            622
            
            
            6,562
            
            
            3,326
            
            
            ---
            
            
            10,510Other
                current
                assets
            
            
            2,290
            
            
            3,668
            
            
            20,391
            
            
            ---
            
            
            26,349Prepaid
                income taxes
            
            
            5,000
            
            
            15,472
            
            
            200
            
            
            ---
            
            
            20,672Total current assets
            
            
            68,822
            
            
            427,833
            
            
            152,554
            
            
            ---
            
            
            649,209**Property
                and Equipment, at Cost:**Total
                property and equipment, net
            
            
            1,531
            
            
            144,010
            
            
            59,948
            
            
            ---
            
            
            205,489**Other
                Long-term Assets:**Investment
                  in
                  subsidiaries and long-termreceivable
                  from (to) subsidiaries
            
            
            1,788,746
            
            
            (67,205
            )
            
            (55,709
            )
            
            (1,665,832
            )
            
            ---Goodwill
            
            
            ---
            
            
            1,355,314
            
            
            26,036
            
            
            ---
            
            
            1,381,350Intangible
                assets, less accumulated amortization
            
            
            1,327
            
            
            93,136
            
            
            20,011
            
            
            ---
            
            
            114,474Long-term
                portion of receivable from affiliate
            
            
            17,460
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            17,460Other
                assets
            
            
            43,537
            
            
            3,913
            
            
            1,144
            
            
            ---
            
            
            48,594Total other long-term assets
            
            
            1,851,070
            
            
            1,385,158
            
            
            (8,518
            )
            
            (1,665,832
            )
            
            1,561,878Total assets
            
            $
            1,921,423
            
            $
            1,957,001
            
            $
            203,984
            
            $
            (1,665,832
            )
            $
            2,416,576**LIABILITIES
                  AND STOCKHOLDER'S INVESTMENT:****Current
                Liabilities:**Notes
                payable
                and other short-term obligations
            
            $
            ---
            
            $
            ---
            
            $
            4,915
            
            $
            ---
            
            $
            4,915Current
                maturities of long-term debt
            
            
            8,850
            
            
            4,885
            
            
            1,051
            
            
            ---
            
            
            14,786Accounts
                payable
            
            
            1,064
            
            
            93,731
            
            
            64,220
            
            
            ---
            
            
            159,015Accrued
                expenses and taxes, net
            
            
            29,884
            
            
            135,235
            
            
            31,602
            
            
            ---
            
            
            196,721Total current liabilities
            
            
            39,798
            
            
            233,851
            
            
            101,788
            
            
            ---
            
            
            375,437**Other
                Liabilities:**Deferred
                income taxes
            
            
            (11,000
            )
            
            15,881
            
            
            15,500
            
            
            ---
            
            
            20,381Other
                long-term liabilities
            
            
            72,184
            
            
            85,126
            
            
            9,059
            
            
            ---
            
            
            166,36961,184
            
            
            101,007
            
            
            24,559
            
            
            ---
            
            
            186,750**Notes,
                Mortgage Notes and Obligations****Payable, Less Current Maturities**
            
            
            1,320,132
            
            
            29,053
            
            
            4,895
            
            
            ---
            
            
            1,354,080Stockholder's
                investment
            
            
            500,309
            
            
            1,593,090
            
            
            72,742
            
            
            (1,665,832
            )
            
            500,309Total liabilities and stockholder's investment
            
            $
            1,921,423
            
            $
            1,957,001
            
            $
            203,984
            
            $
            (1,665,832
            )
            $
            2,416,576






**Unaudited
      Condensed Consolidating Cash Flow Statement**


**For
      the
      three months ended April 1, 2006**




**Guarantor**
              
              **Non-Guarantor**
              
              **Nortek****Parent**
              
              **Subsidiaries**
              
              **Subsidiaries**
              
              **Consolidated***(Dollar
                  amounts in thousands)***Cash
                  Flows from operating activities:**Net
                  cash
                  (used in) provided by operating activities
              
              $
              (14,268
              )
              $
              8,060
              
              $
              16,248
              
              $
              10,040**Cash
                  Flows from investing activities:**Capital
                  expenditures
              
              
              (123
              )
              
              (5,051
              )
              
              (6,932
              )
              
              (12,106
              )Net
                  cash paid
                  for businesses acquired
              
              
              ---
              
              
              (7,900
              )
              
              ---
              
              
              (7,900
              )Proceeds
                  from
                  the sale of property and equipment
              
              
              ---
              
              
              71
              
              
              58
              
              
              129Change
                  in
                  restricted cash and marketable securities
              
              
              (3
              )
              
              ---
              
              
              ---
              
              
              (3
              )Other,
                  net
              
              
              (963
              )
              
              (538
              )
              
              46
              
              
              (1,455
              )Net cash used in investing activities
              
              
              (1,089
              )
              
              (13,418
              )
              
              (6,828
              )
              
              (21,335
              )**Cash
                  Flows from financing activities:**Increase
                  in
                  borrowings
              
              
              ---
              
              
              9,255
              
              
              107
              
              
              9,362Payment
                  of
                  borrowings
              
              
              (1,750
              )
              
              (2,806
              )
              
              (474
              )
              
              (5,030
              )Other,
                  net
              
              
              (54
              )
              
              ---
              
              
              ---
              
              
              (54
              )Net cash (used in) provided by financing activities
              
              
              (1,804
              )
              
              6,449
              
              
              (367
              )
              
              4,278Net
                      (decrease) increase in unrestricted cash and cash
                      equivalents
              
              
              (17,161
              )
              
              1,091
              
              
              9,053
              
              
              (7,017
              )Unrestricted
                      cash and cash equivalents at the beginning of the
                      period
              
              
              57,211
              
              
              3,596
              
              
              16,368
              
              
              77,175Unrestricted
                      cash and cash equivalents at the end of the
                      period
              
              $
              40,050
              
              $
              4,687
              
              $
              25,421
              
              $
              70,158






**Unaudited
      Condensed Consolidating Cash Flow Statement**


**For
      the
      three months ended April 2, 2005**


**Guarantor**
                
                **Non-Guarantor**
                
                **Nortek****Parent**
                
                **Subsidiaries**
                
                **Subsidiaries**
                
                **Consolidated***(Dollar
                    amounts in thousands)***Cash
                    Flows from operating activities:**Net
                    cash used
                    in operating activities
                
                $
                (14,287
                )
                $
                (1,448
                )
                $
                (2,917
                )
                $
                (18,652
                )**Cash
                    Flows from investing activities:**Capital
                    expenditures
                
                
                (237
                )
                
                (1,963
                )
                
                (1,483
                )
                
                (3,683
                )Proceeds
                    from
                    the sale of property and equipment
                
                
                31
                
                
                5,774
                
                
                25
                
                
                5,830Other,
                    net
                
                
                ---
                
                
                (390
                )
                
                (9
                )
                
                (399
                )Net cash (used in) provided by investing activities
                
                
                (206
                )
                
                3,421
                
                
                (1,467
                )
                
                1,748**Cash
                    Flows from financing activities:**Increase
                    in
                    borrowings
                
                
                ---
                
                
                ---
                
                
                3,501
                
                
                3,501Payment
                    of
                    borrowings
                
                
                (5,247
                )
                
                (489
                )
                
                (859
                )
                
                (6,595
                )Other,
                    net
                
                
                (208
                )
                
                ---
                
                
                ---
                
                
                (208
                )Net cash (used in) provided by financing activities
                
                
                (5,455
                )
                
                (489
                )
                
                2,642
                
                
                (3,302
                )Net
                        (decrease) increase in unrestricted cash and cash
                        equivalents
                
                
                (19,948
                )
                
                1,484
                
                
                (1,742
                )
                
                (20,206
                )Unrestricted
                        cash and cash equivalents at the beginning of the
                        period
                
                
                76,562
                
                
                2,313
                
                
                16,080
                
                
                94,955Unrestricted
                        cash and cash equivalents at the end of the
                        period
                
                $
                56,614
                
                $
                3,797
                
                $
                14,338
                
                $
                74,749
  (K)
                On
                    April
                    3, 2006,
                    the Company amended and restated the credit agreement for its
                    senior
                    secured credit facility, expanding its $100,000,000 revolving
                    credit
                    facility to $200,000,000 and modifying certain covenants. The
                    amendment
                    provides the Company with additional liquidity and covenant flexibility.
                    The revolving credit facility matures in August 2010 and includes
                    both a
                    letter of credit sub-facility and swing line loan sub-facility.
                    As of
                    April 3, 2006, the Company had approximately $170,000,000 of
                    borrowing
                    availability under the U.S. portion of its revolving credit facility
                    and
                    approximately $10,000,000 of borrowing availability under the
                    Canadian
                    portion of its revolving credit facility. As of May 5, 2006,
                    there was
                    approximately $45,000,000 outstanding under the U.S. portion
                    of the
                    Company’s revolving credit facility andno
                    outstanding borrowings under the Canadian portion of the revolving
                    credit
                    facility.
 
 On
          April 14, 2006,
          the Company, through two newly formed subsidiaries of its Air Conditioning
          and
          Heating Products Segment, acquired the assets and certain liabilities of
          Huntair
          and Cleanpak, for a combined initial purchase price of approximately $48,000,000
          (utilizing approximately $40,000,000 of cash borrowed under Nortek’s revolving
          credit facility, including approximately $2,000,000 to
          fund Huntair and Cleanpak’s initial working capital needs, all of which
          remains outstanding at May 5, 2006, and issuing unsecured 6% subordinated
          notes
          totaling $10,000,000 due April 2008) plus contingent consideration. Both
          Huntair
          and Cleanpak are located near Portland, OR and manufacture, market and
          distribute custom air handlers and related products for commercial and
          cleanroom
          applications.
 
 Prior
          to
          the completion of the Offering, NTK Holdings is planning on entering into a
          senior unsecured loan facility which will provide for borrowings in an
          aggregate
          principal amount of $205,000,000. The proceeds of these borrowings, which
          will
          only be available in one drawing, will be utilized to (1) make a cash dividend
          of approximately $174,900,000 to Investors LLC which, in turn, will make
          a
          distribution to the holders of its Class A and Class B membership interests,
          including affiliates of Thomas H. Lee Partners, L.P. and certain members
          of the
          Company’s management, (2) together with cash on hand at Nortek, make a
          distribution of approximately $54,000,000 to participants under the 2004
          Nortek
          Holdings, Inc. Deferred Compensation Plan (including certain of the Company’s
          executive officers) and (3) pay related fees and expenses. Following these
          distributions, the holders of the Class A membership interests in Investors
          LLC
          and the participants in the 2004 Nortek Holdings, Inc. Deferred Compensation
          Plan will not be entitled to any further distributions.
 
 As
          noted in Note A,
          on May 5, 2006, NTK Holdings filed a registration statement on Form S-1
          with the
          SEC for an initial public offering of shares of its common stock. The
          net proceeds
          from the Offering will be utilized to (1) repay all amounts outstanding
          under
          the new senior unsecured loan facility as noted above, (2) redeem all of
          the
          Company’s remaining outstanding 9 7/8% Senior Discount Notes, (3) redeem a
          portion of NTK Holdings’ outstanding 10 3/4% Senior Discount Notes, (4) repay a
          portion of the term loan under the Company’s Senior Secured Credit Facility and
          (5) pay related redemption premiums and accrued
          interest.




**NORTEK,
        INC. AND SUBSIDIARIES**
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS**
 **OF
        THE
        UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE
        FIRST QUARTER ENDED APRIL 1, 2006**
 **AND
        THE
        FIRST QUARTER ENDED APRIL 2, 2005**


**ITEM
      2.** **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




Nortek,
      Inc. and
      its wholly-owned subsidiaries (individually and collectively the “Company” or
“Nortek”) are leading diversified manufacturers of innovative, branded
      residential and commercial products, operating within three reporting segments:
      the Residential Ventilation Products segment, the Home Technology Products
      segment and the Air Conditioning and Heating Products segment. In the results
      of
      operations presented below, Unallocated includes corporate related items,
      intersegment eliminations and certain income and expense not allocated to its
      segments. Through its reporting segments, the Company manufactures and sells,
      primarily in the United States, Canada and Europe, a wide variety of products
      for the professional remodeling and replacement markets, the residential and
      commercial construction markets, the manufactured housing market and the
      do-it-yourself (“DIY”) market. 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.





During
      2005, the
      Company changed the composition of its reporting segments to reflect the Home
      Technology Products segment separately. In accordance with Statement of
      Financial Standards (“SFAS”) No. 131, “Disclosures about Segments of an
      Enterprise and Related Information”, the Company has restated prior period
      segment disclosures to conform to the new composition.





The
      Residential
      Ventilation Products (“RVP”) segment manufactures and sells room and whole house
      ventilation products and other products primarily for the professional
      remodeling and replacement, residential new construction and DIY markets. The
      principal products sold by this segment include:





·
            kitchen
                range
                hoods,


·
            exhaust
                fans
                (such as bath fans and fan, heater and light combination units),
                and


·
            indoor
                air
                quality products.





The
      Home Technology
      Products (“HTP”) segment manufactures and sells a broad array of products
      designed to provide convenience and security for residential and light
      commercial applications. The principal products sold by this segment
      are:





·
            audio
                / video
                distribution and control equipment,


·
            speakers
                and
                subwoofers,


·
            security
                and
                access control products,


·
            power
                conditioners and surge protectors,


·
            audio
                / video
                wall mounts and fixtures, and


·
            structured
                wiring.





The
      Air
      Conditioning and Heating Products (“HVAC”) segment manufactures and sells
      heating, ventilating and air conditioning systems for site-built residential
      and
      manufactured housing structures, custom-designed commercial applications and
      standard light commercial products. The principal products sold by this segment
      are:


·
            split
                system
                air conditioners and heat pumps, ·
            furnaces
                and
                related equipment, ·
            air
                handlers,
                and ·
            large
                custom
                roof top cooling and heating
                products.




***Acquisitions***





On
      April 14, 2006,
      the Company, through two newly formed subsidiaries of its Air Conditioning
      and
      Heating Products segment, acquired the assets and certain liabilities of
      Huntair, Inc. (“Huntair”) and Cleanpak International, LLC (“Cleanpak”), for a
      combined initial purchase price of approximately $48,000,000 (utilizing
      approximately $40,000,000 of cash borrowed under Nortek’s revolving credit
      facility, including approximately $2,000,000 to fund Huntair and
      Cleanpak’s initial working capital needs, all of which remains outstanding at
      May 5, 2006, and issuing unsecured 6% subordinated notes totaling $10,000,000
      due April 2008) plus contingent consideration. Both Huntair and Cleanpak are
      located near Portland, OR and manufacture, market and distribute custom air
      handlers and related products for commercial and cleanroom applications.





On
      February 22,
      2006, the Company, through its wholly-owned subsidiary, Linear LLC (“Linear”),
      acquired the assets and certain liabilities of Furman Sound, Inc. (“Furman”) for
      approximately $3,300,000. Furman is located in Petaluma, CA and designs and
      sells audio and video signal processors, as well as, innovative AC power
      conditioning and distribution products.





On
      January 25,
      2006, the Company, through its wholly-owned subsidiary, Mammoth China Ltd.
      (“Mammoth China”), increased its ownership interests in Mammoth (Zhejiang) EG
      Air Conditioning Ltd. (“MEG”) and Shanghai Mammoth Air Conditioning Co., Ltd.
      (“MSH”) to sixty-percent for approximately $2,400,000. The majority ownership
      transaction relating to MSH is still in the process of being finalized with
      the
      Chinese authorities. Prior to January 25, 2006, Mammoth China had a
      forty-percent minority interest in MEG and a fifty-percent interest in
      MSH.





On
      December 9,
      2005, the Company, through Linear, acquired the stock of GTO, Inc. (“GTO”) for
      approximately $28,200,000 in cash, plus contingent consideration of
      approximately $100,000 which was paid in the first quarter of 2006. GTO is
      located in Tallahassee, FL and designs, manufactures and sells automatic
      electric gate openers and access control devices to enhance the security and
      convenience of both residential and commercial property fences.





On
      August 26, 2005,
      the Company, through its wholly-owned subsidiary, Elan Home Systems, LLC
      (“Elan”), acquired the assets and certain liabilities of Sunfire Corporation
      (“Sunfire”) for approximately $4,000,000 (utilizing approximately $3,500,000 of
      cash and issuing an unsecured subordinated promissory note in the amount of
      approximately $500,000) plus contingent consideration, which may be payable
      in
      future years. Sunfire is located in Snohomish, WA and sells and designs home
      audio and home cinema amplifiers, receivers and subwoofers.





On
      August 8, 2005,
      the Company, through its wholly-owned subsidiary, Nortek (UK) Limited, acquired
      the stock of Imerge Limited (“Imerge”) for approximately $6,100,000 in cash plus
      contingent consideration, which may be payable in future years. Imerge is
      located in Cambridge, United Kingdom and designs, manufactures and sells hard
      disk media players and multi-room audio servers.





On
      July 15, 2005,
      the Company, through Linear, acquired the assets and certain liabilities of
      Niles Audio Corporation (“Niles”) for approximately $77,700,000. In connection
      with the acquisition of Niles, the Company utilized approximately $67,700,000
      of
      cash and issued an unsecured promissory note in the amount of approximately
      $10,000,000. Niles is located in Miami, FL and sells and designs products that
      provide customers with innovative solutions for whole-house distribution and
      integration of audio and video systems, including speakers, receivers,
      amplifiers, automation devices, controls and accessories.





On
      June 13, 2005,
      the Company, through its wholly-owned subsidiary Nordyne Inc. (“Nordyne”),
      acquired the assets and certain liabilities of International Marketing Supply,
      Inc. (“IMS”) for approximately $4,600,000, utilizing approximately $4,100,000 of
      cash and issuing an unsecured promissory note in the amount of approximately
      $500,000. IMS is located in Miami, FL and sells heating, ventilation and air
      conditioning equipment to customers in Latin America.





On
      April 26, 2005,
      the Company, through Linear, acquired the stock of Panamax for approximately
      $11,800,000 (utilizing approximately $9,550,000 of cash and issuing an unsecured
      promissory note in the amount of approximately $2,250,000) plus contingent
      consideration of approximately $4,500,000 which was paid in the first quarter
      of
      2006. Panamax is located in Petaluma, CA and sells and designs innovative power
      conditioning and surge protection products that prevent loss or damage of home
      and small business equipment due to power disturbances.





The
      estimated total
      potential amount of contingent consideration that may be paid in the future
      for
      these acquisitions is approximately $40,500,000.





These
      acquisitions
      have been accounted for under the purchase method of accounting and are included
      in the Company’s Home Technology Products segment, with the exception of IMS,
      Huntair and Cleanpak, which are classified in the Company’s Air
      Conditioning and Heating Products segment. Accordingly, the results of these
      acquisitions are included in the Company’s unaudited condensed consolidated
      results since the date of their acquisition.





***Critical
      Accounting Policies***





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
                and
                Other Long-Lived Assets


·
            Pensions
                and
                Post Retirement Health Benefits


·
            Insurance
                Liabilities, and


·
            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
      tables that
      follow present the unaudited net sales, operating earnings and depreciation
      and
      amortization expense for the Company’s reporting segments for the three months
      ended April 1, 2006 and April 2, 2005, 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 three months ended April 1, 2006 and April 2, 2005:




**Change
                  in the **First
                  Quarter 2006******as
                  Compared to the****For
                  the first quarter ended**
              
              **First
                  Quarter 2005****April
                  1, 2006**
              
              **April
                  2, 2005**
              
              $
              
              %*(Dollar
                  amounts in thousands)***Net
                  sales:**Residential
                  ventilation products
              
              $
              211,663
              
              $
              197,133
              
              $
              14,530
              
              
              7.4
              %Home
                  technology products
              
              
              107,504
              
              
              63,891
              
              
              43,613
              
              
              68.3Air
                  conditioning and heating products
              
              
              215,375
              
              
              173,094
              
              
              42,281
              
              
              24.4Consolidated net sales
              
              $
              534,542
              
              $
              434,118
              
              $
              100,424
              
              
              23.1
              %**Operating
                  earnings:**Residential
                  ventilation products
              
              $
              36,056
              
              $
              26,853
              
              $
              9,203
              
              
              34.3
              %Home
                  technology products
              
              
              17,307
              
              
              10,840
              
              
              6,467
              
              
              59.7Air
                  conditioning and heating products
              
              
              17,933
              
              
              7,339
              
              
              10,594
              
              
              *Subtotal
              
              
              71,296
              
              
              45,032
              
              
              26,264
              
              
              58.3**Unallocated:**Stock-based
                  compensation charges
              
              
              (100
              )
              
              (100
              )
              
              ---
              
              
              ---Foreign
                  exchange gain (loss) on intercompany debt
              
              
              100
              
              
              (100
              )
              
              200
              
              
              *Gain
                  on legal
                  settlement
              
              
              ---
              
              
              1,400
              
              
              (1,400
              )
              
              (100.0
              )Unallocated,
                  net
              
              
              (6,628
              )
              
              (5,347
              )
              
              (1,281
              )
              
              (24.0
              )Consolidated operating earnings
              
              $
              64,668
              
              $
              40,885
              
              $
              23,783
              
              
              58.2
              %**Depreciation
                  and amortization expense:**Residential
                  ventilation products
              
              $
              4,687
              
              $
              4,874
              
              $
              (187
              )
              
              (3.8
              )%Home
                  technology products
              
              
              2,994
              
              
              2,390
              
              
              604
              
              
              25.3Air
                  conditioning and heating products
              
              
              4,272
              
              
              4,001
              
              
              271
              
              
              6.8Unallocated
              
              
              297
              
              
              350
              
              
              (53
              )
              
              (15.1
              )$
              12,250
              
              $
              11,615
              
              $
              635
              
              
              5.5
              %**Operating
                  earnings margin:**Residential
                  ventilation products
              
              
              17.0
              %
              
              13.6
              %Home
                  technology products
              
              
              16.1
              
              
              17.0Air
                  conditioning and heating products
              
              
              8.3
              
              
              4.2Consolidated
              
              
              12.1
              %
              
              9.4
              %**Depreciation
                    and amortization**expense
                    as a % of net sales:Residential
                  ventilation products
              
              
              2.2
              %
              
              2.5
              %Home
                  technology products
              
              
              2.8
              
              
              3.7Air
                  conditioning and heating products
              
              
              2.0
              
              
              2.3Consolidated
              
              
              2.3
              %
              
              2.7
              %


*  not
      meaningful


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 as it relates to net earnings. The
      results of operations for the first three months ended April 1, 2006 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 First****Quarter
                  2006 as Compared to****For
                  the First Quarter Ended**
              
              **the
                  First Quarter 2005****April
                  1, 2006**
              
              **April
                  2, 2005**
              
              $
              
              %*(Dollar
                  amounts in millions)*Net
                  sales
              
              $
              534.5
              
              $
              434.1
              
              $
              100.4
              
              
              23.1
              %Cost
                  of
                  products sold
              
              
              370.5
              
              
              309.5
              
              
              (61.0
              )
              
              (19.7
              )Selling,
                  general and administrative expenses, net
              
              
              95.1
              
              
              79.4
              
              
              (15.7
              )
              
              (19.8
              )Amortization
                  of intangible assets
              
              
              4.2
              
              
              4.3
              
              
              0.1
              
              
              2.3Operating
                  earnings
              
              
              64.7
              
              
              40.9
              
              
              23.8
              
              
              58.2Interest
                  expense
              
              
              (28.0
              )
              
              (24.3
              )
              
              (3.7
              )
              
              (15.2
              )Investment
                  income
              
              
              0.7
              
              
              0.4
              
              
              0.3
              
              
              75.0Earnings
                  before provision for income taxes
              
              
              37.4
              
              
              17.0
              
              
              20.4
              
              
              *Provision
                  for
                  income taxes
              
              
              14.2
              
              
              6.3
              
              
              (7.9
              )
              
              *Net
                  earnings
              
              $
              23.2
              
              $
              10.7
              
              $
              12.5
              
              
              *
              %




**Percentage
                    of Net Sales**
                
                **Change
                    in Percentage for the First****First
                    Quarter Ended**
                
                **Quarter
                    2006 as Compared to****April
                    1, 2006**
                
                **April
                    2, 2005**
                
                **the
                    First Quarter 2005**Net
                    sales
                
                
                100.0
                %
                
                100.0
                %
                
                
                ---
                %Cost
                    of
                    products sold
                
                
                69.3
                
                
                71.3
                
                
                
                2.0Selling,
                    general and administrative expenses, net
                
                
                17.8
                
                
                18.3
                
                
                
                0.5Amortization
                    of intangible assets
                
                
                0.8
                
                
                1.0
                
                
                
                0.2Operating
                    earnings
                
                
                12.1
                
                
                9.4
                
                
                
                2.7Interest
                    expense
                
                
                (5.2
                )
                
                (5.6
                )
                
                
                0.4Investment
                    income
                
                
                0.1
                
                
                0.1
                
                
                
                ---Earnings
                    before provision for income taxes
                
                
                7.0
                
                
                3.9
                
                
                
                3.1Provision
                    for
                    income taxes
                
                
                2.7
                
                
                1.4
                
                
                
                (1.3
                )Net
                    earnings
                
                
                4.3
                %
                
                2.5
                %
                
                
                1.8
                %




*  not
      meaningful




The
        Company’s
        reporting segments have a significant number of different products across
        a wide
        range of price points and numerous distribution channels that do not always
        allow meaningful quantitative analysis to be performed with respect to the
        effect on net sales of changes in units sold or the price per unit sold.
        However, whenever the underlying causes of material increases or decreases
        in
        consolidated net sales can be adequately analyzed and quantified, the Company
        attempts to make appropriate disclosure of such reasons, including changes
        in
        price, volume and the mix of products sold.
 *Net
        Sales.* Consolidated
        net
        sales increased approximately $100,400,000 or 23.1% for the first quarter
        of
        2006 as compared to the first quarter of 2005 as discussed further in the
        following paragraphs.
 
 In
        the Residential
        Ventilation Products segment, net sales increased approximately $14,500,000
        or
        7.4% for the first quarter of 2006 as compared to the first quarter of 2005.
        Net
        sales in the RVP segment for the first quarter of 2006 reflect a decrease
        of
        approximately $1,500,000 attributable to the effect of changes in foreign
        currency exchange rates.
 
 The
        increase in net
        sales in the RVP segment for the first quarter of 2006 as compared to the
        first
        quarter of 2005 was primarily due to higher average unit sales prices and
        sales
        volume of range hoods and bathroom exhaust fans, in part, from the sale of
        new
        products with higher price points. Range hoods and bathroom exhaust fans
        are the
        largest product category sold in the RVP segment, accounting for approximately
        85.4% of total segment net sales in the first quarter of 2006. Sales of range
        hoods and bathroom exhaust fans increased approximately 8.2% over the first
        quarter of 2005.
 
 In
        the Home
        Technology Products segment, net sales increased approximately $43,600,000
        or
        68.3% for the first quarter of 2006 as compared to the first quarter of 2005.
        The increase in net sales in the HTP segment for the first quarter of 2006
        includes approximately $26,300,000 attributable to acquisitions and the balance
        of the increase is predominately due to increased sales volume of audio and
        video distribution equipment, speakers and access control devices.
 
 In
          the Air
          Conditioning and Heating Products segment, net sales increased approximately
          $42,300,000 or 24.4% for the first quarter of 2006 as compared to the first
          quarter of 2005. Net sales in the HVAC segment for the first quarter of
          2006
          include (1) a decrease of approximately $300,000 attributable to the effect
          of
          changes in foreign currency exchange rates and (2) an increase of approximately
          $5,200,000 attributable to acquisitions. Net sales in the Air Conditioning
          and
          Heating Products segment for HVAC products sold to residential site-built
          customers constituted the largest category of product sold to a particular
          group
          of customers within the HVAC segment. Sales of products to residential
          site-built customers increased approximately 48.6% over the first quarter
          of
          2005. The increase in net sales in the HVAC segment for the first quarter
          of
          2006 as compared to the first quarter of 2005 was due principally to increased
          sales volume and higher average sales prices of products with a rating
          lower
          than 13 SEER sold to residential site-built and manufactured housing customers,
          favorable weather conditions and to a lesser extent, from increased sales
          of 13
          SEER products. The increased sales volume of products with a rating lower
          than
          13 SEER was partially driven by the change in the minimum seasonal energy
          efficiency rating (“SEER”) for residential central air conditioners to 13 SEER
          on January 23, 2006. The Company’s net sales to customers serving the
          manufactured housing markets, principally consisting of air conditioners
          and
          furnaces, constituted approximately 6.4% and 6.3% of the Company’s consolidated
          net sales for the first quarters of 2006 and 2005, respectively. Sales
          of the
          Company’s commercial HVAC products, before considering the effect of foreign
          exchange, were down in the first quarter of 2006 as compared to the same
          period
          in 2005 principally at the Company’s United Kingdom subsidiary, Eaton Williams.
 *Cost
        of
        Products Sold.* Consolidated
        cost
        of products sold was approximately $370,500,000 for the first quarter of
        2006 as
        compared to approximately $309,500,000 for the first quarter of 2005. Cost
        of
        products sold, as a percentage of net sales, decreased from approximately
        71.3%
        in the first quarter of 2005 to approximately 69.3% for the first quarter
        of
        2006, primarily as a result of the factors that follow.
 
 Overall,
        consolidated material costs were approximately 43.8% and 45.0% of net sales
        for
        the first quarters of 2006 and 2005, respectively. Although the Company
        continued to experience higher material costs related primarily to purchases
        of
        steel, copper and aluminum, as well as, increased transportation and energy
        costs, these cost increases were offset by continued strategic sourcing
        initiatives and improvements in manufacturing efficiency, as well as sales
        price
        increases.
 
 As
        noted in the
        previous paragraph, during the first quarter of 2006, the Company experienced
        an
        increase in freight costs due primarily to increased sales volume and rising
        energy prices. This increase was partially offset by favorable shipping rates
        for lower cost “full truckload” shipments and higher dollars per shipment based
        on the increased volumes, as well as cost reduction measures, thereby reducing
        the overall effect on cost of goods sold as a percentage of net sales.
 
 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.
 
 In
        the Residential
        Ventilation Products segment, cost of products sold for the first quarter
        of
        2006 was approximately $144,600,000, or 68.3% as a percentage of the RVP
        segment’s net sales, as compared to approximately $136,600,000, or 69.3% as a
        percentage of the RVP segment’s net sales, in the first quarter of 2005. The
        decrease in the percentage of cost of products sold to net sales for the
        first
        quarter of 2006 over the first quarter of 2005 reflects the effect of higher
        average unit sales prices without a proportionate increase in costs. Cost
        of
        products sold in the RVP segment for the first quarter of 2006 includes a
        decrease of approximately $1,400,000 related to the effect of changes in
        foreign
        currency exchange rates.
 
 In
        the Home
        Technology Products segment, cost of products sold for the first quarter
        of 2006
        was approximately $56,700,000, or 52.7% as a percentage of the HTP segment’s net
        sales, as compared to approximately $33,600,000, or 52.6% as a percentage
        of the
        HTP segment’s net sales, in the first quarter of 2005. The increase in the
        percentage of cost of products sold to net sales for the first quarter of
        2006
        over the first quarter of 2005 reflects higher material costs of acquired
        businesses as compared to the businesses in the HTP segment prior to the
        acquisitions. Cost of products sold in the HTP segment for the first quarter
        of
        2006 reflects approximately $15,100,000 of cost of products sold contributed
        from acquisitions, including a non-cash charge of approximately $100,000
        related
        to the amortization of purchase price allocated to inventory. Cost of products
        sold in the HTP segment for first quarter of 2005 includes (1) a non-cash
        charge
        of approximately $300,000 related to the amortization of purchase price
        allocated to inventory as a result of the acquisition of Nortek, Inc. by
        affiliates of Thomas H. Lee Partners L.P. and (2) a non-cash charge of
        approximately $100,000 related to the amortization of purchase price allocated
        to inventory as a result of an acquisition.
 
 In
        the Air
        Conditioning and Heating Products segment, cost of products sold for the
        first
        quarter of 2006 was approximately $169,200,000, or 78.6% as a percentage
        of the
        HVAC segment’s net sales, as compared to approximately $139,300,000, or 80.5% as
        a percentage of the HVAC segment’s net sales, for the first quarter of 2005. The
        decrease in the percentage of cost of products sold to net sales for the
        first
        quarter of 2006 over the first quarter of 2005 reflects the effect of increased
        average unit sales prices, partially offset by higher material costs. Cost
        of
        products sold in the HVAC segment in the first quarter of 2006 includes (1)
        a
        decrease of approximately $300,000 related to the effect of changes in foreign
        currency exchange rates and (2) an increase of approximately $4,100,000
        attributable to an acquisition in the HVAC segment.
 
 *Selling,
        General and Administrative Expense.* Consolidated
        selling, general and administrative expense (“SG&A”) was approximately
        $95,100,000 for the first quarter of 2006 as compared to approximately
        $79,400,000 for the first quarter of 2005. SG&A as a percentage of net sales
        decreased from approximately 18.3% for the first quarter of 2005 to
        approximately 17.8% for the first quarter of 2006.
  SG&A
          for the
          first quarter of 2006 includes (1) approximately $11,500,000 from acquisitions
          in the Home Technology Products segment and the Air Conditioning and Heating
          Products segment, (2) a decrease of approximately $1,700,000 of displays
          expense
          in the Residential Ventilation Products segment, (3) an increase in net
          sales in
          the Air Conditioning and Heating Products segment without a proportionate
          increase in expense, (4) a decrease of approximately $200,000, all of which
          is
          included in the Air Conditioning and Heating Products segment, related
          to the
          effect of changes in foreign currency exchange rates, (5) a non-cash foreign
          exchange gain of approximately $100,000, all of which is included in
          Unallocated, related to intercompany debt not indefinitely invested in
          the
          Company’s subsidiaries and (6) approximately $100,000 of stock-based
          compensation expense, all of which is recorded in
          Unallocated.
 
 SG&A
        for the
        first quarter of 2005 includes (1) approximately $100,000 of stock-based
        compensation expense, all of which is recorded in Unallocated, (2) a non-cash
        foreign exchange loss of approximately $500,000, of which approximately $400,000
        is recorded in the Residential Ventilation Products segment, related to
        intercompany debt not indefinitely invested in the Company’s subsidiaries and
        (3) a gain of approximately $1,400,000, all of which is recorded in Unallocated,
        from the settlement of certain obligations of former subsidiaries (see Notes
        D
        and G of the Notes to the Unaudited Financial Statements included elsewhere
        herein).
 
 *Amortization
        of
        Intangible Assets.* Amortization
        of
        intangible assets, as a percentage of net sales, decreased from approximately
        1.0% in the first quarter of 2005 to approximately 0.8% in the first quarter
        of
        2006. This decrease is principally a result of utilizing accelerated
        amortization methods, partially offset by increased amortization of intangible
        assets in the Home Technology Products segment as compared to the same period
        in
        2005 arising primarily from acquisitions in 2005 and 2006.
 
 *Depreciation
        Expense.* Depreciation
        expense increased approximately $1,100,000 from approximately $6,800,000
        for the
        first quarter of 2005 to approximately $7,900,000 for the first quarter of
        2006.
        This increase is primarily attributable to the impact of capital expenditures,
        as well as acquisitions, which represented approximately $400,000 of the
        increase.
 
 *Operating
        Earnings.* Consolidated
        operating earnings improved by approximately $23,800,000 from approximately
        $40,900,000, or 9.4% as a percentage of net sales, for the first quarter
        of 2005
        to approximately $64,700,000, or 12.1% as a percentage of net sales, for
        the
        first quarter of 2006 as a result of the factors discussed above and that
        follow.
 
 Operating
        earnings
        of the Residential Ventilation Products segment for the first quarter of
        2006
        were approximately $36,100,000 as compared to approximately $26,900,000 for
        the
        first quarter of 2005. Operating earnings in the Residential Ventilation
        Products segment for the first quarter of 2006 improved over the same period
        in
        2005 primarily as a result of higher average unit sales prices and volume
        of
        range hoods and bathroom exhaust fans, partially offset by higher material
        costs. Operating earnings of the RVP segment for the first quarter of 2006
        as
        compared to the first quarter of 2005 reflects (1) a decrease of approximately
        $1,700,000 of displays expense, (2) a decrease in earnings of approximately
        $100,000 from the effect of foreign currency exchange rates and (3)
        approximately $200,000 of increased depreciation expense of property and
        equipment and approximately $400,000 of decreased amortization of intangible
        assets. Operating earnings of the Residential Ventilation Products segment
        for
        the first quarter of 2005 reflects a non-cash foreign exchange loss of
        approximately $400,000 related to intercompany debt not indefinitely invested
        in
        the Company’s subsidiaries.
 
 Operating
        earnings
        of the Home Technology Products segment for the first quarter of 2006 was
        approximately $17,300,000 as compared to approximately $10,800,000 for the
        first
        quarter of 2005. The increase in operating earnings in the Home Technology
        Products segment in the first quarter of 2006 over the same period in 2005
        is
        primarily as a result of increased net sales volume of audio and video
        distribution equipment, speakers and access control devices. Operating earnings
        of the HTP segment for the first quarter of 2006 reflects (1) approximately
        $700,000 of operating earnings contributed by acquisitions, (2) approximately
        $400,000 of increased depreciation expense of property and equipment and
        approximately $500,000 of increased amortization of intangible assets, primarily
        attributable to acquisitions, which is included in the impact of acquisitions
        noted above and (3) a non-cash charge of approximately $100,000, all of which
        is
        included in the impact of acquisitions noted above, related to the amortization
        of purchase price allocated to inventory. Operating earnings of the Home
        Technology Products segment for the first quarter of 2005 reflects (1) a
        non-cash charge of approximately $300,000 related to the amortization of
        purchase price allocated to inventory as a result of the acquisition of Nortek,
        Inc. by affiliates of Thomas H. Lee Partners, L.P. and (2) a non-cash charge
        of
        approximately $100,000 related to the amortization of purchase price allocated
        to inventory as a result of an acquisition.
 
 Operating
          earnings
          of the Air Conditioning and Heating Products segment were approximately
          $17,900,000 for the first quarter of 2006 as compared to approximately
          $7,300,000 for the first quarter of 2005. Operating earnings in the Air
          Conditioning and Heating Products segment for the first quarter of 2006
          improved
          over the same period in 2005 as a result of increased sales volume of products
          with a rating lower than 13 SEER sold to residential site-built and manufactured
          housing customers, favorable weather conditions and to a lesser extent,
          from
          increased sales of 13 SEER products. The increased sales volume of products
          with
          a rating lower than 13 SEER was partially driven by the change in the minimum
          SEER rating to 13 SEER on January 23, 2006, improved manufacturing efficiencies,
          as well as increased average unit sales prices related to 13 SEER products
          sold,
          partially offset by higher material costs within the entire HVAC segment.
          Operating earnings of the HVAC segment for the first quarter of 2006 reflects
          (1) an increase in earnings of approximately $200,000 from the effect of
          foreign
          currency exchange rates and (2) approximately $500,000 of increased depreciation
          expense of property and equipment attributable primarily to capital expenditures
          and approximately $200,000 of decreased amortization of intangible
          assets.
 
 The
        operating
        expense in Unallocated was approximately $6,600,000 for the first quarter
        of
        2006 as compared to approximately $4,100,000 for the first quarter of 2005.
        The
        increase in operating expense for the first quarter of 2006 as compared to
        the
        same period of 2005 in Unallocated is primarily due to the items noted below.
        Operating expense in Unallocated for the first quarter of 2006 reflects (1)
        approximately $100,000 of stock-based compensation charges and (2) a non-cash
        foreign exchange gain of approximately $100,000 related to intercompany debt
        not
        indefinitely invested in the Company’s subsidiaries.
 
 Operating
        expense
        in Unallocated for the first quarter of 2005 reflects (1) approximately $100,000
        of stock-based compensation charges, (2) a non-cash foreign exchange loss
        of
        approximately $100,000 related to intercompany debt not indefinitely invested
        in
        the Company’s subsidiaries and (3) a gain of approximately $1,400,000 from the
        settlement of certain obligations (see Notes D and G of the Notes to the
        Unaudited Financial Statements included elsewhere herein).
 
 Operating
        earnings
        of foreign operations, consisting primarily of the results of operations
        of the
        Company’s Canadian and European subsidiaries, were approximately 11.1% and 7.0%
        of operating earnings (before unallocated and corporate expenses) for the
        first
        quarters of 2006 and 2005, respectively. Sales and earnings derived from
        international markets are subject to, among others, the risks of currency
        fluctuations.
 
 *Interest
        Expense.* Interest
        expense
        increased approximately $3,700,000 or approximately 15.2% during the first
        quarter of 2006 as compared to the first quarter of 2005. The increase in
        interest expense during the first quarter of 2006 is primarily due to increased
        interest rates related primarily to the Company’s Senior Secured Credit
        Facility.
 
 *Investment
        Income.* Investment
        income
        was approximately $700,000 and $400,000 for the first quarter of 2006 and
        2005,
        respectively.
 
 *Provision
        for
        Income Taxes.* The
        provision for
        income taxes was approximately $14,200,000 for the first quarter of 2006
        as
        compared to approximately $6,300,000 for the first quarter of 2005. The income
        tax rates in both the first quarter of 2006 and 2005 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 and
        state
        income tax provisions (see Note F of the Notes to the Unaudited Financial
        Statements included elsewhere herein).
  *EBITDA.* The
        Company uses
        EBITDA as both an operating performance and liquidity measure. Operating
        performance measure disclosures with respect to EBITDA are provided below.
        Refer
        to the Liquidity and Capital Resources section for liquidity measure disclosures
        with respect to EBITDA and a reconciliation from net cash flows from operating
        activities to EBITDA.
 
 EBITDA
        is defined
        as net earnings (loss) before interest, taxes, depreciation and amortization
        expense. EBITDA is not a measure of operating performance under U.S. generally
        accepted accounting principles (“GAAP”) and should not be considered as an
        alternative or substitute for GAAP profitability measures such as operating
        earnings (loss) from continuing operations, discontinued operations,
        extraordinary items and net earnings (loss). EBITDA as an operating
        performance measure has material limitations since it excludes, among other
        things, the statement of operations impact of depreciation and amortization
        expense, interest expense and the provision (benefit) for income taxes and
        therefore does not necessarily represent an accurate measure of profitability,
        particularly in situations where a company is highly leveraged or has a
        disadvantageous tax structure. The Company uses a significant amount of capital
        assets and depreciation and amortization expense is a necessary element of
        the
        Company’s costs and ability to generate revenue and therefore its exclusion from
        EBITDA is a material limitation. The Company has a significant amount of
        debt
        and interest expense is a necessary element of the Company’s costs and ability
        to generate revenue and therefore its exclusion from EBITDA is a material
        limitation. The Company generally incurs significant U.S. federal, state
        and
        foreign income taxes each year and the provision (benefit) for income taxes
        is a
        necessary element of the Company’s costs and therefore its exclusion from EBITDA
        is a material limitation. As a result, EBITDA should be evaluated in conjunction
        with net earnings (loss) for a more complete analysis of the Company’s
        profitability, as net earnings (loss) includes the financial statement impact
        of
        these items and is the most directly comparable GAAP operating performance
        measure to EBITDA. As EBITDA is not defined by GAAP, the Company’s definition of
        EBITDA may differ from and therefore may not be comparable to similarly titled
        measures used by other companies, thereby limiting its usefulness as a
        comparative measure. Because of the limitations that EBITDA has as an analytical
        tool, investors should not consider it in isolation, or as a substitute for
        analysis of the Company’s operating results as reported under GAAP.
 
 Company
        management
        uses EBITDA as a supplementary non-GAAP operating performance measure to
        assist
        with its overall evaluation of Company and subsidiary operating performance
        (including the performance of subsidiary management) relative to outside
        peer
        group companies. In addition, the Company uses EBITDA as an operating
        performance measure in financial presentations to the Company’s Board of
        Directors, shareholders, various banks participating in the Company’s Credit
        Facility, note holders and Bond Rating agencies, among others, as a supplemental
        non-GAAP operating measure to assist them in their evaluation of the Company’s
        performance. The Company is also active in mergers, acquisitions and
        divestitures and uses EBITDA as an additional operating performance measure
        to
        assess Company, subsidiary and potential acquisition target enterprise value
        and
        to assist in the overall evaluation of Company, subsidiary and potential
        acquisition target performance on an internal basis and relative to peer
        group
        companies. The Company uses EBITDA in conjunction with traditional GAAP
        operating performance measures as part of its overall assessment of potential
        valuation and relative performance and therefore does not place undue reliance
        on EBITDA as its only measure of operating performance.
 
 The
        Company
        believes EBITDA is useful for both the Company and investors as it is a commonly
        used analytical measurement for comparing company profitability, which
        eliminates the effects of financing, differing valuations of fixed and
        intangible assets and tax structure decisions. The Company believes that
        EBITDA
        is specifically relevant to the Company, due to the different degrees of
        leverage among its competitors, the impact of purchase accounting associated
        with acquisitions, which impacts comparability with its competitors who may
        or
        may not have recently revalued their fixed and intangible assets, and the
        differing tax structures and tax jurisdictions of certain of the Company’s
        competitors. The Company has included EBITDA as a supplemental operating
        performance measure, which should be evaluated by investors in conjunction
        with
        the traditional GAAP performance measures discussed earlier in this Results
        of
        Operations section for a complete evaluation of the Company’s operating
        performance.
 
 The
        following table
        presents a reconciliation from net earnings, which is the most directly
        comparable GAAP operating performance measure, to EBITDA for the first quarters
        of 2006 and 2005:
  **For
                  the First Quarter Ended****April
                  1, 2006**
              
              **April
                  2, 2005***(Dollar
                  amounts in thousands)*Net
                  earnings
                  (1)
              
              $
              23,200
              
              $
              10,700Provision
                  for income taxes
              
              
              14,200
              
              
              6,300Interest expense
              
              
              27,976
              
              
              24,285Investment income
              
              
              (708
              )
              
              (400
              )Depreciation expense
              
              
              7,923
              
              
              6,851Amortization expense
              
              
              4,327
              
              
              4,764EBITDA
              
              $
              76,918
              
              $
              52,500




(1)  EBITDA
      includes approximately $100,000 of stock based compensation charges recorded
      in
      each of the first quarters of 2006 and 2005, respectively (see Notes A and
      D of
      the Notes to the Unaudited Financial Statements included elsewhere
      herein) .





**Liquidity
      and Capital Resources**




The
        Company
        acquired two companies during the first quarter of 2006 utilizing cash and
        proceeds from additional indebtedness to finance these acquisitions. Companies
        acquired during the first quarter of 2006 and the impact on cash flow in
        the
        first quarter of 2006 were as follows:
 
 ·
            On
                February
                22, 2006, the Company, through Linear, acquired the assets and certain
                liabilities of Furman for an initial purchase price of approximately
                $3,300,000. ·
            On
                January
                25, 2006, the Company, through Mammoth China, increased its ownership
                interests in MEG and MSH to sixty-percent for approximately $2,400,000. ·
            Contingent
                consideration related to Panamax and GTO was also paid during the
                first
                quarter of 2006 in the amount of $4,500,000 and $100,000,
                respectively. 
 The
        Company had
        consolidated debt as of April 1, 2006, of approximately $1,378,825,000
        consisting of (i) $23,960,000 of short-term borrowings and current maturities
        of
        long-term debt, (ii) $37,383,000 of long-term notes, mortgage notes and other
        indebtedness, (iii) $9,982,000 of the Company’s 9 7/8% Senior Subordinated Notes
        due 2011, (iv) $625,000,000 of the Company’s 8 1/2% Senior Subordinated Notes
        due 2014 and (v) $682,500,000 of long-term debt outstanding under the Company’s
        Senior Secured Credit Facility.
 
 During
        the first
        quarter of 2006, the Company had a net increase in its consolidated debt
        of
        approximately $5,044,000 resulting from (1) additional borrowings of
        approximately $9,743,000 related primarily to the Company’s European
        subsidiaries and (2) an approximate $331,000 increase related to the effects
        of
        foreign currency translation, partially offset by (3) approximately $5,030,000
        of principal and other payments made during the period.
 
 The
        Company’s debt
        to equity ratio was approximately 2.6:1 as of April 1, 2006 as compared to
        approximately 2.7:1 as of December 31, 2005. The decrease in the ratio was
        primarily due to an increase in stockholder’s equity, primarily as a result of
        net earnings in the first quarter of 2006, partially offset by the net increase
        in indebtedness as discussed above.
 
 On
        April 3, 2006,
        the Company amended and restated the credit agreement for its senior secured
        credit facility, expanding its $100,000,000 revolving credit facility to
        $200,000,000 and modifying certain covenants. The amendment provides the
        Company
        with additional liquidity and covenant flexibility. The revolving credit
        facility matures in August 2010 and includes both a letter of credit
        sub-facility and swing line loan sub-facility. As of April 3, 2006, the Company
        had approximately $170,000,000 of borrowing availability under the U.S. portion
        of its revolving credit facility and approximately $10,000,000 of borrowing
        availability under the Canadian portion of its revolving credit facility.
        As of
        May 5, 2006, there was approximately $45,000,000 outstanding under the U.S.
        portion of the Company’s revolving credit facility and no outstanding borrowings
        under the Canadian portion of the revolving credit facility.
 
 On
        April 14, 2006,
        the Company, through two newly formed subsidiaries of its Air Conditioning
        and
        Heating Products Segment, acquired the assets and certain liabilities of
        Huntair
        and Cleanpak, for a combined initial purchase price of approximately $48,000,000
        (utilizing approximately $40,000,000 of cash borrowed under Nortek’s revolving
        credit facility, including approximately $2,000,000 to fund Huntair
        and Cleanpak’s initial working capital needs, all of which remains outstanding
        at May 5, 2006, and issuing unsecured 6% subordinated notes totaling $10,000,000
        due April 2008) plus contingent consideration.
 
 The
        estimated total
        potential amount of contingent consideration that may be paid in the future
        for
        all acquisitions is approximately $40,500,000 (see Note C of the Notes to
        the
        Unaudited Financial Statements included elsewhere herein).
 
 As
          of April 1,
          2006, approximately $20,000,000 of letters of credit have been issued under
          the
          Company’s revolving credit facility as additional security for (1) approximately
          $15,000,000 relating to certain of the Company’s insurance programs, (2)
          approximately $3,900,000 relating to leases outstanding for certain of
          the
          Company’s manufacturing facilities and (3) approximately $1,100,000 relating to
          certain of the subsidiaries purchases and other requirements. Letters of
          credit
          reduce borrowing availability under the Company’s revolving credit facility on a
          dollar for dollar basis.
 The
        indentures and
        other agreements governing the Company and its subsidiaries’ indebtedness
        (including the credit agreement for the Company’s 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.
 
 As
        of April 1,
        2006, approximately $150,700,000 was available for the payment of cash
        dividends, stock purchases or other restricted payments by the Company as
        defined under the terms of the Company’s most restrictive loan agreement, the
        Company’s Senior Secured Credit Facility. Subsequent to the transactions
        discussed below, there will be approximately $122,700,000 available for the
        payment of cash dividends, stock purchases or other restricted payments by
        the
        Company as defined under the terms of the Company’s Senior Secured Credit
        Facility.
 
 Prior
        to
        the completion of the Offering as noted below, NTK Holdings is planning on
        entering into a senior unsecured loan facility which will provide for borrowings
        in an aggregate principal amount of $205,000,000. The proceeds of these
        borrowings, which will only be available in one drawing, will be utilized
        to (1)
        make a cash dividend of approximately $174,900,000 to Investors LLC which,
        in
        turn, will make a distribution to the holders of its Class A and Class B
        membership interests, including affiliates of Thomas H. Lee Partners, L.P.
        and
        certain members of the Company’s management, (2) together with cash on hand at
        Nortek, make a distribution of approximately $54,000,000 to participants
        under
        the 2004 Nortek Holdings, Inc. Deferred Compensation Plan (including certain
        of
        the Company’s executive officers) and (3) pay related fees and expenses.
        Following these distributions, the holders of the Class A membership interests
        in Investors LLC and the participants in the 2004 Nortek Holdings, Inc. Deferred
        Compensation Plan will not be entitled to any further
        distributions.
 
 On
        May 5, 2006, NTK
        Holdings filed a registration statement on Form S-1 with the SEC for an initial
        public offering of shares of its common stock. The
        net proceeds
        from the Offering will be utilized to (1) repay all amounts outstanding under
        the new senior unsecured loan facility as noted above, (2) redeem all of
        the
        Company’s remaining outstanding 9 7/8% Senior Discount Notes, (3) redeem a
        portion of NTK Holdings’ outstanding 10 3/4% Senior Discount Notes, (4) repay a
        portion of the term loan under the Company’s Senior Secured Credit Facility and
        (5) pay related redemption premiums and accrued interest.
 
 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.
 
 The
        Company expects
        to meet its cash flow requirements for fiscal 2006 from cash from operations,
        existing cash and cash equivalents and the use of its Senior Secured Credit
        Facility, as needed.
 
 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,
        2005.
 
 Unrestricted
        cash
        and cash equivalents decreased from approximately $77,200,000 at December
        31,
        2005 to approximately $70,200,000 at April 1, 2006. The Company has classified
        as restricted, in the accompanying consolidated balance sheet, certain cash
        and
        cash equivalents that are not fully available for use in its operations.
        At
        April 1, 2006, approximately $4,018,000 (all of which is included in long-term
        assets) of cash and cash equivalents are held primarily as collateral to
        fund
        future capital expenditures within the Company’s segments, as well as for
        insurance and letter of credit requirements.
 
 Capital
        expenditures were approximately $12,100,000 (none of which were financed
        under a
        capital lease) for the first quarter of 2006 as compared to approximately
        $5,600,000 (of which approximately $1,900,000 was financed under a capital
        lease) for the first quarter of 2005. Capital expenditures were approximately
        $33,700,000 for the year ended December 31, 2005 and are expected to be
        approximately $45,000,000 in 2006. Under the Company’s Amended Senior Secured
        Credit Facility, capital expenditures are limited to approximately $65,000,000
        in 2006.
 
 The
        Company’s
        working capital and current ratio increased from approximately $273,800,000
        and
        1.7:1 at December 31, 2005 to approximately $297,100,000 and 1.8:1 at April
        1,
        2006. This increase in working capital and current ratio for the first quarter
        of 2006 was primarily as a result of seasonal increases in accounts receivable
        and inventory and a reduction in accrued expenses, which was partially offset
        by
        an increase in accounts payable.
 
 Accounts
        receivable
        increased approximately $30,700,000, or approximately 11.3%, between December
        31, 2005 and April 1, 2006, while net sales increased approximately $31,200,000,
        or approximately 6.2%, in the first quarter of 2006 as compared to the fourth
        quarter of 2005. These increases are primarily a result of increased sales
        levels, timing of cash collections and acquisitions. Acquisitions contributed
        approximately $7,500,000 to the increase in net sales in the first quarter
        of
        2006 as compared to the fourth quarter of 2005 and approximately $6,700,000
        to
        the increase in accounts receivable at April 1, 2006. 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 1,
        2006
        as compared to December 31, 2005. The Company did not experience any significant
        overall changes in credit terms, collection efforts, credit utilization or
        delinquency in accounts receivable in the first quarter of 2006.
 
 Inventories
        increased approximately $13,500,000, or approximately 5.6%, between December
        31,
        2005 and April 1, 2006 primarily as a result of increased inventory levels,
        in
        part, due to strong demand of certain product categories, and acquisitions
        which
        contributed approximately $3,100,000 to the increase at April 1, 2006.
 
 Accounts
        payable
        increased approximately $21,500,000, or approximately 13.5%, between December
        31, 2005 and April 1, 2006 due primarily to increased inventory levels and
        timing of payments. Acquisitions contributed approximately $3,500,000 to
        the
        increase in accounts payable at April 1, 2006.
 
 Changes
        in certain
        working capital accounts, as noted above, between December 31, 2005 and April
        1,
        2006, differ from the changes reflected in the Company’s Unaudited 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 $7,017,000 and approximately
        $20,206,000 from December 31, 2005 to April 1, 2006 and from December 31,
        2004
        to April 2, 2005, respectively, principally as a result of the
        following:
  **Condensed
                  Consolidated****Cash
                  Flows (1)****For
                    the First Quarter Ended****April
                  1, 2006**
              
              **April
                  2, 2005***(Dollar
                  amounts in thousands)***Operating
                  Activities:**Cash flow from operations, net
              
              $
              40,479
              
              $
              29,177Change
                  in accounts receivable, net
              
              
              (23,400
              )
              
              (17,313
              )Change in inventories
              
              
              (10,183
              )
              
              (17,036
              )Change in prepaids and other current assets
              
              
              775
              
              
              612Change in accounts payable
              
              
              16,934
              
              
              21,753Change in accrued expenses and taxes
              
              
              (13,869
              )
              
              (31,664
              )**Investing
                  Activities:**Capital expenditures
              
              
              (12,106
              )
              
              (3,683
              )Net cash paid for businesses acquired
              
              
              (7,900
              )
              
              ---Proceeds from the sale of property and equipment
              
              
              129
              
              
              5,830Change in restricted cash and marketable securities
              
              
              (3
              )
              
              ---**Financing
                  Activities:**Change in borrowings, net
              
              
              4,332
              
              
              (3,094
              )Other,
                  net
              
              
              (2,205
              )
              
              (4,788
              )$
              (7,017
              )
              $
              (20,206
              )




(1)
            Summarized
                from the Company’s Unaudited Condensed Consolidated Statement of Cash
                Flows for the first quarter ended April 1, 2006 and April 2, 2005
                (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.




The
      Company uses
      EBITDA as both a liquidity and operating performance measure. Liquidity measure
      disclosures with respect to EBITDA are provided below. Refer to the Results
      of
      Operations section for operating performance measure disclosures with respect
      to
      EBITDA and a reconciliation from net earnings (loss) to EBITDA.





EBITDA
      is defined
      as net earnings (loss) before interest, taxes, depreciation and amortization
      expense. EBITDA is not a measure of cash flow under U.S. generally accepted
      accounting principles (“GAAP”) and should not be considered as an alternative or
      substitute for GAAP cash flow measures such as cash flows from operating,
      investing and financing activities. EBITDA does not necessarily represent an
      accurate measure of cash flow performance because it excludes, among other
      things, capital expenditures, working capital requirements, significant debt
      service for principal and interest payments, income tax payments and other
      contractual obligations, which may have a significant adverse impact on a
      company’s cash flow performance thereby limiting its usefulness when evaluating
      the Company’s cash flow performance. The Company uses a significant amount of
      capital assets and capital expenditures are a significant component of the
      Company’s annual cash expenditures and therefore their exclusion from EBITDA is
      a material limitation. The Company has significant working capital requirements
      during the year due to the seasonality of its business, which require
      significant cash expenditures and therefore its exclusion from EBITDA is a
      material limitation. The Company has a significant amount of debt and the
      Company has significant cash expenditures during the year related to principal
      and interest payments and therefore their exclusion from EBITDA is a material
      limitation. The Company generally pays significant U.S. federal, state and
      foreign income taxes each year and therefore its exclusion from EBITDA is a
      material limitation. As a result, EBITDA should be evaluated in conjunction
      with
      net cash from operating, investing and financing activities for a more complete
      analysis of the Company’s cash flow performance, as they include the financial
      statement impact of these items. Although depreciation and amortization are
      non-cash charges, the assets being depreciated and amortized will often have
      to
      be replaced in the future and EBITDA does not reflect any cash requirements
      for
      replacements. As EBITDA is not defined by GAAP, the Company’s definition of
      EBITDA may differ from and therefore may not be comparable to similarly titled
      measures used by other companies thereby limiting its usefulness as a
      comparative measure. Because of the limitations that EBITDA has as an analytical
      tool, investors should not consider it in isolation, or as a substitute for
      analysis of the Company’s cash flows as reported under GAAP.





Company
      management
      uses EBITDA as a supplementary non-GAAP liquidity measure to allow the Company
      to evaluate its operating units cash-generating ability to fund income tax
      payments, corporate overhead, capital expenditures and increases in working
      capital. EBITDA is also used by management to allocate resources for growth
      among its businesses, to identify possible impairment charges, to evaluate
      the
      Company’s ability to service its debt and to raise capital for growth
      opportunities, including acquisitions. In addition, the Company uses EBITDA
      as a
      liquidity measure in financial presentations to the Company’s Board of
      Directors, shareholders, various banks participating in the Company’s Credit
      Facility, note holders and Bond Rating agencies, among others, as a supplemental
      non-GAAP liquidity measure to assist them in their evaluation of the Company’s
      cash flow performance. The Company uses EBITDA in conjunction with traditional
      GAAP liquidity measures as part of its overall assessment of cash flow ability
      and therefore does not place undue reliance on EBITDA as its only measure of
      cash flow performance.





The
      Company
      believes EBITDA is useful for both the Company and investors as it is a commonly
      used analytical measurement for assessing a company’s cash flow ability to
      service and/or incur additional indebtedness, which eliminates the impact of
      certain non-cash items such as depreciation and amortization. The Company
      believes that EBITDA is specifically relevant to the Company due to the
      Company’s leveraged position as well as the common use of EBITDA as a liquidity
      measure within the Company’s industries by lenders, investors, others in the
      financial community and peer group companies. The Company has included EBITDA
      as
      a supplemental liquidity measure, which should be evaluated by investors in
      conjunction with the traditional GAAP liquidity measures discussed earlier
      in
      this Liquidity and Capital Resources section for a complete evaluation of the
      Company’s cash flow performance.




The
      following table
      presents a reconciliation from net cash used in operating activities, which
      is
      the most directly comparable GAAP liquidity measure, to EBITDA for the first
      quarters of 2006 and 2005:


**For
                    the First Quarter Ended****April
                  1, 2006**
              
              **April
                  2, 2005***(Dollar
                  amounts in thousands)*Net cash used in operating activities
              
              $
              10,040
              
              $
              (18,652
              )Cash used by (provided from) working capital andother long-term asset and liability changes
              
              
              30,439
              
              
              47,829Deferred federal income tax provision
              
              
              (3,500
              )
              
              (5,700
              )(Loss) gain  on sale of fixed assets
              
              
              (134
              )
              
              280Non-cash interest expense, net
              
              
              (1,312
              )
              
              (1,363
              )Non-cash stock-based compensation expense
              
              
              (83
              )
              
              (79
              )Provision for income taxes
              
              
              14,200
              
              
              6,300Interest expense
              
              
              27,976
              
              
              24,285Investment income
              
              
              (708
              )
              
              (400
              )EBITDA
              
              $
              76,918
              
              $
              52,500






**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 remodeling and replacement 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
        historically have occurred 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.
 
 Effective
        January
        23, 2006, the minimum seasonal energy efficiency rating for residential central
        air conditioners (“SEER”) was raised to 13 SEER by the Department of Energy. The
        prior minimum was 10 SEER. The Company has not experienced and does not expect
        any significant adverse effect on its business subsequent to January 23,
        2006 as
        a result of the increase in the minimum SEER rating.
 
 As
        of April 1,
        2006, approximately 9.6% of the Company’s workforce was subject to various
        collective bargaining agreements.
 
 On
        June 8, 2005 the
        Company’s collective bargaining agreement with the United Automobile Aerospace
& Agricultural Implement Workers of America and its Local No. 2029 expired.
        That agreement is estimated, at April 1, 2006, to cover approximately 4.3%
        of
        the Company’s employees (417 employees), which are located at the Cincinnati, OH
        location of the Company’s subsidiary NuTone, Inc. The Company presented its
        final proposal to the union bargaining committee, but such proposal was not
        accepted by the union members. On July 16, 2005, the Company locked out the
        union employees at the NuTone Cincinnati, OH facility. On September 6, 2005,
        the
        Company notified the union bargaining committee that negotiations had reached
        an
        impasse and that it was unilaterally implementing the terms of its final
        offer.
        On March 6, 2006, the Company received notice that the union filed an unfair
        labor practice charge with the United States National Labor Relations Board
        claiming that the Company had not bargained to impasse and that, from and
        after
        September 6, 2005, it had failed to bargain collectively and in good faith.
        On
        April 28, 2006, the United States National Labor Relations Board dismissed
        this
        complaint. The union has until May 11, 2006 to file an appeal. The Company’s
        management has provided temporary manufacturing support, which is designed
        to
        ensure that operational disruptions are minimized and the Company’s customers’
needs are met without significant delay. NuTone’s operating results are included
        in the Company’s Residential Ventilation Products segment. See Note I of the
        Notes to the Unaudited Financial Statements included elsewhere
        herein.
 
 A
        work stoppage at
        one of the Company’s facilities that lasts for a significant period of time
        could cause the Company to lose sales, incur increased costs and adversely
        affect its ability to meet customers’ needs. A plant shutdown or a substantial
        modification to a collective bargaining agreement could result in material
        gains
        and losses or the recognition of an asset impairment. As agreements expire,
        until negotiations are completed, it is not known whether the Company will
        be
        able to negotiate collective bargaining agreements on the same or more favorable
        terms as the current agreements or at all and without production interruptions,
        including labor stoppages.


**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 periodically
      mitigate 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, 2005 disclosures
      included in the Company’s annual report on Form 10-K as filed with the
      SEC.





**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. At April 1, 2006, the fair value of the Company’s unrestricted and
      restricted investments and marketable securities was not materially different
      from their cost basis.





The
      Company has
      historically managed its borrowing exposure to changes in interest rates by
      optimizing the use of fixed rate debt with extended maturities. At April 1,
      2006, approximately 48.8% of the carrying values of the Company’s long-term debt
      was at fixed interest rates.





**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 2006, the net impact of foreign currency changes was not
      material to the Company’s financial condition or results of operations, but this
      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 $543,000 for the first quarter of 2006. The Company manages its
      exposure to foreign currency exchange risk principally by trying to minimize
      the
      Company’s net investment in foreign assets, including, 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 1, 2006, 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 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 1, 2006, the Company did not have any
      material outstanding commodity forward contracts.





**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 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 SEC.





**Item
      3.**  **Quantitative
      and Qualitative Disclosures about Market Risk**





Quantitative
      and
      qualitative disclosure about market risk is set forth in Management’s Discussion
      and Analysis of Financial Condition and Results of Operations - Market
      Risk.





**Item
      4.**  **Controls
      and Procedures**





As
      of the end of
      the period covered by this report, 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 and Chief Financial Officer and the Company’s Corporate
      Disclosure and Controls Committee, of the effectiveness of the Company’s
      disclosure controls and procedures as defined in Rule 13a-15e and 15d-15e under
      the Securities Exchange Act of 1934, as amended. Based upon that evaluation,
      the
      Company’s Chairman and Chief Executive Officer along with the Company’s Vice
      President and Chief Financial Officer concluded that as of the end of such
      period, the Company’s disclosure controls and procedures are effective to ensure
      that information relating to the Company (including its consolidated
      subsidiaries) required to be disclosed in the Company’s periodic SEC filings is
      recorded, processed, summarized and reported within the time periods specified
      by the SEC’s rules and forms. There have been no significant changes in the
      Company’s internal control over financial reporting that occurred during the
      period covered by this report that have materially affected, or that are
      reasonably likely to materially affect the Company’s internal control over
      financial reporting.







**PART
      II.
      OTHER INFORMATION**





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





None





**Item
      5.**  **Other
      Information**





None





**Item
      6.**  **Exhibits**


The
      items marked
      with an asterisk are filed herewith.





*
            31.1
            Certificate
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.*
            31.2
            Certificate
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.








SIGNATURE





Pursuant
      to the
      requirements of the Securities Exchange Act of 1934, the Registrant has duly
      caused this report to be signed on its behalf by the undersigned thereunto
      duly
      authorized.





NORTEK,
              INC.(Registrant)/s/ Almon
              C. HallAlmon
              C.
              Hall,Vice
              President and Chief Financial OfficerMay 9,
              2006