**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 September 29, 2007**





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:  **333-133866**





**NTK
                Holdings, Inc.**(exact
                name of registrant as specified in its charter)**Delaware**
            **20-1934298**(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 filer” 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 November 9, 2007 was
      3,000.









**PART
      I – FINANCIAL INFORMATION**





**Item
      1.  Financial Statements**





**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEET**


*(Dollar
      amounts in millions)*





**September
                  29,**
              
              
              **December
                  31,****2007**
              
              
              **2006****Assets****Current
                  Assets:**Unrestricted
                  cash and cash equivalents
              
              $
              66.6
              
              
              $
              57.4Restricted
                  cash
              
              
              1.0
              
              
              
              1.2Accounts
                  receivable, less allowancesof $12.5 and $9.4
              
              
              356.5
              
              
              
              328.9Inventories:Raw materials
              
              
              97.2
              
              
              
              83.1Work in process
              
              
              36.3
              
              
              
              28.7Finished goods
              
              
              196.4
              
              
              
              166.8329.9
              
              
              
              278.6Prepaid
                  expenses
              
              
              13.2
              
              
              
              13.7Other
                  current
                  assets
              
              
              16.9
              
              
              
              24.4Prepaid
                  income taxes
              
              
              30.5
              
              
              
              21.2Total current assets
              
              
              814.6
              
              
              
              725.4**Property
                  and Equipment, at Cost:**Land
              
              
              10.2
              
              
              
              9.5Buildings
                  and
                  improvements
              
              
              108.0
              
              
              
              101.9Machinery
                  and
                  equipment
              
              
              208.5
              
              
              
              177.2326.7
              
              
              
              288.6Less
                  accumulated depreciation
              
              
              94.3
              
              
              
              66.1Total property and equipment, net
              
              
              232.4
              
              
              
              222.5**Other
                  Assets:**Goodwill
              
              
              1,515.6
              
              
              
              1,481.4Intangible
                  assets, less accumulated amortizationof $72.1 and $52.4
              
              
              152.1
              
              
              
              150.4Deferred
                  debt
                  expense
              
              
              33.0
              
              
              
              41.7Restricted
                  investments and marketable securities
              
              
              2.0
              
              
              
              3.3Other
                  assets
              
              
              9.8
              
              
              
              11.21,712.5
              
              
              
              1,688.0**Total
                  Assets**
              
              $
              2,759.5
              
              
              $
              2,635.9**Liabilities
                  and Stockholder’s Investment****Current
                  Liabilities:**Notes
                  payable
                  and other short-term obligations
              
              $
              112.8
              
              
              $
              23.3Current
                  maturities of long-term debt
              
              
              27.0
              
              
              
              20.0Accounts
                  payable
              
              
              216.4
              
              
              
              188.2Accrued
                  expenses and taxes, net
              
              
              235.4
              
              
              
              283.7Total current liabilities
              
              
              591.6
              
              
              
              515.2**Other
                  Liabilities:**Deferred
                  income taxes
              
              
              31.5
              
              
              
              35.9Other
              
              
              140.0
              
              
              
              128.8171.5
              
              
              
              164.7**Notes,
                  Mortgage Notes and Obligations****Payable, Less Current Maturities**
              
              
              1,910.2
              
              
              
              1,883.2**Stockholder’s
                  Investment:**Common
                  stock,
                  $0.01 par value, authorized 3,000 shares;3,000 issued and outstanding at September 29, 2007 andDecember 31, 2006
              
              
              ---
              
              
              
              ---Additional
                  paid-in capital
              
              
              21.6
              
              
              
              21.3Retained
                  earnings
              
              
              36.5
              
              
              
              39.9Accumulated
                  other comprehensive income
              
              
              28.1
              
              
              
              11.6Total stockholder's investment
              
              
              86.2
              
              
              
              72.8**Total
                  Liabilities and Stockholder's Investment**
              
              $
              2,759.5
              
              
              $
              2,635.9





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






**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS**




**For
                  the third quarter ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Net
                  Sales**
              
              $
              602.2
              
              
              $
              579.0**Costs
                  and Expenses:**Cost of products sold (see Note D)
              
              
              433.0
              
              
              
              404.2Selling, general and administrative expense, net (see Note
                  D)
              
              
              125.1
              
              
              
              101.1Amortization of intangible assets
              
              
              6.5
              
              
              
              6.2564.6
              
              
              
              511.5Operating
                  earnings
              
              
              37.6
              
              
              
              67.5Interest
                  expense
              
              
              (46.4
              )
              
              
              (41.8
              )Investment
                  income
              
              
              0.6
              
              
              
              0.4(Loss)
                  earnings before provision for income taxes
              
              
              (8.2
              )
              
              
              26.1Provision
                  for
                  income taxes
              
              
              0.5
              
              
              
              10.9**Net
                  (loss) earnings**
              
              $
              (8.7
              )
              
              $
              15.2


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






**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS**





**For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Net
                  Sales**
              
              $
              1,799.0
              
              
              $
              1,677.3**Costs
                  and Expenses:**Cost of products sold (see Note D)
              
              
              1,269.7
              
              
              
              1,168.4Selling, general and administrative expense, net (see Note
                  D)
              
              
              363.3
              
              
              
              263.7Amortization of intangible assets
              
              
              18.9
              
              
              
              16.21,651.9
              
              
              
              1,448.3Operating
                  earnings
              
              
              147.1
              
              
              
              229.0Interest
                  expense
              
              
              (137.4
              )
              
              
              (120.2
              )Investment
                  income
              
              
              1.5
              
              
              
              1.6Earnings
                  before provision for income taxes
              
              
              11.2
              
              
              
              110.4Provision
                  for
                  income taxes
              
              
              11.4
              
              
              
              43.5**Net
                  (loss) earnings**
              
              $
              (0.2
              )
              
              $
              66.9


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






**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS**




**For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Cash
                  Flows from operating activities:**Net
                  (loss)
                  earnings
              
              $
              (0.2
              )
              
              $
              66.9**Adjustments
                  to reconcile net (loss) earnings to net cash****provided by operating activities:**Depreciation
                  and amortization expense
              
              
              46.9
              
              
              
              44.2Non-cash
                  interest expense, net
              
              
              50.4
              
              
              
              33.3Non-cash
                  stock-based compensation expense
              
              
              0.3
              
              
              
              0.3Gain
                  from
                  curtailment of post-retirement medical benefits
              
              
              ---
              
              
              
              (35.9
              )Loss
                  on
                  property and equipment
              
              
              1.0
              
              
              
              1.4Deferred
                  federal income tax (benefit) provision
              
              
              (9.4
              )
              
              
              10.2**Changes
                  in certain assets and liabilities, net of****effects from acquisitions and dispositions:**Accounts
                  receivable, net
              
              
              (12.6
              )
              
              
              (43.4
              )Inventories
              
              
              (36.7
              )
              
              
              (37.9
              )Prepaids
                  and
                  other current assets
              
              
              1.4
              
              
              
              5.1Accounts
                  payable
              
              
              16.3
              
              
              
              9.2Accrued
                  expenses and taxes
              
              
              (3.5
              )
              
              
              19.6Long-term
                  deferred compensation
              
              
              ---
              
              
              
              (54.0
              )Long-term
                  assets, liabilities and other, net
              
              
              4.1
              
              
              
              0.3Total adjustments to net (loss) earnings
              
              
              58.2
              
              
              
              (47.6
              )Net cash provided by operating activities
              
              
              58.0
              
              
              
              19.3**Cash
                  Flows from investing activities:**Capital
                  expenditures
              
              
              (24.1
              )
              
              
              (33.0
              )Net
                  cash paid
                  for businesses acquired
              
              
              (93.5
              )
              
              
              (67.0
              )Proceeds
                  from
                  the sale of property and equipment
              
              
              0.6
              
              
              
              3.4Change
                  in
                  restricted cash and marketable securities
              
              
              1.5
              
              
              
              0.4Other,
                  net
              
              
              (1.4
              )
              
              
              (3.1
              )Net cash used in investing activities
              
              
              (116.9
              )
              
              
              (99.3
              )**Cash
                  Flows from financing activities:**Increase
                  in
                  borrowings
              
              
              112.8
              
              
              
              83.9Payment
                  of
                  borrowings
              
              
              (40.2
              )
              
              
              (46.8
              )Payment
                  in
                  connection with senior unsecured loan facility rollover
              
              
              (4.5
              )
              
              
              ---Borrowing
                  under the senior unsecured loan facility
              
              
              ---
              
              
              
              200.8Dividends
              
              
              ---
              
              
              
              (174.9
              )Payment
                  of
                  expenses in connection with IPO
              
              
              ---
              
              
              
              (2.4
              )Other,
                  net
              
              
              ---
              
              
              
              (1.6
              )Net cash provided by financing activities
              
              
              68.1
              
              
              
              59.0Net
                  change in
                  unrestricted cash and cash equivalents
              
              
              9.2
              
              
              
              (21.0
              )Unrestricted
                  cash and cash equivalents at the beginning of the period
              
              
              57.4
              
              
              
              77.2Unrestricted
                  cash and cash equivalents at the end of the period
              
              $
              66.6
              
              
              $
              56.2**Supplemental
                  disclosure of cash flow information:**Interest
                  paid
              
              $
              95.4
              
              
              $
              95.9Income
                  taxes
                  paid, net
              
              $
              4.7
              
              
              $
              17.1


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






**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


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


**FOR
      THE THIRD QUARTER ENDED SEPTEMBER 30, 2006**


*(Dollar
      amounts in millions)*





**Accumulated****Additional**
              
              
              
              
              
              **Other****Paid-in**
              
              
              **Retained**
              
              
              **Comprehensive**
              
              
              **Comprehensive****Capital**
              
              
              **Earnings**
              
              
              **Income
                  (Loss)**
              
              
              **Income
                  (Loss)****Balance,
                  July 1, 2006**
              
              $
              21.2
              
              
              $
              33.9
              
              
              $
              14.4
              
              
              $
              ---Net
                  earnings
              
              
              ---
              
              
              
              15.2
              
              
              
              ---
              
              
              
              15.2Other
                  comprehensive income (loss):Currency translation adjustment
              
              
              ---
              
              
              
              ---
              
              
              
              (0.2
              )
              
              
              (0.2
              )Comprehensive
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              15.0Stock-based
                  compensation
              
              
              0.1
              
              
              
              ---
              
              
              
              ---**Balance,
                  September 30, 2006**
              
              $
              21.3
              
              
              $
              49.1
              
              
              $
              14.2




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





**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


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


**FOR
      THE FIRST NINE MONTHS ENDED SEPTEMBER 30, 2006**


*(Dollar
      amounts in millions)*





**Accumulated****Additional**
              
              
              
              
              
              **Other****Paid-in**
              
              
              **Retained**
              
              
              **Comprehensive**
              
              
              **Comprehensive****Capital**
              
              
              **Earnings**
              
              
              **Income**
              
              
              **Income****Balance,
                  December 31, 2005**
              
              $
              130.2
              
              
              $
              52.8
              
              
              $
              7.5
              
              
              $
              ---Net
                  earnings
              
              
              ---
              
              
              
              66.9
              
              
              
              ---
              
              
              
              66.9Other
                  comprehensive income:Currency translation adjustment
              
              
              ---
              
              
              
              ---
              
              
              
              6.7
              
              
              
              6.7Comprehensive
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              73.6Dividends
              
              
              (104.3
              )
              
              
              (70.6
              )
              
              
              ---Adjustment
                  of
                  carryover basis of continuingmanagement investors in the THL Transaction
              
              
              (4.9
              )
              
              
              ---
              
              
              
              ---Stock-based
                  compensation
              
              
              0.3
              
              
              
              ---
              
              
              
              ---**Balance,
                  September 30, 2006**
              
              $
              21.3
              
              
              $
              49.1
              
              
              $
              14.2




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






**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


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


**FOR
      THE THIRD QUARTER ENDED SEPTEMBER 29, 2007**


*(Dollar
      amounts in millions)*




**Accumulated****Additional**
              
              
              
              
              
              **Other****Paid-in**
              
              
              **Retained**
              
              
              **Comprehensive**
              
              
              **Comprehensive****Capital**
              
              
              **Earnings**
              
              
              **Income
                  (Loss)**
              
              
              **Income
                  (Loss)****Balance,
                  June 30, 2007**
              
              $
              21.5
              
              
              $
              45.2
              
              
              $
              20.1
              
              
              $
              ---Net
                  loss
              
              
              ---
              
              
              
              (8.7
              )
              
              
              ---
              
              
              
              (8.7
              )Other
                  comprehensive income (loss):Currency translation adjustment
              
              
              ---
              
              
              
              ---
              
              
              
              8.1
              
              
              
              8.1Pension liability adjustment
              
              
              ---
              
              
              
              ---
              
              
              
              (0.1
              )
              
              
              (0.1
              )Comprehensive
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (0.7
              )Stock-based
                  compensation
              
              
              0.1
              
              
              
              ---
              
              
              
              ---**Balance,
                  September 29, 2007**
              
              $
              21.6
              
              
              $
              36.5
              
              
              $
              28.1


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






**NTK
      HOLDINGS, INC. AND SUBSIDIARIES**


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


**FOR
      THE FIRST NINE MONTHS ENDED SEPTEMBER 29, 2007**


*(Dollar
      amounts in millions)*




**Accumulated****Additional**
              
              
              
              
              
              **Other****Paid-in**
              
              
              **Retained**
              
              
              **Comprehensive**
              
              
              **Comprehensive****Capital**
              
              
              **Earnings**
              
              
              **Income
                  (Loss)**
              
              
              **Income
                  (Loss)****Balance,
                  December 31, 2006**
              
              $
              21.3
              
              
              $
              39.9
              
              
              $
              11.6
              
              
              $
              ---Net
                  loss
              
              
              ---
              
              
              
              (0.2
              )
              
              
              ---
              
              
              
              (0.2
              )Other
                  comprehensive income (loss):Currency translation adjustment
              
              
              ---
              
              
              
              ---
              
              
              
              16.7
              
              
              
              16.7Pension liability adjustment
              
              
              ---
              
              
              
              ---
              
              
              
              (0.2
              )
              
              
              (0.2
              )Comprehensive
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              16.3Adoption
                  of
                  FIN 48 (see Note F)
              
              
              ---
              
              
              
              (3.2
              )
              
              
              ---Stock-based
                  compensation
              
              
              0.3
              
              
              
              ---
              
              
              
              ---**Balance,
                  September 29, 2007**
              
              $
              21.6
              
              
              $
              36.5
              
              
              $
              28.1


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






**NTK
        HOLDINGS, INC. AND SUBSIDIARIES**
 **NOTES
        TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        29, 2007 AND SEPTEMBER 30, 2006**





(A)
            The
                unaudited condensed consolidated financial statements presented herein
                (the “Unaudited Financial Statements”) reflect the financial position,
                results of operations and cash flows of NTK Holdings, Inc. (the “Company”
                or “NTK Holdings”) and all of its wholly-owned
                subsidiaries.  The Unaudited Financial Statements include the
                accounts of NTK Holdings, as appropriate, and all of its wholly-owned
                subsidiaries, including Nortek, Inc. ("Nortek"), 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, the Company filed a registration statement on Form S-1 (most recently
      amended on September 15, 2006) with the SEC for an initial public offering
      of
      shares of its common stock.  The Company requested the withdrawal of
      its registration statement on Form S-1 in a filing with the SEC on November
      13,
      2007 due to the unsettled market conditions.





**Stock-Based
      Compensation of Employees, Officers and Directors**





The
      Company follows the modified-prospective transition method of accounting for
      stock-based compensation in accordance with SFAS No. 123R.  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.  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.





At
      September 29, 2007, certain employees and consultants held approximately 23,383
      C-1 units and approximately 44,778 C-2 units, which represent equity interests
      in THL-Nortek Investors, LLC (“Investors LLC”), the parent of NTK Holdings, that
      function similar to stock awards.  The C-1 units vest pro rata on a
      quarterly basis over a three-year period and approximately 22,409 and 16,720
      were vested at September 29, 2007 and December 31, 2006,
      respectively.  The total fair value of the C-1 units is approximately
      $1.1 million and approximately $0.1 million remains to be amortized at September
      29, 2007.  The C-2 units only vest in the event that certain
      performance-based criteria, as defined, are met.  At September
      29, 2007 and December 31, 2006, there was approximately $1.6 million of
      unamortized stock-based employee compensation with respect to the C-2 units,
      which will be recognized 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.





The
      Company recorded stock-based compensation charges in selling, general and
      administrative expense, net of approximately $0.1 million for each of the third
      quarters ended September 29, 2007 and September 30, 2006, respectively, and
      approximately $0.3 million for each of the first nine months ended September
      29,
      2007 and September 30, 2006, respectively, in accordance with SFAS No.
      123R.




**Income
      Taxes**





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (an
      interpretation of FASB Statement No. 109)”, (“FIN 48”).  FIN 48
      clarifies the criteria that an individual tax position must satisfy for some
      or
      all of the benefits of that position to be recognized in a company’s financial
      statements.  FIN 48 prescribes a recognition threshold of
“more-likely-than-not” and a measurement attribute for all tax positions taken
      or expected to be taken on a tax return in order for those tax positions to
      be
      recognized in the financial statements.  The Company adopted FIN 48 on
      January 1, 2007 (see Note F).





**Goodwill**





The
      following table presents a summary of the activity in goodwill for the first
      nine months ended September 29, 2007:





*(Amounts
                in millions)***Balance
                at December 31, 2006**
            
            **$**
            **1,481.4**Acquisitions
                during the first nine months ended September 29, 2007
            
            
            37.2Adoption
                of FIN 48 (see Note F)
            
            
            3.8Realization
                of FIN 48 reserves
            
            
            (1.4
            )Purchase
                accounting adjustments
            
            
            (7.4
            )Impact
                of foreign currency translation
            
            
            2.0**Balance
                at September 29, 2007**
            
            **$**
            **1,515.6**





At
      September 29, 2007, the Company had an approximate carrying value of Goodwill
      as
      follows:





(*Amounts
                in millions)*Segment:Residential
                Ventilation Products
            
            $
            801.2Home
                Technology Products
            
            
            398.2Air
                Conditioning and Heating Products *
            
            
            316.2$
            1,515.6





*
            Mostly
                relates to residential HVAC
                products.





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 $18.1 million and $62.3 million of
      goodwill associated with certain companies acquired during the first nine months
      ended September 29, 2007 and the year ended December 31, 2006, 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.





The
      Company accounts for acquired goodwill in accordance with Statement of Financial
      Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS No. 141”) and SFAS
      No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) which involves
      judgment with respect to the determination of the purchase price and the
      valuation of the acquired assets and liabilities in order to determine the
      final
      amount of goodwill.





Under
      SFAS No. 142, goodwill determined to have an indefinite useful life are not
      amortized, instead these assets are evaluated for impairment on an annual basis
      or more frequently if events or business conditions warrant it.  The
      Company has set the annual evaluation date as of the first day of its fiscal
      fourth quarter.  The Company primarily utilizes a discounted cash flow
      approach in order to value the Company’s reporting units required to be tested
      for impairment by SFAS No. 142, which requires that the Company forecast future
      cash flows of the reporting units and discount the cash flow stream based upon
      a
      weighted average cost of capital that is derived from comparable companies
      within similar industries.  The discounted cash flow calculations also
      include a terminal value calculation that is based upon an expected long-term
      growth rate for the applicable reporting unit.  The Company believes
      that its procedures for estimating gross future cash flows, including the
      terminal valuation, are reasonable and consistent with market conditions at
      the
      time of estimation.





The
      Company’s businesses are experiencing a difficult market environment, in part
      due to weak residential new construction and residential air conditioning
      markets, and increased commodity costs, and expects these trends to continue
      into 2008.





As
      of
      September 29, 2007, the Company and its subsidiaries have not completed the
      Company wide planning process of future projected cash flows used to perform
      its
      annual evaluation under SFAS No. 142.





The
      Company believes that despite the current difficult market environment, that
      once it completes its annual evaluation for the potential impairment of goodwill
      as of the first day of its fiscal fourth quarter, it is more likely than not
      that there will not be a need to reduce the fair value of goodwill of its
      reporting segments below its carrying value as of September 29,
      2007.  However, there can be no assurances that the results of the
      Company’s evaluation as of the first day of its fiscal fourth quarter will not
      result in an impairment of goodwill.





**Other
      Long-Lived Assets**





The
      Company performs the evaluation as of the first day of its fiscal fourth quarter
      and more frequently if impairment indicators are identified, for the impairment
      of long-lived assets, other than goodwill, based on expectations of
      non-discounted future cash flows compared to the carrying value of the
      subsidiary in accordance with SFAS No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets (“SFAS No. 144”).  The Company’s cash
      flow estimates are based upon historical cash flows, as well as future projected
      cash flows received from subsidiary management in connection with the annual
      Company wide planning process, and include a terminal valuation for the
      applicable subsidiary based upon a multiple of EBITDA.  The Company
      estimates the EBITDA multiple by reviewing comparable company information and
      other industry data.  The Company has not identified any impairment
      indicators during the third quarter of 2007.





The
      Company believes that despite the current difficult market environment, that
      once it completes its annual evaluation for the potential impairment of other
      long- lived assets as of the first day of its fiscal fourth quarter, it is
      more
      likely than not that there will not be a need to reduce the fair value of other
      long-lived assets of its reporting segments below its carrying value as of
      September 29, 2007.  However, there can be no assurances that the
      results of the Company’s evaluation as of the first day of its fiscal fourth
      quarter will not result in an impairment of other long-lived
      assets.





**New
      Accounting Pronouncements**





In
      September 2006, the FASB issued Statement of Financial Accounting Standard
      (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”).  SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      accordance with U.S. generally accepted accounting principles, and expands
      disclosures about fair value measurements.  The provisions of SFAS No.
      157 are effective for the Company beginning January 1, 2008, including interim
      periods within the year ending December 31, 2008.  Earlier adoption is
      encouraged.  The Company is currently evaluating the impact of
      adopting SFAS No. 157 on its consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an Amendment of FASB
      Statement No. 115” (“SFAS No. 159”).  SFAS No. 159 permits entities to
      choose to measure many financial instruments and certain other items at fair
      value and is effective for fiscal years beginning after November 15, 2007,
      or
      January 1, 2008 for the Company.  Early adoption is permitted as of the
      beginning of the previous fiscal year provided that the entity makes that choice
      in the first 120 days of that fiscal year and also elects to apply the
      provisions of SFAS No. 157.  The Company is currently evaluating the
      impact of adopting SFAS No. 159 on its consolidated financial
      statements.





(B)
            On
                May 10, 2006, NTK Holdings borrowed an aggregate principal amount
                of
                $205.0 million under a senior unsecured loan facility.  The
                proceeds of this borrowing were utilized to (1) pay a cash dividend
                of
                approximately $174.9 million to Investors LLC which, in turn, made
                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) contribute capital of
                approximately $25.9 million to Nortek Holdings, which was used by
                Nortek
                Holdings, together with a dividend of approximately $28.1 million
                from
                Nortek to make a distribution of approximately $54.0 million 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.  As a result of 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
                are not entitled to any further
                distributions.





On
      May
      10, 2007, the Company exercised an option to extend the maturity date of the
      senior unsecured loan facility to March 1, 2014 (the “Option”) and paid a loan
      extension fee of approximately $4.5 million.  As a result, the Company
      recorded approximately $4.5 million as debt discount and recorded approximately
      $3.9 million of additional non-cash interest expense in the second quarter
      of
      2007 related primarily to the decrease in the fair value of the
      Option.  The debt discount is being amortized as non-cash interest
      expense using the interest method through March 1, 2014.





The
      senior unsecured loan facility bears interest at LIBOR plus a spread, which
      spread increases over time, subject to a cap on the overall interest rate of
      11%
      per annum.  At September 29, 2007, the senior unsecured loan facility
      had an actual interest rate of approximately 10.38%.  The Company is
      accruing at an interest rate of approximately 10.94%, reflecting the estimated
      average interest rate over the remaining term of the senior unsecured loan
      facility.  NTK Holdings has the option to pay interest in cash (“Cash
      Option”) or by adding interest to the principal amount of the loans under the
      senior unsecured loan facility (“PIK Option”).  If the Company
      exercises the PIK Option with respect to any interest period, an amount equal
      to
      the unpaid interest accrued will be added to the principal amount of the senior
      unsecured loan facility and such accrued interest will be deemed to have been
      paid.  Following an increase in the principal amount of the senior
      unsecured loan facility as a result of the payment through the PIK Option,
      the
      senior unsecured loan facility will bear interest on such increased principal
      amount.  The Company must elect the form of interest payment for each
      interest period.  Since the initial borrowing on May 10, 2006, the
      Company has elected the PIK option to increase the principal amount of the
      senior unsecured loan facility for the interest accrued during the applicable
      interest periods.  As a result of exercising this PIK Option, the
      Company recorded approximately $5.8 million and $15.8 million of accrued
      interest for the third quarter and first nine months ended September 29, 2007,
      respectively, and approximately $4.1 million and $6.3 million of accrued
      interest for the third quarter ended September 30, 2006 and the period from
      May
      10, 2006 to September 30, 2006, respectively, as additional indebtedness
      relating to the senior unsecured loan facility.  At September 29, 2007
      and December 31, 2006, the actual outstanding principal balance on the senior
      unsecured loan facility was approximately $231.8 million and $216.0 million,
      respectively. The amount recorded as of September 29, 2007, net of
      unamortized debt discount, is approximately $227.5 million.  The
      senior unsecured loan facility is not guaranteed by any of the NTK Holdings’
subsidiaries and is not secured by any assets of NTK Holdings or any of its
      subsidiaries.





At
      September 29, 2007, Nortek had approximately $89.0 million outstanding and
      approximately $79.5 million of available borrowing capacity under the U.S.
      revolving portion of its senior secured credit facility, with approximately
      $21.5 million in outstanding letters of credit.  Borrowings under the
      revolving portion of the senior secured credit facility are used for general
      working capital purposes.  Under the Canadian revolving portion of its
      senior secured credit facility, Nortek had no outstanding borrowings and
      approximately $10.0 million of available borrowing capacity.  Letters
      of credit have been issued under Nortek’s revolving credit facility as
      additional security for (1) approximately $17.2 million relating to certain
      of
      the Company’s insurance programs, (2) approximately $3.6 million relating to
      leases outstanding for certain of the Company’s manufacturing facilities and (3)
      approximately $0.7 million relating to certain of the subsidiaries’ purchases
      and other requirements.  Letters of credit reduce borrowing
      availability under Nortek’s revolving credit facility on a dollar for dollar
      basis.  Subsequent to September 29, 2007, Nortek repaid approximately
      $29.0 million of outstanding borrowings under the U.S. revolving portion of
      its
      senior secured credit facility.





At
      September 29, 2007, the Company had approximately $57.7 million available for
      the payment of cash dividends, stock purchases or other restricted payments
      (“Restricted Payments”) under the terms of the indenture governing the Company’s
      10 3/4% Senior Discount Notes’ and the agreement governing the Company’s senior
      unsecured loan facility.  Restricted Payments to NTK Holdings and
      Nortek Holdings from Nortek are limited by the terms of Nortek’s most
      restrictive loan agreement, Nortek’s senior secured credit
      facility.  The amount available for such payments under Nortek’s
      senior secured credit facility was approximately $172.4 million at September
      29,
      2007.





(C)
            On
                September 18, 2007, the Company acquired all the capital stock of
                Stilpol
                SP. Zo.O. (“Stilpol”) and certain assets and liabilities of Metaltecnica
                S.r.l. (“Metaltecnica”) for approximately $7.9 million in cash and the
                assumption of indebtedness (estimated to be approximately $4.5 million
                at
                September 29, 2007) through its kitchen range hood subsidiaries,
                based in
                Italy and Poland (“Best Subsidiaries”).  The Company’s Best
                subsidiaries borrowed the cash portion of the purchase price from
                banks in
                Italy.  These acquisitions supply various fabricated material
                components and sub-assemblies used by the Company’s Best subsidiaries in
                the manufacture of kitchen range
                hoods.





On
      August 1, 2007, the Company, through its wholly-owned subsidiary Jensen, Inc.,
      acquired certain assets of Solar of Michigan, Inc. (“Triangle”) for
      approximately $1.7 million of cash.  Triangle is located in
      Coopersville, MI and manufactures, markets and distributes bath cabinets and
      related products.





On
      July
      27, 2007, the Company acquired all of the ownership units of HomeLogic LLC
      (“HomeLogic”) for approximately $5.1 million (utilizing approximately $3.1
      million of cash and issuing unsecured 6% subordinated notes totaling
      approximately $2.0 million due July 2011) plus contingent consideration, which
      may be payable in future years.  HomeLogic is located in Marblehead,
      MA and designs and sells software and hardware that facilitates the control
      of
      third party residential subsystems such as home theatre, whole-house audio,
      climate control, lighting, security and irrigation.





On
      July
      23, 2007, the Company, through Linear, acquired the assets and certain
      liabilities of Aigis Mechtronics LLC (“Aigis”) for approximately $2.2 million of
      cash.  Aigis is located in Winston-Salem, NC and manufactures and
      sells equipment, such as camera housings, into the close-circuit television
      portion of the global security market.





On
      June
      25, 2007, the Company, through its wholly-owned subsidiary, Linear LLC
      (“Linear”), acquired International Electronics, Inc. (“IEI”) through a cash
      tender offer to purchase all of the outstanding shares of common stock of IEI
      at
      a price of $6.65 per share.  The total purchase price was
      approximately $13.8 million.  IEI is located in Canton, MA and designs
      and sells security and access control components and systems for use in
      residential and light commercial applications.





On
      April 10, 2007, the Company, through Linear, acquired the assets and certain
      liabilities of c.p. All Star Corporation (“All Star”) for approximately $2.8
      million (utilizing approximately $2.3 million of cash and issuing unsecured
      6%
      subordinated notes totaling $0.5 million due April 2009).  All Star is
      located in Downington, PA and is a leading manufacturer and distributor of
      residential, commercial and industrial gate operators, garage door openers,
      radio controls and accessory products for the garage door and perimeter security
      industry.





On
      March 2, 2007, the Company, through Linear, acquired the stock of LiteTouch,
      Inc. (“LiteTouch”) for approximately $10.5 million (utilizing approximately $8.0
      million of cash and issuing unsecured 6% subordinated notes totaling $2.5
      million due March 2009) plus contingent consideration, which may be payable
      in
      future years.  LiteTouch is located in Salt Lake City, UT and designs,
      manufactures and sells automated lighting controls for a variety of uses
      including residential, commercial, new construction and retro-fit
      applications.





On
      December 12, 2006, the Company, through Linear, acquired the stock of Gefen,
      Inc. (“Gefen”) for approximately $24.0 million (utilizing approximately $21.5
      million of cash and issuing unsecured 6% subordinated notes totaling $2.5
      million due December 2008) plus contingent consideration, which may be payable
      in future years.  Gefen is located in Chatsworth, CA and designs and
      sells audio and video products which extend, switch, distribute and convert
      signals in a variety of formats, including high definition, for both the
      residential and commercial markets.





On
      November 17, 2006, the Company, through its wholly-owned subsidiary,
      Broan-NuTone LLC (“Broan”), acquired the stock of Zephyr Corporation (“Zephyr”)
      and Pacific Zephyr Range Hood, Inc. (“Pacific”) for approximately $26.5 million
      (utilizing approximately $22.5 million of cash and issuing unsecured 6%
      subordinated notes totaling $4.0 million due November 2009).  Zephyr
      and Pacific are both located in San Francisco, CA.  Zephyr designs and
      sells upscale range hoods, while Pacific designs, sells and installs range
      hoods
      and other kitchen products for Asian cooking markets in the United
      States.





On
      July
      18, 2006, the Company, through Linear, acquired the stock of Magenta Research,
      Ltd. (“Magenta”) for approximately $14.4 million (utilizing approximately $11.9
      million of cash, of which approximately $10.0 million was borrowed under
      Nortek’s revolving credit facility and was repaid in the second quarter of 2007,
      and issuing unsecured 6% subordinated notes totaling $2.5 million due July
      2008)
      plus contingent consideration, which may be payable in future
      years.  Magenta is located in New Milford, CT and designs and sells
      products that distribute audio and video signals over Category 5 and fiber
      optic
      cable to multiple display screens.





On
      June
      26, 2006, the Company, through Linear, acquired the stock of Secure Wireless,
      Inc. (“Secure Wireless”) and Advanced Bridging Technologies, Inc. (“ABT”)
      through two mergers for approximately $10.5 million, plus contingent
      consideration of approximately $18.1 million that was earned by Secure Wireless
      in 2006 and was paid in April 2007.  Additional contingent
      consideration may be payable in future years.  Secure Wireless designs
      and sells wireless security products for the residential and commercial markets
      while ABT designs and sells innovative radio frequency control products and
      accessories.  Both Secure Wireless and ABT are located in Carlsbad,
      CA.





On
      April 14, 2006, the Company, through two newly formed subsidiaries of its HVAC
      segment, acquired the assets and certain liabilities of Huntair, Inc.
      (“Huntair”) and Cleanpak International, LLC (“Cleanpak”), for approximately
      $48.4 million (utilizing approximately $38.4 million of cash and issuing
      unsecured 6% subordinated notes totaling $10.0 million due April 2008) plus
      contingent consideration of approximately $30.0 million which was earned in
      2006
      and was paid in April 2007.  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 Linear, acquired the assets and certain
      liabilities of Furman Sound, Inc. (“Furman”) for approximately $3.3
      million.  Furman is located in Petaluma, CA and designs and sells
      audio and video signal processors and innovative power conditioning and surge
      protection 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 $2.4
      million.  The majority ownership transaction relating to MSH was
      finalized with the Chinese authorities in May 2006.  Prior to January
      25, 2006, Mammoth China had a forty-percent minority interest in MEG and a
      fifty-percent interest in MSH.  On June 15, 2007, the Company further
      increased its ownership in MEG and MSH to seventy-five percent.





Acquisitions
      contributed approximately $30.9 million, $2.2 million and $1.0 million to net
      sales, operating earnings and depreciation and amortization expense,
      respectively, for the third quarter ended September 29, 2007 and contributed
      approximately $119.8 million, $17.3 million and $5.3 million to net sales,
      operating earnings and depreciation and amortization expense, respectively,
      for
      the first nine months ended September 29, 2007.  With the exception of
      Stilpol, Metaltecnica, Triangle, Zephyr and Pacific, which are included in
      the
      Residential Ventilation Products segment, and Huntair, Cleanpak, MEG and MSH,
      which are 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).





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 first half of 2008.





Approximately
      $55.6 million of contingent consideration was paid in the first nine months
      of
      2007 related to the Secure Wireless, Huntair, Cleanpak and OmniMount
      acquisitions.  The remaining estimated total maximum potential amount
      of contingent consideration that may be paid in the future for all completed
      acquisitions is approximately $95.2 million.





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)
            During
                the third quarter ended September 29, 2007 and September 30, 2006,
                the
                Company’s results of operations include the following (income) and expense
                items recorded in cost of products sold and selling, general and
                administrative expense, net in the accompanying unaudited condensed
                consolidated statement of
                operations:





**For
                the third quarter ended *****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Amounts
                in millions)*Charges
                related to the closure of the Company’s NuTone, Inc. Cincinnati, OH
                facility (1)
            
            $
            0.4
            
            
            $
            0.3Charges
                related to the closure of the Company’s Mammoth, Inc. Chaska, MN
                facility
            
            
            2.3
            
            
            
            ---Charges
                related to the closure of the Company’s Jensen, Inc. Vernon, CA
                facility
            
            
            0.2
            
            
            
            ---Legal
              and
              other professional fees and expenses incurred in connection with matters
              related to certain subsidiaries basedin Italy and Poland
            
            
            0.9
            
            
            
            ---Increase
              in
              product liability expense for the third quarter of 2007 as compared
              to the
              same periodof 2006 in the RVP segment (2)
            
            
            5.5
            
            
            
            ---Product
                safety upgrade reserves in the RVP and HTP segments (3)
            
            
            0.8
            
            
            
            ---Loss
                on settlement of litigation in the RVP segment
            
            
            1.9
            
            
            
            ---Gain
                on settlement of litigation in the HVAC segment
            
            
            ---
            
            
            
            (1.2
            )Foreign
              exchange losses (gains) related to transactions, including intercompany
              debt not indefinitely investedin the Company’s subsidiaries
            
            
            1.4
            
            
            
            (0.1
            )$
            13.4
            
            
            $
            (1.0
            )





*
            Unless
                otherwise indicated, all items noted in the table have been recorded
                in
                selling, general and administrative expense, net in the accompanying
                unaudited condensed consolidated statement of
                operations.





(1)
            For
                the third quarter ended September 29, 2007, all charges related to
                the
                closure of NuTone were recorded in selling, general and administrative
                expense, net.  For the third quarter ended September 30, 2006,
                all charges related to the closure of NuTone were recorded in cost
                of
                products sold (see Note H).





(2)
            The
                RVP segment recorded the increase in product liability expense in
                cost of
                products sold (see Note G).





(3)
            The
                RVP and HTP segments recorded these product safety upgrade reserves
                in
                cost of products sold (see Note G).






During
      the first nine months ended September 29, 2007 and September 30, 2006, the
      Company’s results of operations include the following (income) and expense items
      recorded in cost of products sold and selling, general and administrative
      expense, net in the accompanying unaudited condensed consolidated statement
      of
      operations:





**For
                the first nine months ended *****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Amounts
                in millions)*Gain
                from curtailment of post-retirement medical and life insurance benefits
                (see Note I)
            
            $
            ---
            
            
            $
            (35.9
            )Charges
                related to the closure of the Company’s NuTone, Inc. Cincinnati, OH
                facility (1)
            
            
            1.8
            
            
            
            4.1Charges
                related to the closure of the Company’s Mammoth, Inc. Chaska, MN
                facility
            
            
            2.6
            
            
            
            ---Charges
                related to the closure of the Company’s Jensen, Inc. Vernon, CA
                facility
            
            
            0.2
            
            
            
            ---Legal
              and
              other professional fees and expenses incurred in connection with matters
              related to certain subsidiaries basedin Italy and Poland
            
            
            2.2
            
            
            
            ---Increase
              in
              product liability expense for the first nine months of 2007 as compared
              to
              the same period of 2006in the RVP segment (2)
            
            
            7.3
            
            
            
            ---Product
                safety upgrade reserves in the RVP and HTP segments (3)
            
            
            0.6
            
            
            
            5.5Reserve
                for amounts due from customers in the HTP and HVAC
                segments
            
            
            2.3
            
            
            
            ---Loss
                on settlement of litigation in the RVP segment
            
            
            1.9
            
            
            
            ---Gain
                on settlement of litigation in the HVAC segment
            
            
            ---
            
            
            
            (1.6
            )Foreign
              exchange losses related to transactions, including intercompany debt
              not
              indefinitely investedin the Company’s subsidiaries
            
            
            3.4
            
            
            
            ---$
            22.3
            
            
            $
            (27.9
            )





*
            Unless
                otherwise indicated, all items noted in the table have been recorded
                in
                selling, general and administrative expense, net in the accompanying
                unaudited condensed consolidated statement of
                operations.





(1)
            For
                the first nine months ended September 29, 2007, all charges related
                to the
                closure of NuTone were recorded in selling, general and administrative
                expense, net.  For the first nine months ended September 30,
                2006, approximately $1.7 million of the charges related to the closure
                of
                NuTone was recorded in cost of products sold and approximately $2.4
                million was charged to selling, general and administrative expense,
                net
                (see Note H).





(2)
            The
                RVP segment recorded the increase in product liability expense in
                cost of
                products sold (see Note G).





(3)
            The
                RVP and HTP segments recorded these product safety upgrade reserves
                in
                cost of products sold (see Note G).





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.  The Company expensed approximately $0.6 million for each of
      the third quarters ended September 29, 2007 and September 30, 2006,
      respectively, and expensed approximately $1.6 million and $1.8 million for
      the
      first nine months ended September 29, 2007 and September 30, 2006, 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 (“RVP”) segment,
                the Home Technology Products (“HTP”) segment and the Air Conditioning and
                Heating Products (“HVAC”) segment.  The HVAC segment combines
                the results of the Company’s residential and commercial heating,
                ventilating and air conditioning 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.





Unaudited
      net sales, operating earnings and pre-tax earnings for the Company’s segments
      for the third quarter ended September 29, 2007 and September 30, 2006 were
      as
      follows:





**For
                  the third quarter ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Net
                  sales:**Residential
                  ventilation products
              
              $
              203.9
              
              
              $
              200.4Home
                  technology products
              
              
              148.7
              
              
              
              127.4Air
                  conditioning and heating products
              
              
              249.6
              
              
              
              251.2Consolidated net sales
              
              $
              602.2
              
              
              $
              579.0**Operating
                  earnings:**Residential
                  ventilation products (1)
              
              $
              19.4
              
              
              $
              30.7Home
                  technology products (2)
              
              
              19.2
              
              
              
              24.1Air
                  conditioning and heating products (3)
              
              
              6.2
              
              
              
              19.1Subtotal
              
              
              44.8
              
              
              
              73.9**Unallocated:**Stock-based
                  compensation charges
              
              
              (0.1
              )
              
              
              (0.1
              )Foreign
                  exchange gains on transactions,including intercompany debt
              
              
              0.1
              
              
              
              0.1Unallocated,
                  net
              
              
              (7.2
              )
              
              
              (6.4
              )Consolidated operating earnings
              
              
              37.6
              
              
              
              67.5Interest
                  expense
              
              
              (46.4
              )
              
              
              (41.8
              )Investment
                  income
              
              
              0.6
              
              
              
              0.4(Loss) earnings before provision for income taxes
              
              $
              (8.2
              )
              
              $
              26.1


(1)
            The
                operating results of the RVP segment for the third quarter ended
                September
                29, 2007 include an increase in product liability expense of approximately
                $5.5 million as compared to the third quarter ended September 30,
                2006, a
                charge to warranty expense of approximately $0.5 million related
                to a
                product safety upgrade, an approximate $0.4 million charge related
                to the
                closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility (see Note
                H), an approximate $0.2 million charge related to the closure of
                the
                Company’s Jensen, Inc. Vernon, California facility (see Note H), legal and
                other professional fees and expenses incurred in connection with
                matters
                related to certain subsidiaries based in Italy and Poland of approximately
                $0.9 million (see Note G), an approximate $1.9 million loss related
                to the
                settlement of litigation and foreign exchange losses of approximately
                $0.6
                million related to transactions, including intercompany debt not
                indefinitely invested in the Company’s subsidiaries.  The
                operating results of the RVP segment for the third quarter ended
                September
                30, 2006 include an approximate $0.3 million charge related to the
                planned
                closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility (see Note
                H).





(2)
            The
                operating results of the HTP segment for the third quarter ended
                September
                29, 2007 include a charge to warranty expense of approximately $0.3
                million related to a product safety upgrade and foreign exchange
                gains of
                approximately $0.1 million related to
                transactions.





(3)
            The
                operating results of the HVAC segment for the third quarter ended
                September 29, 2007 include a charge of approximately $2.3 million
                related
                to the planned closure of the Company’s Mammoth, Inc. Chaska, Minnesota
                manufacturing facility (see Note H) and foreign exchange losses of
                approximately $1.0 million related to transactions, including intercompany
                debt not indefinitely invested in the Company’s
                subsidiaries.  The operating results of the HVAC segment for the
                third quarter ended September 30, 2006 include an approximate $1.2
                million
                gain related to the settlement of
                litigation.






Unaudited
      net sales, operating earnings and pre-tax earnings for the Company’s segments
      for the first nine months ended September 29, 2007 and September 30, 2006 were
      as follows:





**For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Net
                  sales:**Residential
                  ventilation products
              
              $
              618.7
              
              
              $
              619.3Home
                  technology products
              
              
              415.8
              
              
              
              350.0Air
                  conditioning and heating products
              
              
              764.5
              
              
              
              708.0Consolidated net sales
              
              $
              1,799.0
              
              
              $
              1,677.3**Operating
                  earnings:**Residential
                  ventilation products (1)
              
              $
              70.6
              
              
              $
              136.6Home
                  technology products (2)
              
              
              59.0
              
              
              
              55.8Air
                  conditioning and heating products (3)
              
              
              38.7
              
              
              
              56.3Subtotal
              
              
              168.3
              
              
              
              248.7**Unallocated:**Stock-based
                  compensation charges
              
              
              (0.3
              )
              
              
              (0.3
              )Foreign
                  exchange gains on transactions,including intercompany debt
              
              
              0.3
              
              
              
              0.3Unallocated,
                  net
              
              
              (21.2
              )
              
              
              (19.7
              )Consolidated operating earnings
              
              
              147.1
              
              
              
              229.0Interest
                  expense
              
              
              (137.4
              )
              
              
              (120.2
              )Investment
                  income
              
              
              1.5
              
              
              
              1.6Earnings before provision for income taxes
              
              $
              11.2
              
              
              $
              110.4


(1)
            The
                operating results of the RVP segment for the first nine months ended
                September 29, 2007 include an increase in product liability expense
                of
                approximately $7.3 million as compared to the first nine months ended
                September 30, 2006, a charge to warranty expense of approximately
                $0.5
                million related to a product safety upgrade, an approximate $1.8
                million
                charge related to the closure of the Company’s NuTone, Inc. Cincinnati,
                Ohio facility (see Note H), an approximate $0.2 million charge related
                to
                the closure of the Company’s Jensen, Inc. Vernon, California facility (see
                Note H), legal and other professional fees and expenses incurred
                in
                connection with matters related to certain subsidiaries based in
                Italy and
                Poland of approximately $2.2 million (see Note G), an approximate
                $1.9
                million loss related to the settlement of litigation and foreign
                exchange
                losses of approximately $1.5 million related to transactions, including
                intercompany debt not indefinitely invested in the Company’s
                subsidiaries.  The operating results of the RVP segment for the
                first nine months ended September 30, 2006 include an approximate
                $35.9
                million curtailment gain related to post-retirement medical benefits,
                an
                approximate $4.1 million charge related to the planned closure of
                the
                Company’s NuTone, Inc. Cincinnati, Ohio facility (see Note H), a charge to
                warranty expense of approximately $1.5 million related to a product
                safety
                upgrade and foreign exchange losses of approximately $0.2 million
                related
                to transactions, including intercompany debt not indefinitely invested
                in
                the Company’s subsidiaries.





(2)
            The
                operating results of the HTP segment for the first nine months ended
                September 29, 2007 include a charge of approximately $0.5 million
                related
                to a reserve for amounts due from a customer, a charge to warranty
                expense
                of approximately $0.1 million related to a product safety upgrade
                and
                foreign exchange gains of approximately $0.2 million related to
                transactions.  The operating results of the HTP segment for the
                first nine months ended September 30, 2006 include a charge to warranty
                expense of approximately $4.0 million related to a product safety
                upgrade
                and foreign exchange gains of approximately $0.1 million related
                to
                transactions.





(3)
            The
                operating results of the HVAC segment for the first nine months ended
                September 29, 2007 include a charge of approximately $2.6 million
                related
                to the planned closure of the Company’s Mammoth, Inc. Chaska, Minnesota
                manufacturing facility (see Note H), a charge of approximately $1.8
                million related to reserves for amounts due from customers and foreign
                exchange losses of approximately $2.4 million related to transactions,
                including intercompany debt not indefinitely invested in the Company’s
                subsidiaries.  The operating results of the HVAC segment for the
                first nine months ended September 30, 2006 include an approximate
                $1.6
                million gain related to the settlement of litigation and foreign
                exchange
                losses of approximately $0.2 million related to transactions, including
                intercompany debt not indefinitely invested in the Company’s
                subsidiaries.






Unaudited
      depreciation expense, amortization expense and capital expenditures for the
      Company’s segments for the third quarter ended September 29, 2007 and September
      30, 2006 were as follows:




**For
                  the third quarter ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Depreciation
                  Expense:**Residential
                  ventilation products
              
              $
              3.5
              
              
              $
              3.2Home
                  technology products
              
              
              1.5
              
              
              
              1.1Air
                  conditioning and heating products
              
              
              4.1
              
              
              
              4.2Other
              
              
              0.2
              
              
              
              0.2Consolidated depreciation expense
              
              $
              9.3
              
              
              $
              8.7**Amortization
                  expense:**Residential
                  ventilation products (1)
              
              $
              1.8
              
              
              $
              1.8Home
                  technology products
              
              
              2.7
              
              
              
              2.5Air
                  conditioning and heating products (2)
              
              
              1.8
              
              
              
              2.8Other
              
              
              0.2
              
              
              
              0.1Consolidated amortization expense
              
              $
              6.5
              
              
              $
              7.2**Capital
                  Expenditures:**Residential
                  ventilation products
              
              $
              4.1
              
              
              $
              5.3Home
                  technology products
              
              
              1.6
              
              
              
              1.8Air
                  conditioning and heating products
              
              
              4.2
              
              
              
              3.2Other
              
              
              0.1
              
              
              
              ---Consolidated capital expenditures
              
              $
              10.0
              
              
              $
              10.3





(1)
            Includes
                amortization of approximately $0.3 million for the third quarter
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





(2)
            Includes
                amortization of approximately $0.7 million for the third quarter
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.






Unaudited
      depreciation expense, amortization expense and capital expenditures for the
      Company’s segments for the first nine months ended September 29, 2007 and
      September 30, 2006 were as follows:





**For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Depreciation
                  Expense:**Residential
                  ventilation products
              
              $
              10.6
              
              
              $
              9.7Home
                  technology products
              
              
              4.2
              
              
              
              2.9Air
                  conditioning and heating products
              
              
              12.7
              
              
              
              11.7Other
              
              
              0.5
              
              
              
              0.5Consolidated depreciation expense
              
              $
              28.0
              
              
              $
              24.8**Amortization
                  expense:**Residential
                  ventilation products (1)
              
              $
              4.4
              
              
              $
              4.8Home
                  technology products (2)
              
              
              8.6
              
              
              
              6.9Air
                  conditioning and heating products (3)
              
              
              5.5
              
              
              
              7.3Other
              
              
              0.4
              
              
              
              0.4Consolidated amortization expense
              
              $
              18.9
              
              
              $
              19.4**Capital
                  Expenditures:**Residential
                  ventilation products
              
              $
              9.8
              
              
              $
              14.7Home
                  technology products
              
              
              4.2
              
              
              
              5.2Air
                  conditioning and heating products
              
              
              10.0
              
              
              
              13.0Other
              
              
              0.1
              
              
              
              0.1Consolidated capital expenditures
              
              $
              24.1
              
              
              $
              33.0


(1)
            Includes
                amortization of approximately $0.3 million for the first nine months
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





(2)
            Includes
                amortization of approximately $0.1 million for the first nine months
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





(3)
            Includes
                amortization of approximately $2.8 million for the first nine months
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.








(F)
            The
                Company provided income taxes on an interim basis based upon the
                actual
                effective tax rate through September 29, 2007.  The following
                reconciles the federal statutory income tax rate to the actual effective
                tax rate of approximately 101.8% and 39.4% for the first nine months
                ended
                September 29, 2007 and September 30,
                2006:





**For
                the first nine months ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006**Income
                tax provision at the federal statutory rate
            
            
            35.0
            %
            
            
            35.0
            %Net
                change from federal statutory rate:Interest
                related to uncertain tax positions, net of federal income tax
                effect
            
            
            13.7
            
            
            
            ---State
                income tax provision, net of federalincome
                tax effect
            
            
            10.7
            
            
            
            1.9Tax
                effect resulting from foreign activities
            
            
            33.7
            
            
            
            1.4Non-deductible
                expenses
            
            
            8.2
            
            
            
            0.7Other,
                net
            
            
            0.5
            
            
            
            0.4Income
                tax provision at actual effective rate
            
            
            101.8
            %
            
            
            39.4
            %





As
      indicated in Note A, the Company adopted the provisions of FIN 48 effective
      January 1, 2007.  As a result of the adoption of this standard, the
      Company recorded a charge to retained earnings of approximately $3.2 million
      and
      also increased goodwill related to pre-acquisition tax uncertainties by
      approximately $3.8 million.





As
      of
      January 1, 2007, after the adoption of FIN 48, the Company has provided a
      liability of approximately $38.2 million for unrecognized tax benefits related
      to various federal, foreign and state income tax matters.  Of this
      amount, the amount that would impact the Company’s effective tax rate, if
      recognized, is approximately $7.1 million.  The Company has revised
      the opening reserve previously disclosed in its Form 10-Q for the first quarter
      ended March 31, 2007 from $33.0 million to $38.2 million.  In
      connection with its continuing analysis of FIN 48, the Company identified
      additional uncertain tax positions that were previously reported as deferred
      tax
      liabilities.  These amounts have been reclassified to the reserve for
      uncertain tax positions as of January 1, 2007.  The difference between
      the total amount of unrecognized tax benefits and the amount that would impact
      the effective tax rate consists of items that are offset by deferred tax assets
      of approximately $7.1 million, goodwill adjustments of approximately $17.2
      million, and the federal tax benefit of state income tax items of approximately
      $6.8 million.  The
      reserve for uncertain tax positions has increased by approximately $1.5 million
      from approximately $38.2 million to approximately $39.7 million at September
      29,
      2007.




During
          the first nine months ended September 29, 2007, the Company provided
          approximately $3.2 million of reserves for uncertain tax positions and
          made
          payments of approximately $0.7 million related to amounts covered by the
          liability for uncertain tax positions.  The Company expects that
          approximately $4.1 million of the total amount of unrecognized tax benefits
          will
          be recognized during 2007 as a reduction of goodwill as a result of the
          expiration of the statutes of limitation for various items.  During
          the third quarter of 2007, the Company reversed approximately $1.0 million
          of
          the total amount of the reserve for uncertain tax positions as a reduction
          of
          goodwill related to the expiration of the statute of limitations for certain
          items.
 
 The
          Company has been notified that its federal tax returns for the periods
          from
          January 1, 2004 to August 27, 2004 and from August 28, 2004 to December
          31, 2004
          and the year ended December 31, 2005 will be audited by the Internal Revenue
          Service.  The Company and its subsidiaries’ foreign and state income
          tax returns are generally subject to audit for the periods from January
          10, 2003
          to December 31, 2003, from January 1, 2004 to August 27, 2004 and from
          August
          28, 2004 to December 31, 2004 and for the years ended December 31, 2002,
          2005
          and 2006.


As
      of
      January 1, 2007, the Company has accrued approximately $4.7 million of interest
      related to uncertain tax positions.  As of September 29, 2007, the
      total amount of accrued interest and penalties is approximately $6.8
      million.  The Company accounts for interest and penalties related to
      uncertain tax positions as part of its provision for federal and state income
      taxes.





(G)
            At
                September 29, 2007, the Company’s former subsidiary, Ply Gem, has
                guaranteed approximately $19.9 million 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 $0.8 million
                at
                September 29, 2007 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 $11.2 million
      and $12.0 million at September 29, 2007 and December 31, 2006,
      respectively.  Approximately $5.1 million of short-term liabilities
      and approximately $6.1 million of long-term liabilities are recorded in accrued
      expenses and other long-term liabilities, respectively, in the accompanying
      unaudited condensed consolidated balance sheet at September 29, 2007 related
      to
      these indemnifications.





The
      Company records insurance liabilities and related expenses for health, workers
      compensation, product and general liability losses and other insurance reserves
      and expenses in accordance with either the contractual terms of its policies
      or,
      if self-insured, the total liabilities that are estimable and probable as of
      the
      reporting date.  Insurance liabilities are recorded as current
      liabilities to the extent payments are expected to be made in the succeeding
      year by the Company with the remaining requirements classified as long-term
      liabilities.  The accounting for self-insured plans requires that
      significant judgments and estimates be made both with respect to the future
      liabilities to be paid for known claims and incurred but not reported claims
      as
      of the reporting date.  The Company considers historical trends when
      determining the appropriate insurance reserves to record in the consolidated
      balance sheet.  In certain cases where partial insurance coverage
      exists, the Company must estimate the portion of the liability that will be
      covered by existing insurance policies to arrive at the net expected liability
      to the Company.  The majority of the Company’s approximate $62.5
      million of recorded insurance liabilities at September 29, 2007 relate to
      product liability accruals of approximately $35.0 million.





Changes
      in the Company’s combined short-term and long-term product liability accruals
      during the third quarter ended September 29, 2007 and September 30, 2006 are
      as
      follows:





**For
                the third quarter ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Amounts
                in millions)*Balance,
                beginning of the period
            
            $
            29.6
            
            
            $
            18.0Provision
                during the period
            
            
            7.4
            
            
            
            1.8Payments
                made during the period
            
            
            (1.7
            )
            
            
            (1.4
            )Other
                adjustments
            
            
            (0.3
            )
            
            
            ---Balance,
                end of the period
            
            $
            35.0
            
            
            $
            18.4





Changes
      in the Company’s combined short-term and long-term product liability
      accruals during the first nine months ended September 29, 2007 and September
      30,
      2006 are as follows:





**For
                the first nine months ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Amounts
                in millions)*Balance,
                beginning of the period
            
            $
            26.8
            
            
            $
            18.1Provision
                during the period
            
            
            12.6
            
            
            
            5.6Payments
                made during the period
            
            
            (4.8
            )
            
            
            (4.3
            )Other
                adjustments
            
            
            0.4
            
            
            
            (1.0
            )Balance,
                end of the period
            
            $
            35.0
            
            
            $
            18.4





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 the 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 combined short-term and long-term warranty accruals during the
      third quarter ended September 29, 2007 and September 30, 2006 are as
      follows:




**For
                the third quarter ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Amounts
                in millions)*Balance,
                beginning of the period
            
            $
            43.4
            
            
            $
            43.4Warranties
                provided during the period
            
            
            7.9
            
            
            
            5.0Settlements
                made during the period
            
            
            (8.0
            )
            
            
            (6.9
            )Changes
                in liability estimate, including expirations and
                acquisitions
            
            
            0.7
            
            
            
            0.2Balance,
                end of the period
            
            $
            44.0
            
            
            $
            41.7





Changes
      in the Company’s combined short-term and long-term warranty accruals during the
      first nine months ended September 29, 2007 and September 30, 2006 are as
      follows:





**For
                the first nine months ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Amounts
                in millions)*Balance,
                beginning of the period
            
            $
            41.2
            
            
            $
            34.8Warranties
                provided during the period
            
            
            21.2
            
            
            
            22.5Settlements
                made during the period
            
            
            (20.6
            )
            
            
            (16.9
            )Changes
                in liability estimate, including expirations and
                acquisitions
            
            
            2.2
            
            
            
            1.3Balance,
                end of the period
            
            $
            44.0
            
            
            $
            41.7





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.





Certain
      sole source suppliers of various fabricated material components and
      sub-assemblies to the Company’s Best Subsidiaries experienced financial
      difficulties in January 2007 and subsequently filed for settlement with
      creditors to prevent bankruptcy.  The Company secured alternative
      sources for all but two of these suppliers and negotiated the purchase of the
      two remaining businesses, Stilpol and Metaltecnica, from the trustee appointed
      by the local court in the settlement procedures.  As discussed in Note
      C, the closing of these two acquisitions occurred on September 18, 2007 for
      a
      purchase price of approximately $7.9 million plus the assumption of indebtedness
      (estimated to be approximately $4.5 million at September 29,
      2007).  The Company’s Best subsidiaries borrowed the cash portion of
      the purchase price from banks in Italy.  The Company has not
      experienced any significant disruption in the manufacture of its products or
      shipments to its customers as a result of these supplier difficulties and
      believes it can successfully integrate these acquired businesses into its
      existing operations.  The Company recorded approximately $16.0 million
      of estimated losses in the RVP segment in the fourth quarter of 2006 in selling,
      general and administrative expense, net, resulting from the likelihood that
      these suppliers will be unable to repay the advances from our subsidiaries
      based
      in Italy and Poland and amounts due under other arrangements.  While
      the Company has recorded its best estimate of the losses related to these
      suppliers, the actual losses may be different than the amounts recorded at
      December 31, 2006.  The Company has incurred approximately $0.9
      million and $2.2 million of legal and other professional fees and expenses
      in
      connection with these suppliers in the third quarter and first nine months
      of
      2007, respectively.





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
      that are not within 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.





In
      late
      June 2006, the Company informed the union located at the Cincinnati, OH location
      of its subsidiary NuTone, that the Company would close the manufacturing
      operations at the facility on or about August 30, 2006.  As a result
      of this planned closure, the Company, through its RVP segment, recorded an
      approximate $4.1 million charge to operations during the first nine months
      of
      2006 (of which approximately $1.7 million is recorded in cost of goods sold
      and
      approximately $2.4 million is recorded in selling, general and administrative
      expense) consisting of severance of approximately $2.4 million and write-offs
      related to equipment sales and disposals of approximately $1.7
      million.





The
      Company, in the third quarter and first nine months of 2007, recorded
      liabilities of approximately $0.4 million and $1.8 million, respectively, in
      the
      accompanying unaudited condensed consolidated statement of operations related
      to
      the closure of its NuTone Cincinnati, OH facility and the relocation of such
      operations to certain other subsidiaries of the Company within the RVP
      segment.  It is estimated that in total approximately $2.0 million,
      including the amounts noted above, will be expensed in selling, general and
      administrative expense, net in conjunction with the closure of this
      facility.  The NuTone facility was shutdown in the third quarter of
      2007 and approximately 59 employees were terminated.  Prior to August
      2006, this facility supported manufacturing, warehousing and distribution
      activities for NuTone.





During
      the second quarter of 2007, after meeting and negotiating with the bargaining
      committee of the Teamsters Local 970, representing approximately 127 union
      employees of the Company’s wholly-owned subsidiary Mammoth, Inc. (“Mammoth”)
      located in Chaska, Minnesota, it was decided to shut down manufacturing
      operations at the Chaska plant and relocate such operations to other
      manufacturing facilities within the Commercial HVAC Group.  During the
      second quarter of 2007, Mammoth finalized its negotiations with the union over
      the severance benefits associated with the shutdown and approximately $0.3
      million was paid related to severance to the union employees.  In
      addition to the severance paid in the second quarter of 2007 related to the
      union employees, the Company recorded approximately $2.3 million in the third
      quarter of 2007 related to shutdown costs and asset write-offs associated with
      the anticipated cessation of manufacturing operations at Chaska during the
      fourth quarter of 2007.  The total costs of the shutdown, including
      severance, relocation expenses, facility lease costs and asset write-offs are
      estimated to be between $2.8 million and $3.7 million.





On
      August 8, 2007, after meeting and negotiating with the bargaining committee
      of
      the Steel, Paper House, Chemical Drivers and Helpers, Local No. 578, which
      represented approximately 64 union employees located at the Vernon, CA
      manufacturing facility of the Company’s wholly-owned subsidiary Jensen, Inc.
      (“Jensen”), it was decided to shut down manufacturing operations and relocate
      such operations to other manufacturing facilities within the RVP
      segment.  Additionally, on such date, Jensen finalized its
      negotiations with the union over the severance benefits associated with this
      shutdown.  The total costs of the shutdown, including severance,
      relocation expenses, facility lease costs and asset write-offs are estimated
      to
      be approximately $1.7 million, of which approximately $0.2 million was recorded
      in the third quarter of 2007.





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 balance sheet at
      September 29, 2007 and the accompanying unaudited condensed statement of
      operations for the third quarter and first nine months ended September 29,
      2007.  These costs are included in selling, general and administrative
      expense, net in the accompanying unaudited condensed consolidated statement
      of
      operations of the Company.





**Employee
                Separation Expenses**
            
            
            **Other**
            
            
            **Total**
              **Restructuring**
              **Costs***(Dollar
                amounts in millions)***Balance
                at December 31, 2006**
            
            **$**
            **---**
            
            
            **$**
            **0.1**
            
            
            **$**
            **0.1**Provision
            
            
            0.6
            
            
            
            0.1
            
            
            
            0.7Payments
                and asset write downs
            
            
            ---
            
            
            
            (0.1
            )
            
            
            (0.1
            )**Balance
                at March 31, 2007**
            
            ****
            **0.6**
            
            
            ****
            **0.1**
            
            
            ****
            **0.7**Provision
            
            
            1.1
            
            
            
            ---
            
            
            
            1.1Payments
            
            
            (0.3
            )
            
            
            ---
            
            
            
            (0.3
            )**Balance
                at June 30, 2007**
            
            ****
            **1.4**
            
            
            ****
            **0.1**
            
            
            ****
            **1.5**Provision
            
            
            0.6
            
            
            
            2.6
            
            
            
            3.2Payments
                and asset write downs
            
            
            (0.2
            )
            
            
            (1.4
            )
            
            
            (1.6
            )**Balance
                at September 29, 2007**
            
            **$**
            **1.8**
            
            
            **$**
            **1.3**
            
            
            **$**
            **3.1**





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.




In
        the third
        quarter of 2007, the Company reached a settlement over litigation with certain
        former NuTone retirees regarding a dispute over post-retirement medical benefits
        and recorded an approximate $1.9 million charge to operating
        results.





(I)
            The
                Company and its subsidiaries have various pension plans, 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 $2.1
      million and $2.6 million for the third quarter ended September 29, 2007 and
      September 30, 2006, respectively, and aggregated approximately $6.5 million
      and
      $7.9 million for the first nine months ended September 29, 2007 and September
      30, 2006, respectively.





The
      Company’s policy is to generally fund currently at least the minimum required
      annual contribution of its various qualified defined benefit
      plans.  At December 31, 2006, as previously disclosed in the Company’s
      latest annual report on Form 10-K as filed with the SEC, it was estimated that
      approximately $9.6 million would be contributed to the Company’s defined benefit
      pension plans in 2007.  However, at September 29, 2007, the Company
      revised its estimated contributions to its defined benefit pension plans to
      approximately $8.1 million, all of which have been made.





The
      Company’s unaudited net periodic benefit cost for its defined benefit plans for
      the third quarter ended September 29, 2007 and September 30, 2006 consists
      of
      the following components:





**For
                the third quarter ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Dollar
                amounts in millions)*Service
                cost
            
            $
            0.1
            
            
            $
            0.2Interest
                cost
            
            
            2.4
            
            
            
            2.3Expected
                return on plan assets
            
            
            (2.5
            )
            
            
            (2.3
            )Net
                periodic benefit cost
            
            $
            ---
            
            
            $
            0.2





The
      Company’s unaudited net periodic benefit cost for its defined benefit plans for
      the first nine months ended September 29, 2007 and September 30, 2006 consists
      of the following components:





**For
                the first nine months ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Dollar
                amounts in millions)*Service
                cost
            
            $
            0.4
            
            
            $
            0.8Interest
                cost
            
            
            7.2
            
            
            
            6.8Expected
                return on plan assets
            
            
            (7.5
            )
            
            
            (6.8
            )Net
                periodic benefit cost
            
            $
            0.1
            
            
            $
            0.8





The
      Company’s unaudited net periodic benefit cost for its subsidiary’s
      Post-Retirement Health Benefit Plan for the third quarter ended September 29,
      2007 and September 30, 2006 consists of the following components:





**For
                the third quarter ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Dollar
                amounts in millions)*Interest
                cost
            
            $
            0.1
            
            
            $
            0.1Net
                periodic post-retirement health cost
            
            $
            0.1
            
            
            $
            0.1





The
      Company’s unaudited net periodic benefit cost for its subsidiary’s
      Post-Retirement Health Benefit Plan for the first nine months ended September
      29, 2007 and September 30, 2006 consists of the following
      components:





**For
                the first nine months ended****Sept.
                29, 2007**
            
            
            **Sept.
                30, 2006***(Dollar
                amounts in millions)*Service
                cost
            
            $
            ---
            
            
            $
            0.1Interest
                cost
            
            
            0.2
            
            
            
            0.6Amortization
                of prior service cost
            
            
            (0.1
            )
            
            
            (1.4
            )Curtailment
                gain
            
            
            ---
            
            
            
            (35.9
            )Net
                periodic post-retirement health cost (income)
            
            $
            0.1
            
            
            $
            (36.6
            )





In
      the
      second quarter of 2006 in connection with union negotiations with certain
      employees of the Company’s NuTone, Inc. Cincinnati, OH facility, the Company
      presented its final proposal to the union bargaining committee.  This
      final proposal did not provide the NuTone union members with post-retirement
      medical and life insurance benefits.  This final offer subsequently
      became implemented and the Company recorded a curtailment gain of approximately
      $35.9 million ($22.3 million, net of tax) in the second quarter of
      2006.





**NTK
                  HOLDINGS, INC. AND
                  SUBSIDIARIES**
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS**
 **OF
        THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THIRD QUARTER AND FIRST NINE MONTHS ENDED SEPTEMBER 29,
        2007**
 **AND
        THE THIRD QUARTER AND FIRST NINE MONTHS ENDED SEPTEMBER 30,
        2006**




**Item
      2. Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**





NTK
      Holdings, Inc. and its wholly-owned subsidiaries (individually and collectively
      the “Company” or “NTK Holdings”) are leading diversified global manufacturers of
      innovative, branded residential and commercial products, operating within three
      reporting segments:





·
            the
                Residential Ventilation Products, or RVP,
                segment,


·
            the
                Home Technology Products, or HTP, segment,
                and


·
            the
                Air Conditioning and Heating Products, or HVAC,
                segment.





Through
      these 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 “NTK Holdings” refer to NTK Holdings,
      Inc., together with its subsidiaries, unless the context indicates
      otherwise.  Such terms as “Company” and “NTK Holdings” are used for
      convenience only and are not intended as a precise description of any of the
      separate corporations, each of which manages its own affairs.





The
      Residential Ventilation Products segment manufactures and sells room and whole
      house ventilation products and other products primarily for the professional
      remodeling and replacement markets, the residential new construction market
      and
      the DIY market.  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 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
      include:





·
            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,


·
            lighting
                controls, and


·
            structured
                wiring.





The
      Air
      Conditioning and Heating Products 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 include:





·
            split
                system air conditioners and heat
                pumps,


·
            furnaces
                and related equipment,


·
            air
                handlers, and


·
            large
                custom roof top cooling and heating
                products.





In
      the
      results of operations presented below, Unallocated includes corporate related
      items, intersegment eliminations and certain income and expense not allocated
      to
      its segments.





***Financial
      Statement Presentation***





The
      unaudited condensed consolidated financial statements presented herein (the
      “Unaudited Financial Statements”) reflect the financial position, results of
      operations and cash flows of NTK Holdings, Inc. and all of its wholly-owned
      subsidiaries.




***Acquisitions***





The
      Company has made the following acquisitions since January 1, 2006:





Acquired
                Company
            Date
                of
              Acquisition
            Primary
                Business
              of
                Acquired Company
            Reporting
              SegmentStilpol
                SP. Zo.O.
            September
                18, 2007
            Supply
                various fabricated material components and sub-assemblies used by
                the
                Company’s Best subsidiaries in the manufacture of kitchen range
                hoods.
            RVPMetaltecnica
                S.r.l.
            September
                18, 2007
            Supply
                various fabricated material components and sub-assemblies used by
                the
                Company’s Best subsidiaries in the manufacture of kitchen range
                hoods.
            RVPTriangle
            August
                1, 2007
            Manufacture,
                marketing and distribution of bath cabinets and related
                products.
            RVPHome
                Logic, LLC
            July
                27, 2007
            Design
                and sale of software and hardware that facilitates the control of
                third
                party residential subsystems such as home theatre, whole-house audio,
                climate control, lighting, security and irrigation.
            HTPAigis
                Mechtronics, Inc.
            July
                23, 2007
            Manufacture
                and sale of equipment, such as camera housings, into the close-circuit
                television portion of the global security market.
            HTPInternational
                Electronics, Inc.
            June
                25, 2007
            Design
                and sale of security and access control components and systems for
                use in
                residential and light commercial applications.
            HTPc.p.
                All Star Corporation
            April
                10, 2007
            Manufacture
                and distribution of residential, commercial and industrial gate operators,
                garage door openers, radio controls and accessory products for the
                garage
                door and fence industry.
            HTPLiteTouch,
                Inc.
            March
                2, 2007
            Design,
                manufacture and sale of automated lighting controls for a variety
                of uses
                including residential, commercial, new construction and retro-fit
                applications.
            HTPGefen,
                Inc.
            December
                12, 2006
            Design
                and sale of audio and video products which extend, switch, distribute
                and
                convert signals in a variety of formats, including high definition,
                for
                both the residential and commercial markets.
            HTPZephyr
                Corporation
            November
                17, 2006
            Design
                and sale of upscale range hoods.
            RVPPacific
                Zephyr Range Hood, Inc.
            November
                17, 2006
            Design,
                sale and installation of range hoods and other kitchen products for
                Asian
                cooking markets in the United States.
            RVPMagenta
                Research, Ltd.
            July
                18, 2006
            Design
                and sale of products that distribute audio and video signals over
                Category
                5 and fiber optic cable to multiple display screens.
            HTPSecure
                Wireless, Inc.
            June
                26, 2006
            Design
                and sale of wireless security products for the residential and commercial
                markets.
            HTPAdvanced
                Bridging Technologies, Inc.
            June
                26, 2006
            Design
                and sale of innovative radio frequency control products and
                accessories.
            HTPHuntair,
                Inc.
            April
                14, 2006
            Design,
                manufacture and sale of custom air handlers and related products
                for
                commercial and clean room applications.
            HVACCleanpak
                International, LLC
            April
                14, 2006
            Design,
                manufacture and sale of custom air handlers and related products
                for
                commercial and clean room applications.
            HVACFurman
                Sound, Inc.
            February
                22, 2006
            Design
                and sale of audio and video signal processors and innovative power
                conditioning and surge protection products.
            HTPMammoth
                (Zhejiang) EG Air Conditioning Ltd. (1)
            January
                25, 2006
            Design,
                manufacture and sale of commercial HVAC products, including water
                source
                heat pumps.
            HVACShanghai
                Mammoth Air Conditioning Co., Ltd. (1)
            January
                25, 2006
            Design,
                manufacture and sale of commercial HVAC products, including water
                source
                heat pumps.
            HVAC





(1)
                On January 25, 2006, the Company increased its ownership to
                60%.  On June 15, 2007, the Company increased this ownership
                from 60% to 75%.





These
      acquisitions have been accounted for under the purchase method of accounting
      and
      accordingly, the results of these acquisitions are included in the Company’s
      Unaudited Financial Statements 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, Accounts Receivable and Related
                Expenses


·
            Inventory
                Valuation


·
            Income
                Taxes


·
            Goodwill
                and Other Long-Lived Assets


·
            Pensions
                and Post-Retirement Health Benefits


·
            Warranty,
              Product Recalls and Safety Upgrades ·
            Insurance
                Liabilities, including Product Liability,
                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
      following table presents the financial information for the Company’s reporting
      segments for the third quarter ended September 29, 2007 and September 30,
      2006:




**For
                  the third quarter ended**
              
              
              **Net
                  Change****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006**
              
              
              **$**
              
              
              
              **%***(Dollar
                  amounts in millions)***Net
                  sales:**Residential
                  ventilation products
              
              $
              203.9
              
              
              $
              200.4
              
              
              $
              3.5
              
              
              
              1.7
              %Home
                  technology products
              
              
              148.7
              
              
              
              127.4
              
              
              
              21.3
              
              
              
              16.7Air
                  conditioning and heating products
              
              
              249.6
              
              
              
              251.2
              
              
              
              (1.6
              )
              
              
              (0.6
              )Consolidated net sales
              
              $
              602.2
              
              
              $
              579.0
              
              
              $
              23.2
              
              
              
              4.0
              %**Operating
                  earnings:**Residential
                  ventilation products (1)
              
              $
              19.4
              
              
              $
              30.7
              
              
              $
              (11.3
              )
              
              
              (36.8
              )%Home
                  technology products (2)
              
              
              19.2
              
              
              
              24.1
              
              
              
              (4.9
              )
              
              
              (20.3
              )Air
                  conditioning and heating products (3)
              
              
              6.2
              
              
              
              19.1
              
              
              
              (12.9
              )
              
              
              (67.5
              )Subtotal
              
              
              44.8
              
              
              
              73.9
              
              
              
              (29.1
              )
              
              
              (39.4
              )**Unallocated:**Stock-based
                  compensation charges
              
              
              (0.1
              )
              
              
              (0.1
              )
              
              
              ---
              
              
              
              ---Foreign
                  exchange gains on transactions,including intercompany debt
              
              
              0.1
              
              
              
              0.1
              
              
              
              ---
              
              
              
              ---Unallocated,
                  net
              
              
              (7.2
              )
              
              
              (6.4
              )
              
              
              (0.8
              )
              
              
              (12.5
              )Consolidated operating earnings
              
              $
              37.6
              
              
              $
              67.5
              
              
              $
              (29.9
              )
              
              
              (44.3
              )%**Depreciation
                  and amortization expense:**Residential
                  ventilation products (4)
              
              $
              5.3
              
              
              $
              5.0
              
              
              $
              0.3
              
              
              
              6.0
              %Home
                  technology products
              
              
              4.2
              
              
              
              3.6
              
              
              
              0.6
              
              
              
              16.7Air
                  conditioning and heating products (5)
              
              
              5.9
              
              
              
              7.0
              
              
              
              (1.1
              )
              
              
              (15.7
              )Unallocated
              
              
              0.4
              
              
              
              0.3
              
              
              
              0.1
              
              
              
              33.3$
              15.8
              
              
              $
              15.9
              
              
              $
              (0.1
              )
              
              
              (0.6
              )%**Operating
                  earnings margin:**Residential
                  ventilation products (1)
              
              
              9.5
              %
              
              
              15.3
              %Home
                  technology products (2)
              
              
              12.9
              
              
              
              18.9Air
                  conditioning and heating products (3)
              
              
              2.5
              
              
              
              7.6Consolidated
              
              
              6.2
              %
              
              
              11.6
              %**Depreciation
                  and amortization****expense
                  as a % of net sales:**Residential
                  ventilation products (4)
              
              
              2.6
              %
              
              
              2.5
              %Home
                  technology products
              
              
              2.8
              
              
              
              2.8Air
                  conditioning and heating products (5)
              
              
              2.4
              
              
              
              2.8Consolidated
              
              
              2.6
              %
              
              
              2.7
              %




(1)
            The
                operating results of the RVP segment for the third quarter ended
                September
                29, 2007 include an increase in product liability expense of approximately
                $5.5 million as compared to the third quarter ended September 30,
                2006, a
                charge to warranty expense of approximately $0.5 million related
                to a
                product safety upgrade, an approximate $0.4 million charge related
                to the
                closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility (see Note
                H of the Notes to the Unaudited Financial Statements included elsewhere
                herein), an approximate $0.2 million charge related to the closure
                of the
                Company’s Jensen, Inc. Vernon, California facility (see Note H of the
                Notes to the Unaudited Financial Statements included elsewhere herein),
                legal and other professional fees and expenses incurred in connection
                with
                matters related to certain subsidiaries based in Italy and Poland
                of
                approximately $0.9 million (see Note G of the Notes to the Unaudited
                Financial Statements included elsewhere herein), an approximate $1.9
                million loss related to the settlement of litigation and foreign
                exchange
                losses of approximately $0.6 million related to transactions, including
                intercompany debt not indefinitely invested in the Company’s
                subsidiaries.





The
      operating results of the RVP segment for the third quarter ended September
      30,
      2006 include an approximate $0.3 million charge related to the planned closure
      of the Company’s NuTone, Inc. Cincinnati, Ohio facility (see Note H of the Notes
      to the Unaudited Financial Statements included elsewhere herein).





(2)
            The
                operating results of the HTP segment for the third quarter ended
                September
                29, 2007 include a charge to warranty expense of approximately $0.3
                million related to a product safety upgrade and foreign exchange
                gains of
                approximately $0.1 million related to
                transactions.





(3)
            The
                operating results of the HVAC segment for the third quarter ended
                September 29, 2007 include a charge of approximately $2.3 million
                related
                to the planned closure of the Company’s Mammoth, Inc. Chaska, Minnesota
                manufacturing facility (see Note H of the Notes to the Unaudited
                Financial
                Statements included elsewhere herein) and foreign exchange losses
                of
                approximately $1.0 million related to transactions, including intercompany
                debt not indefinitely invested in the Company’s
                subsidiaries.





The
      operating results of the HVAC segment for the third quarter ended September
      30,
      2006 include an approximate $1.2 million gain related to the settlement of
      litigation.





(4)
            Includes
                amortization of approximately $0.3 million for the third quarter
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





(5)
            Includes
                amortization of approximately $0.7 million for the third quarter
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





The
      following table presents the financial information for the Company’s reporting
      segments for the first nine months ended September 29, 2007 and September 30,
      2006:





**For
                  the first nine months ended**
              
              
              **Net
                  Change****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006**
              
              
              **$**
              
              
              
              **%***(Dollar
                  amounts in millions)***Net
                  sales:**Residential
                  ventilation products
              
              $
              618.7
              
              
              $
              619.3
              
              
              $
              (0.6
              )
              
              
              (0.1
              )%Home
                  technology products
              
              
              415.8
              
              
              
              350.0
              
              
              
              65.8
              
              
              
              18.8Air
                  conditioning and heating products
              
              
              764.5
              
              
              
              708.0
              
              
              
              56.5
              
              
              
              8.0Consolidated net sales
              
              $
              1,799.0
              
              
              $
              1,677.3
              
              
              $
              121.7
              
              
              
              7.3
              %**Operating
                  earnings:**Residential
                  ventilation products (1)
              
              $
              70.6
              
              
              $
              136.6
              
              
              $
              (66.0
              )
              
              
              (48.3
              )%Home
                  technology products (2)
              
              
              59.0
              
              
              
              55.8
              
              
              
              3.2
              
              
              
              5.7Air
                  conditioning and heating products (3)
              
              
              38.7
              
              
              
              56.3
              
              
              
              (17.6
              )
              
              
              (31.3
              )Subtotal
              
              
              168.3
              
              
              
              248.7
              
              
              
              (80.4
              )
              
              
              (32.3
              )**Unallocated:**Stock-based
                  compensation charges
              
              
              (0.3
              )
              
              
              (0.3
              )
              
              
              ---
              
              
              
              ---Foreign
                  exchange gains on transactions,including intercompany debt
              
              
              0.3
              
              
              
              0.3
              
              
              
              ---
              
              
              
              ---Unallocated,
                  net
              
              
              (21.2
              )
              
              
              (19.7
              )
              
              
              (1.5
              )
              
              
              (7.6
              )Consolidated operating earnings
              
              $
              147.1
              
              
              $
              229.0
              
              
              $
              (81.9
              )
              
              
              (35.8
              )%**Depreciation
                  and amortization expense:**Residential
                  ventilation products (4)
              
              $
              15.0
              
              
              $
              14.5
              
              
              $
              0.5
              
              
              
              3.4
              %Home
                  technology products (5)
              
              
              12.8
              
              
              
              9.8
              
              
              
              3.0
              
              
              
              30.6Air
                  conditioning and heating products (6)
              
              
              18.2
              
              
              
              19.0
              
              
              
              (0.8
              )
              
              
              (4.2
              )Unallocated
              
              
              0.9
              
              
              
              0.9
              
              
              
              ---
              
              
              
              ---$
              46.9
              
              
              $
              44.2
              
              
              $
              2.7
              
              
              
              6.1
              %**Operating
                  earnings margin:**Residential
                  ventilation products (1)
              
              
              11.4
              %
              
              
              22.1
              %Home
                  technology products (2)
              
              
              14.2
              
              
              
              15.9Air
                  conditioning and heating products (3)
              
              
              5.1
              
              
              
              8.0Consolidated
              
              
              8.2
              %
              
              
              13.7
              %**Depreciation
                  and amortization****expense
                  as a % of net sales:**Residential
                  ventilation products (4)
              
              
              2.4
              %
              
              
              2.3
              %Home
                  technology products (5)
              
              
              3.1
              
              
              
              2.8Air
                  conditioning and heating products (6)
              
              
              2.4
              
              
              
              2.7Consolidated
              
              
              2.6
              %
              
              
              2.6
              %




(1)
            The
                operating results of the RVP segment for the first nine months ended
                September 29, 2007 include an increase in product liability expense
                of
                approximately $7.3 million as compared to the first nine months ended
                September 30, 2006, a charge to warranty expense of approximately
                $0.5
                million related to a product safety upgrade, an approximate $1.8
                million
                charge related to the closure of the Company’s NuTone, Inc. Cincinnati,
                Ohio facility (see Note H of the Notes to the Unaudited Financial
                Statements included elsewhere herein), an approximate $0.2 million
                charge
                related to the closure of the Company’s Jensen, Inc. Vernon, California
                facility (see Note H of the Notes to the Unaudited Financial Statements
                included elsewhere herein), legal and other professional fees and
                expenses
                incurred in connection with matters related to certain subsidiaries
                based
                in Italy and Poland of approximately $2.2 million (see Note G of
                the Notes
                to the Unaudited Financial Statements included elsewhere herein),
                an
                approximate $1.9 million loss related to the settlement of litigation
                and
                foreign exchange losses of approximately $1.5 million related to
                transactions, including intercompany debt not indefinitely invested
                in the
                Company’s subsidiaries.





The
      operating results of the RVP segment for the first nine months ended September
      30, 2006 include an approximate $35.9 million curtailment gain related to
      post-retirement medical benefits, an approximate $4.1 million charge related
      to
      the planned closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility (see
      Note H of the Notes to the Unaudited Financial Statements included elsewhere
      herein), a charge to warranty expense of approximately $1.5 million related
      to a
      product safety upgrade and foreign exchange losses of approximately $0.2 million
      related to transactions, including intercompany debt not indefinitely invested
      in the Company’s subsidiaries.





(2)
            The
                operating results of the HTP segment for the first nine months ended
                September 29, 2007 include a charge of approximately $0.5 million
                related
                to a reserve for amounts due from a customer, a charge to warranty
                expense
                of approximately $0.1 million related to a product safety upgrade
                and
                foreign exchange gains of approximately $0.2 million related to
                transactions.





The
      operating results of the HTP segment for the first nine months ended September
      30, 2006 include a charge to warranty expense of approximately $4.0 million
      related to a product safety upgrade and foreign exchange gains of approximately
      $0.1 million related to transactions, including intercompany debt not
      indefinitely invested in the Company’s subsidiaries.





(3)
            The
                operating results of the HVAC segment for the first nine months ended
                September 29, 2007 include a charge of approximately $2.6 million
                related
                to the planned closure of the Company’s Mammoth, Inc. Chaska, Minnesota
                manufacturing facility (see Note H of the Notes to the Unaudited
                Financial
                Statements included elsewhere herein), a charge of approximately
                $1.8
                million related to reserves for amounts due from customers and foreign
                exchange losses of approximately $2.4 million related to transactions,
                including intercompany debt not indefinitely invested in the Company’s
                subsidiaries.





The
      operating results of the HVAC segment for the first nine months ended September
      30, 2006 include an approximate $1.6 million gain related to the settlement
      of
      litigation and foreign exchange losses of approximately $0.2 million related
      to
      transactions, including intercompany debt not indefinitely invested in the
      Company’s subsidiaries.





(4)
            Includes
                amortization of approximately $0.3 million for the first nine months
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





(5)
            Includes
                amortization of approximately $0.1 million for the first nine months
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





(6)
            Includes
                amortization of approximately $2.8 million for the first nine months
                ended
                September 30, 2006 of excess purchase price allocated to inventory
                recorded as a non-cash charge to cost of products
                sold.





The
      following table presents the financial information for the third quarter ended
      September 29, 2007 and September 30, 2006.  The results of operations
      for the third quarter ended September 29, 2007 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
                  third quarter 2007****as
                  compared to the****For
                  the third quarter ended**
              
              
              **third
                  quarter 2006****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006**
              
              
              **$**
              
              
              
              **%***(Dollar
                  amounts in millions)*Net
                  sales
              
              $
              602.2
              
              
              $
              579.0
              
              
              $
              23.2
              
              
              
              4.0
              %Cost
                  of
                  products sold
              
              
              433.0
              
              
              
              404.2
              
              
              
              (28.8
              )
              
              
              (7.1
              )Selling,
                  general and administrative expense, net
              
              
              125.1
              
              
              
              101.1
              
              
              
              (24.0
              )
              
              
              (23.7
              )Amortization
                  of intangible assets
              
              
              6.5
              
              
              
              6.2
              
              
              
              (0.3
              )
              
              
              (4.8
              )Operating
                  earnings
              
              
              37.6
              
              
              
              67.5
              
              
              
              (29.9
              )
              
              
              (44.3
              )Interest
                  expense
              
              
              (46.4
              )
              
              
              (41.8
              )
              
              
              (4.6
              )
              
              
              (11.0
              )Investment
                  income
              
              
              0.6
              
              
              
              0.4
              
              
              
              0.2
              
              
              
              50.0(Loss)
                  earnings before provision for income taxes
              
              
              (8.2
              )
              
              
              26.1
              
              
              
              (34.3
              )
              
              
              (131.4
              )Provision
                  for
                  income taxes
              
              
              0.5
              
              
              
              10.9
              
              
              
              10.4
              
              
              
              95.4Net
                  (loss)
                  earnings
              
              $
              (8.7
              )
              
              $
              15.2
              
              
              $
              (23.9
              )
              
              
              (157.2
              )%


**Change
                  in percentage for****Percentage
                  of net sales**
              
              
              **the
                  third quarter 2007****third
                  quarter ended**
              
              
              **as
                  compared to the****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006**
              
              
              **third
                  quarter 2006**Net
                  sales
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              ---
              %Cost
                  of
                  products sold
              
              
              71.9
              
              
              
              69.8
              
              
              
              (2.1
              )Selling,
                  general and administrative expense, net
              
              
              20.8
              
              
              
              17.5
              
              
              
              (3.3
              )Amortization
                  of intangible assets
              
              
              1.1
              
              
              
              1.1
              
              
              
              ---Operating
                  earnings
              
              
              6.2
              
              
              
              11.6
              
              
              
              (5.4
              )Interest
                  expense
              
              
              (7.7
              )
              
              
              (7.2
              )
              
              
              (0.5
              )Investment
                  income
              
              
              0.1
              
              
              
              0.1
              
              
              
              ---(Loss)
                  earnings before provision for income taxes
              
              
              (1.4
              )
              
              
              4.5
              
              
              
              (5.9
              )Provision
                  for
                  income taxes
              
              
              0.1
              
              
              
              1.9
              
              
              
              1.8Net
                  (loss)
                  earnings
              
              
              (1.5
              )%
              
              
              2.6
              %
              
              
              (4.1
              )%




The
      following table presents the financial information for the first nine months
      ended September 29, 2007 and September 30, 2006.  The results of
      operations for the first nine months ended September 29, 2007 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 nine months 2007****as
                  compared to the****For
                  the first nine months ended**
              
              
              **first
                  nine months 2006****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006**
              
              
              **$**
              
              
              
              **%***(Dollar
                  amounts in millions)*Net
                  sales
              
              $
              1,799.0
              
              
              $
              1,677.3
              
              
              $
              121.7
              
              
              
              7.3
              %Cost
                  of
                  products sold
              
              
              1,269.7
              
              
              
              1,168.4
              
              
              
              (101.3
              )
              
              
              (8.7
              )Selling,
                  general and administrative expense, net
              
              
              363.3
              
              
              
              263.7
              
              
              
              (99.6
              )
              
              
              (37.8
              )Amortization
                  of intangible assets
              
              
              18.9
              
              
              
              16.2
              
              
              
              (2.7
              )
              
              
              (16.7
              )Operating
                  earnings
              
              
              147.1
              
              
              
              229.0
              
              
              
              (81.9
              )
              
              
              (35.8
              )Interest
                  expense
              
              
              (137.4
              )
              
              
              (120.2
              )
              
              
              (17.2
              )
              
              
              (14.3
              )Investment
                  income
              
              
              1.5
              
              
              
              1.6
              
              
              
              (0.1
              )
              
              
              (6.3
              )Earnings
                  before provision for income taxes
              
              
              11.2
              
              
              
              110.4
              
              
              
              (99.2
              )
              
              
              (89.9
              )Provision
                  for
                  income taxes
              
              
              11.4
              
              
              
              43.5
              
              
              
              32.1
              
              
              
              73.8Net
                  (loss)
                  earnings
              
              $
              (0.2
              )
              
              $
              66.9
              
              
              $
              (67.1
              )
              
              
              (100.3
              )%
  **Change
                    in percentage for****Percentage
                    of net sales**
                
                
                **the
                    first nine months 2007****first
                    nine months ended**
                
                
                **as
                    compared to the****Sept.
                    29, 2007**
                
                
                **Sept.
                    30, 2006**
                
                
                **first
                    nine months 2006**Net
                    sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                ---
                %Cost
                    of
                    products sold
                
                
                70.6
                
                
                
                69.6
                
                
                
                (1.0
                )Selling,
                    general and administrative expense, net
                
                
                20.2
                
                
                
                15.7
                
                
                
                (4.5
                )Amortization
                    of intangible assets
                
                
                1.0
                
                
                
                1.0
                
                
                
                ---Operating
                    earnings
                
                
                8.2
                
                
                
                13.7
                
                
                
                (5.5
                )Interest
                    expense
                
                
                (7.6
                )
                
                
                (7.2
                )
                
                
                (0.4
                )Investment
                    income
                
                
                0.1
                
                
                
                0.1
                
                
                
                ---Earnings
                    before provision for income taxes
                
                
                0.7
                
                
                
                6.6
                
                
                
                (5.9
                )Provision
                    for
                    income taxes
                
                
                0.7
                
                
                
                2.6
                
                
                
                1.9Net
                    (loss)
                    earnings
                
                
                ---
                %
                
                
                4.0
                %
                
                
                (4.0
                )%





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.





Excluding
      the effect of acquisitions and foreign exchange, the operating results of the
      Company were impacted in the third quarter and first nine months of 2007 by
      a
      decline in sales in the built-in products and residential air conditioning
      products wholesale channels as the housing market continues to
      weaken.  Higher material costs, which were partially offset by
      continued strategic sourcing initiatives as well as sales price increases,
      also
      adversely impacted the third quarter and first nine months of
      2007.  The Company expects these trends to continue in
      2008.  Additionally, declines in existing home sales will likely have
      a negative impact on remodeling spending in the fourth quarter of 2007 and
      the first half of 2008, which will have an adverse effect on the Company’s
      operating results.





*Net
      Sales.*Consolidated net sales increased approximately $23.2
      million or 4.0% for the third quarter ended September 29, 2007 as compared
      to
      the third quarter ended September 30, 2006, and increased approximately $121.7
      million or 7.3% for the first nine months ended September 29, 2007 as compared
      to the first nine months ended September 30, 2006 as discussed further in the
      following paragraphs.  Acquisitions contributed approximately $30.9
      million and $119.8 million to net sales for the third quarter and first nine
      months ended September 29, 2007, respectively.





In
      the
      RVP segment, net sales increased approximately $3.5 million or 1.7% for the
      third quarter ended September 29, 2007 as compared to the third quarter ended
      September 30, 2006 and decreased approximately $0.6 million or 0.1% for the
      first nine months ended September 29, 2007 as compared to the first nine months
      ended September 30, 2006.  Net sales in the RVP segment for the third
      quarter and first nine months ended September 29, 2007 reflects an increase
      of
      approximately $5.0 million and $11.4 million, respectively, attributable to
      the
      effect of changes in foreign currency exchange rates and includes approximately
      $7.6 million and $21.2 million, respectively, attributable to
      acquisitions.





Excluding
      the effect of acquisitions and foreign exchange, net sales in the RVP segment
      decreased approximately $9.1 million in the third quarter of 2007 as compared
      to
      the third quarter of 2006, and decreased approximately $33.2 million in the
      first nine months of 2007 as compared to the first nine months of
      2006.  The decrease in net sales in the RVP segment for the third
      quarter and first nine months ended September 29, 2007 as compared to the same
      periods of 2006 reflects lower sales volume of bathroom exhaust fans and kitchen
      range hoods, primarily in the RVP segment’s domestic subsidiaries, partially
      offset by higher average unit sales prices in the third quarter and first nine
      months of 2007 of kitchen range hoods and bathroom exhaust
      fans.  Higher average unit sales prices of kitchen range hoods and
      bathroom exhaust fans reflect, in part, the impact of the sale of new products
      with higher price points and an increase in the relative percentage of products
      sold with higher sales price points as compared to 2006.  Kitchen
      range hoods and bathroom exhaust fans are the largest product category sold
      in
      the RVP segment, accounting for approximately 79.2% and 80.5% of the total
      RVP
      segment’s gross sales for the third quarter and first nine months ended
      September 29, 2007.  Excluding the effect of acquisitions and foreign
      currency exchange rates, sales of range hoods and bathroom exhaust fans
      decreased approximately 3.9% and 4.7% in the third quarter and first nine months
      ended September 29, 2007, respectively, for the RVP segment’s domestic
      subsidiaries and decreased approximately 2.3% and 0.9% in the third quarter
      and
      first nine months ended September 29, 2007, respectively, for the RVP segment’s
      foreign subsidiaries.





In
      the
      HTP segment, net sales increased approximately $21.3 million or 16.7% for the
      third quarter ended September 29, 2007 as compared to the third quarter ended
      September 30, 2006 and increased approximately $65.8 million or 18.8% for the
      first nine months ended September 29, 2007 as compared to the first nine months
      ended September 30, 2006.  Net sales in the HTP segment for the third
      quarter and first nine months ended September 29, 2007 includes approximately
      $23.3 million and $64.5 million, respectively, attributable to acquisitions
      and
      reflects an increase of approximately $0.1 million and $0.4 million,
      respectively, attributable to the effect of changes in foreign currency exchange
      rates.  The remaining decrease in net sales in the third quarter of
      2007 in the HTP segment is due a decline in sales of certain security and access
      control products, partially offset by increased sales of audio and video
      distribution equipment and speakers.





In
      the
      HVAC segment, net sales decreased approximately $1.6 million or 0.6% for the
      third quarter ended September 29, 2007 as compared to the third quarter ended
      September 30, 2006 and increased approximately $56.5 million or 8.0% for the
      first nine months ended September 29, 2007 as compared to the first nine months
      ended September 30, 2006.  Net sales in the HVAC segment for the first
      nine months ended September 29, 2007 includes approximately $34.1 million
      attributable to acquisitions and for the third quarter and first nine months
      reflects an increase of approximately $3.3 million and $7.7 million,
      respectively, attributable to the effect of changes in foreign currency exchange
      rates.  The remaining increase in net sales in the HVAC segment for
      the first nine months ended September 29, 2007 as compared to the same period
      of
      2006 includes higher sales volume of HVAC products sold to commercial customers,
      partially offset by lower sales volume for products sold to both residential
      site-built and manufactured housing customers occurring in the first quarter
      of
      2007.  Sales of products to residential site-built customers increased
      approximately 10.1% over the third quarter ended September 30, 2006 and
      decreased approximately 3.0% over the first nine months ended September 30,
      2006.  Net sales in the HVAC 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.  The
      Company’s net sales to customers serving the manufactured housing markets,
      principally consisting of air conditioners and furnaces, constituted
      approximately 4.6% and 5.1% of the Company’s consolidated net sales for the
      third quarter ended September 29, 2007 and September 30, 2006, respectively,
      and
      constituted approximately 4.4% and 5.2% of the Company’s consolidated net sales
      for the first nine months ended September 29, 2007 and September 30, 2006,
      respectively.





Foreign
      net sales, which are attributed based on the location of the Company’s
      subsidiary responsible for the sale, were approximately 21.2% and 19.1% of
      consolidated net sales for the third quarter ended September 29, 2007 and
      September 30, 2006, respectively, and were approximately 21.0% and 19.0% of
      consolidated net sales for the first nine months ended September 29, 2007 and
      September 30, 2006, respectively.  Net sales from the Company’s
      Canadian subsidiaries were approximately 8.6% and 7.7% of consolidated net
      sales
      for the third quarter ended September 29, 2007 and September 30, 2006,
      respectively, and were approximately 8.3% and 8.0% of consolidated net sales
      for
      the first nine months ended September 29, 2007 and September 30, 2006,
      respectively.  Net sales from the Company’s Canadian subsidiaries
      include net sales from the Company’s RVP and HVAC segments.  Net sales
      from the Company’s European subsidiaries were approximately 9.8% and 9.6% of
      consolidated net sales for the third quarter ended September 29, 2007 and
      September 30, 2006, respectively, and were approximately 10.0% and 9.4% of
      consolidated net sales for the first nine months ended September 29, 2007 and
      September 30, 2006, respectively.  Net sales from the Company’s
      European subsidiaries include net sales primarily from the Company’s RVP and
      HVAC segments and to a lesser extent the Company’s HTP segment.





*Cost
      of Products Sold.*Consolidated cost of products sold was
      approximately $433.0 million for the third quarter ended September 29, 2007
      as
      compared to approximately $404.2 million for the third quarter ended September
      30, 2006 and was approximately $1,269.7 million for the first nine months ended
      September 29, 2007 as compared to approximately $1,168.4 million for the first
      nine months ended September 30, 2006.  Cost of products sold, as a
      percentage of net sales, increased from approximately 69.8% for the third
      quarter ended September 30, 2006 to approximately 71.9% for the third quarter
      ended September 29, 2007 and increased from approximately 69.6% for the first
      nine months ended September 30, 2006 to approximately 70.6% for the first nine
      months ended September 29, 2007, primarily as a result of the factors described
      below.





Overall,
      consolidated material costs were approximately 47.7% and 46.3% of net sales
      for
      the third quarter ended September 29, 2007 and September 30, 2006, respectively,
      and were approximately 46.8% and 45.0% of net sales for the first nine months
      ended September 29, 2007 and September 30, 2006, respectively.  As
      compared to the third quarter and first nine months of 2006, the Company
      experienced higher material costs related to purchases of steel, copper,
      aluminum and related purchased components, such as motors.  Cost
      increases during the third quarter and first nine months of 2007 as compared
      to
      the same periods of 2006 were partially offset by continued strategic sourcing
      initiatives and improvements in manufacturing efficiency.





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
      RVP segment, cost of products sold for the third quarter ended September 29,
      2007 was approximately $148.0 million, or 72.6% as a percentage of the RVP
      segment’s net sales, as compared to approximately $139.5 million, or 69.6% as a
      percentage of the RVP segment’s net sales for the third quarter ended September
      30, 2006.  Cost of products sold for the first nine months ended
      September 29, 2007 was approximately $436.9 million, or 70.6% as a percentage
      of
      the RVP segment’s net sales, as compared to approximately $424.0 million, or
      68.5% as a percentage of the RVP segment’s net sales for the first nine months
      ended September 30, 2006.  Cost of products sold in the RVP segment
      for the third quarter and first nine months ended September 29, 2007 includes
      (1) an increase in product liability expense of approximately $5.5 million
      and
      $7.3 million, respectively, as compared to the same periods of 2006, (2) a
      charge to warranty expense of approximately $0.5 million related to a product
      safety upgrade recorded in the third quarter of 2007, (3) an increase of
      approximately $3.9 million and $9.2 million, respectively, related to the effect
      of changes in foreign currency exchange rates and (4) approximately $4.8 million
      and $13.1 million, respectively, of cost of products sold contributed by
      acquisitions.  Cost of products sold in the RVP segment for the third
      quarter and first nine months ended September 30, 2006 includes (1)
      approximately $0.3 million and $1.7 million, respectively, of severance charges
      related to the planned closure of the Company’s NuTone facility (see note H of
      the Notes to the Unaudited Financial Statements included elsewhere herein),
      (2)
      a charge to warranty expense of approximately $1.5 million related to a product
      safety upgrade recorded in the first nine months of 2006 and (3) a non-cash
      charge of approximately $0.3 million recorded in the third quarter of 2006
      related to the amortization of purchase price allocated to
      inventory.  The increases in the percentage of cost of products sold
      to net sales for the third quarter and first nine months ended September 29,
      2007 over the same periods of 2006 reflect increased material costs and a
      decline in sales volume of kitchen range hoods and bathroom exhaust fans without
      a proportionate decrease in costs.





In
      the
      HTP segment, cost of products sold for the third quarter ended September 29,
      2007****was approximately $80.8 million, or 54.3% as a
      percentage of the HTP segment’s net sales, as compared to approximately $66.3
      million, or 52.0% as a percentage of the HTP segment’s net sales for the third
      quarter ended September 30, 2006.  Cost of products sold for the first
      nine months ended September 29, 2007 was approximately $222.6 million, or 53.5%
      as a percentage of the HTP segment’s net sales, as compared to approximately
      $188.0 million, or 53.7% as a percentage of the HTP segment’s net sales for the
      first nine months ended September 30, 2006.  Cost of products sold in
      the HTP segment for the third quarter and first nine months ended September
      29,
      2007 reflects (1) approximately $14.2 million and $36.1 million, respectively,
      of cost of products sold contributed by acquisitions, (2) a charge to warranty
      expense of approximately $0.3 million and $0.1 million, respectively, related
      to
      a product safety upgrade and (3) an increase of approximately $0.1 million
      in
      the first nine months of 2007 related to the effect of changes in foreign
      currency exchange rates.  Cost of products sold in the HTP segment for
      the third quarter and first nine months ended September 30, 2006 includes (1)
      a
      charge to warranty costs of approximately $4.0 million related to a product
      safety upgrade recorded in the first nine months of 2006 and (2) a non-cash
      charge of approximately $0.1 million in the first nine months of 2006 related
      to
      the amortization of purchase price allocated to inventory.  The
      decrease in the percentage of cost of products sold to net sales for the first
      nine months ended September 29, 2007 as compared to the same period of 2006
      is
      primarily as a result of increased warranty costs recorded in 2006, as noted
      above.





In
      the
      HVAC segment, cost of products sold for the third quarter ended September 29,
      2007 was approximately $204.2 million, or 81.8% as a percentage of the HVAC
      segment’s net sales, as compared to approximately $198.4 million, or 79.0% as a
      percentage of the HVAC segment’s net sales for the third quarter ended September
      30, 2006.  Cost of products sold for the first nine months ended
      September 29, 2007 was approximately $610.2 million, or 79.8% as a percentage
      of
      the HVAC segment’s net sales, as compared to approximately $556.4 million, or
      78.6% as a percentage of the HVAC segment’s net sales for the first nine months
      ended September 30, 2006.  Cost of products sold in the HVAC segment
      for the third quarter and first nine months ended September 29, 2007 includes
      (1) approximately $21.0 million of cost of products sold in the first nine
      months of 2007 contributed by acquisitions and (2) an increase of approximately
      $2.6 million and $6.1 million, respectively, related to the effect of changes
      in
      foreign currency exchange rates.  Cost of products sold in the HVAC
      segment for the third quarter and first nine months ended September 30, 2006
      includes a non-cash charge of approximately $0.7 million and $2.8 million,
      respectively, related to the amortization of purchase price allocated to
      inventory.  The increases in cost of products sold as a percentage of
      net sales for the third quarter and first nine months ended September 29, 2007
      as compared to the same periods of 2006 reflect the effect of higher material
      costs related primarily to purchases of copper, steel, aluminum and purchased
      components such as motors.




*Selling,
      General and Administrative Expense, Net.*Consolidated selling,
      general and administrative expense, net (“SG&A”) was approximately $125.1
      million for the third quarter ended September 29, 2007 as compared to
      approximately $101.1 million for the third quarter ended September 30, 2006,
      and
      was approximately $363.3 million for the first nine months ended September
      29,
      2007 as compared to approximately $263.7 million for the first nine months
      ended
      September 30, 2006.  SG&A as a percentage of net sales increased
      from approximately 17.5% for the third quarter ended September 30, 2006 to
      approximately 20.8% for the third quarter ended September 29, 2007 and increased
      from approximately 15.7% for the first nine months ended September 30, 2006
      to
      approximately 20.2% for the first nine months ended September 29,
      2007.  This increase in SG&A as a percentage of net sales is
      principally due to the effect of a curtailment gain, related to post-retirement
      medical and life insurance benefits in the second quarter of 2006 of
      approximately $35.9 million in the RVP segment.





SG&A
      for the third quarter and first nine months ended September 29, 2007
      includes:





**Third
                Quarter**
            
            
            **First
                Nine Months****Ended
                September 29, 2007***(Dollar
                amounts in millions)*(1
            )
            SG&A
                related to acquisitions
            
            $
            8.9
            
            
            $
            28.1(2
            )
            Effect
                of changes in foreign currency exchange rates
            
            
            1.6
            
            
            
            3.4(3
            )
            Charges
                related to the closure of the Company’s NuTone, Inc. Cincinnati, OH
                facility
            
            
            0.4
            
            
            
            1.8(4
            )
            Charges
                related to the closure of the Company’s Mammoth, Inc. Chaska, MN
                facility
            
            
            2.3
            
            
            
            2.6(5
            )
            Charges
                related to the closure of the Company’s Jensen, Inc. Vernon, CA
                facility
            
            
            0.2
            
            
            
            0.2(6
            )
            Legal
              and
              other professional fees and expenses incurred in connection with matters
              relatedto certain subsidiaries based in Italy and Poland
            
            
            0.9
            
            
            
            2.2(7
            )
            Charges
                related to reserves for amounts due from customers in the HTP and
                HVAC
                segments
            
            
            ---
            
            
            
            2.3(8
            )
            Loss
                on settlement of litigation in the RVP segment
            
            
            1.9
            
            
            
            1.9(9
            )
            (Decrease)/increase
                in displays expense in the RVP segment
            
            
            (0.2
            )
            
            
            4.5(10
            )
            Foreign
              exchange losses related to transactions, including intercompany debt
              not
              indefinitelyinvested in the Company’s subsidiaries
            
            
            1.4
            
            
            
            3.4(11
            )
            Stock-based
                compensation expense
            
            
            0.1
            
            
            
            0.3





SG&A
      for the third quarter and first nine months ended September 30, 2006 includes
      (1) a curtailment gain of post-retirement medical benefits of approximately
      $35.9 million recorded in the second quarter of 2006, (2) approximately $2.4
      million of severance, equipment write-offs and other charges recorded in the
      second quarter of 2006 related to the planned closure of the Company’s NuTone
      facility within the RVP segment (see Note H of the Notes to the Unaudited
      Financial Statements included elsewhere herein), (3) an approximate $1.2 million
      gain and $1.6 million gain, respectively, related to the settlement of
      litigation within the HVAC segment, (4) approximately $0.1 million and $0.3
      million, respectively, of stock-based compensation expense, which is recorded
      in
      Unallocated and (5) foreign exchange gains of approximately $0.1 million
      recorded in the third quarter of 2006, all of which is included in Unallocated,
      related to transactions, including intercompany debt not indefinitely invested
      in the Company’s subsidiaries.





*Amortization
      of Intangible Assets.*Amortization of intangible assets
      increased approximately $0.3 million from approximately $6.2 million for the
      third quarter ended September 30, 2006 to approximately $6.5 million for the
      third quarter ended September 29, 2007 and increased approximately $2.7 million
      from approximately $16.2 million for the first nine months ended September
      30,
      2006 to approximately $18.9 million for the first nine months ended September
      29, 2007.  The change in amortization of intangible assets is due to
      the impact of acquisitions, which contributed approximately $0.8 million and
      $4.2 million to the increase in the third quarter and first nine months ended
      September 29, 2007, respectively, offset by higher amortization expense in
      the
      prior periods as a result of accelerated amortization methods.




*Depreciation
      Expense.*Depreciation expense increased approximately $0.6
      million from approximately $8.7 million for the third quarter ended September
      30, 2006 to approximately $9.3 million for the third quarter ended September
      29,
      2007 and increased approximately $3.2 million from approximately $24.8 million
      for the first nine months ended September 30, 2006 to approximately $28.0
      million for the first nine months ended September 29, 2007.  This
      increase is primarily attributable to capital expenditures, and to a lesser
      extent the impact of acquisitions in the third quarter and first nine months
      of
      2007, which represented approximately $0.2 million and $1.1 million,
      respectively, of the increase.





*Operating
      Earnings.*Consolidated operating earnings decreased by
      approximately $29.9 million from approximately $67.5 million for the third
      quarter ended September 30, 2006 to approximately $37.6 million for the third
      quarter ended September 29, 2007 and decreased approximately $81.9 million
      from
      approximately $229.0 million for the first nine months ended September 30,
      2006
      to approximately $147.1 million for the first nine months ended September 29,
      2007.  Acquisitions contributed approximately $2.2 million and $17.3
      million to operating earnings for the third quarter and first nine months ended
      September 29, 2007, respectively.  The decrease in consolidated
      operating earnings is primarily due to the factors discussed above and that
      follow.  Operating earnings, as a percentage of net sales, decreased
      from approximately 11.6% for the third quarter ended September 30, 2006 to
      approximately 6.2% for the third quarter ended September 29, 2007 and decreased
      from approximately 13.7% for the first nine months ended September 30, 2006
      to
      approximately 8.2% for the first nine months ended September 29,
      2007.





Operating
      earnings of the RVP segment for the third quarter ended September 29, 2007
      were
      approximately $19.4 million as compared to approximately $30.7 million for
      the
      third quarter ended September 30, 2006 and were approximately $70.6 million
      for
      the first nine months ended September 29, 2007 as compared to approximately
      $136.6 million for the first nine months ended September 30,
      2006.  Operating earnings of the RVP segment for the third quarter and
      first nine months ended September 29, 2007 reflects (1) an increase in product
      liability expense of approximately $5.5 million and $7.3 million, respectively,
      as compared to the same periods of 2006, (2) approximately $0.4 million and
      $1.8
      million, respectively, of severance charges related to the closure of the
      Company’s NuTone facility, (3) a charge to warranty expense of approximately
      $0.5 million related to a product safety upgrade recorded in the third quarter
      of 2007, (4) a decrease of approximately $0.2 million and an increase of
      approximately $4.5 million, respectively, of displays expense, (5) an increase
      in earnings of approximately $0.3 million and $0.7 million, respectively, from
      the effect of foreign currency exchange rates, (6) an approximate $1.9 million
      loss in the third quarter of 2007 related to the settlement of litigation,
      (7)
      approximately $0.9 million and $2.2 million, respectively, of legal and other
      professional fees and expenses incurred in connection with matters related
      to
      certain subsidiaries based in Italy and Poland, (8) approximately $0.2 million
      of charges recorded in the third quarter of 2007 related to the closure of
      the
      Company’s Jensen facility, (9) approximately $0.3 million and $0.9 million,
      respectively, of increased depreciation expense of property and equipment and
      approximately $0.4 million of decreased amortization of intangible assets in
      the
      first nine months of 2007, (10) approximately $0.1 million and $0.3 million,
      respectively, of operating earnings contributed by acquisitions and (11) foreign
      exchange losses of approximately $0.6 million and $1.5 million, respectively,
      related to transactions, including intercompany debt not indefinitely invested
      in the Company’s subsidiaries.





Operating
      earnings of the RVP segment for the third quarter and first nine months ended
      September 30, 2006 reflects (1) a curtailment gain of post-retirement medical
      benefits of approximately $35.9 million recorded in the second quarter of 2006,
      (2) approximately $0.3 million and $4.1 million, respectively, of severance,
      equipment write-offs and other charges related to the planned closure of the
      Company’s NuTone facility (see Note H of the Notes to the Unaudited Financial
      Statements included elsewhere herein), (3) a charge to warranty expense of
      approximately $1.5 million related to a product safety upgrade recorded in
      the
      first nine months of 2006, (4) a non-cash charge of approximately $0.3 million
      related to the amortization of purchase price allocated to inventory and (5)
      foreign exchange losses of approximately $0.2 million for the first nine months
      of 2006 related to transactions, including intercompany debt not indefinitely
      invested in the Company’s subsidiaries.





The
      remaining decreases in operating earnings in the RVP segment for the third
      quarter and first nine months ended September 29, 2007 as compared to the same
      periods in 2006 are a result of lower sales volume of kitchen range hoods and
      bathroom exhaust fans, partially offset by price increases in the third quarter
      and first nine months of 2007.





Operating
      earnings of the HTP segment for the third quarter ended September 29, 2007
      were
      approximately $19.2 million as compared to approximately $24.1 million for
      the
      third quarter ended September 30, 2006 and were approximately $59.0 million
      in
      the first nine months ended September 29, 2007 as compared to approximately
      $55.8 million for the first nine months ended September 30,
      2006.  Operating earnings of the HTP segment for the third quarter and
      first nine months ended September 29, 2007 reflects (1) approximately $2.1
      million and $9.3 million, respectively, of operating earnings contributed by
      acquisitions, (2) approximately $0.4 million and $1.3 million, respectively,
      of
      increased depreciation expense of property and equipment and approximately
      $0.2
      million and $1.7 million, respectively, of increased amortization of intangible
      assets, primarily attributable to acquisitions, both of which are included
      in
      the impact of acquisitions noted above, (3) a charge of approximately $0.5
      million in the first nine months of 2007 related to a reserve for amounts due
      from a customer, (4) a charge to warranty expense of approximately $0.3 million
      and $0.1 million, respectively, related to a product safety upgrade, (5) a
      decrease in earnings of approximately $0.1 million and $0.2 million,
      respectively, from the effect of foreign currency exchange rates and (6) foreign
      exchange gains of approximately $0.1 million and $0.2 million, respectively,
      related to transactions.





Operating
      earnings of the HTP segment for the first nine months ended September 30, 2006
      reflects (1) a charge to warranty costs of approximately $4.0 million related
      to
      a product safety upgrade, (2) a non-cash charge of approximately $0.1 million
      related to the amortization of purchase price allocated to inventory and (3)
      foreign exchange gains of approximately $0.1 million for the first nine months
      of 2006 related to transactions.





The
      remaining increase in operating earnings in the HTP segment for the third
      quarter ended September 29, 2007 over the same period in 2006 is primarily
      a
      result of increased net sales volume of audio and video distribution equipment
      and speakers.  The remaining decrease in operating earnings in the HTP
      segment for the first nine months ended September 29, 2007 over the same period
      in 2006 is primarily a result of lower sales volume of certain security and
      access control devices and increased material costs in cost of products sold,
      offset by increased sales volume of audio and video distribution equipment
      and
      speakers.





Operating
      earnings of the HVAC segment were approximately $6.2 million for the third
      quarter ended September 29, 2007 as compared to approximately $19.1 million
      for
      the third quarter ended September 30, 2006 and were approximately $38.7 million
      for the first nine months ended September 29, 2007 as compared to approximately
      $56.3 million for the first nine months ended September 30,
      2006.  Operating earnings of the HVAC segment for the third quarter
      and first nine months ended September 29, 2007 reflect (1) approximately $7.7
      million in the first nine months of 2007 of operating earnings contributed
      by
      acquisitions, (2) a charge of approximately $1.8 million in the first nine
      months of 2007 related to reserves for amounts due from customers, (3)
      approximately $2.3 million and $2.6 million, respectively, of severance charges
      related to the closure of the Company’s Mammoth facility (see Note H of the
      Notes to the Unaudited Financial Statements included elsewhere herein), (4)
      approximately $0.1 million of decreased depreciation expense in the third
      quarter of 2007 and $1.0 million of increased depreciation expense in the first
      nine months of 2007 of property and equipment and approximately $1.0 million
      and
      $1.8 million, respectively, of decreased amortization of intangible assets
      primarily attributable to acquisitions, both of which are included in the impact
      of acquisitions noted above, (5) an increase in earnings of approximately $0.1
      million and $0.2 million, respectively, from the effect of foreign currency
      exchange rates and (6) foreign exchange losses of approximately $1.0 million
      and
      $2.4 million, respectively, related to transactions, including intercompany
      debt
      not indefinitely invested in the Company’s subsidiaries.





Operating
      earnings of the HVAC segment for the third quarter and first nine months ended
      September 30, 2006 reflects (1) a non-cash charge of approximately $0.7 million
      and $2.8 million, respectively, related to the amortization of purchase price
      allocated to inventory, (2) an approximate $1.2 million gain and $1.6 million
      gain, respectively, related to the settlement of litigation and (3) foreign
      exchange losses of approximately $0.2 million for the first nine months of
      2006
      related to transactions, including intercompany debt not indefinitely invested
      in the Company’s subsidiaries.





The
      remaining decrease in operating earnings in the HVAC segment for the first
      nine
      months ended September 29, 2007 as compared to the same period in 2006 is
      primarily the result of decreased sales volume for products sold to both
      residential site-built and manufactured housing customers and increased material
      costs related to purchases of copper, steel and purchased components such as
      motors, offset by higher sales levels of HVAC products sold to commercial
      customers.





Operating
      earnings of foreign operations, consisting primarily of the results of
      operations of the Company’s Canadian and European subsidiaries, were
      approximately 10.9% and 13.0% of operating earnings (before unallocated and
      corporate expenses) for the third quarter ended September 29, 2007 and September
      30, 2006, respectively, and were approximately 13.1% and 11.2% of operating
      earnings (before unallocated and corporate expenses) for the first nine months
      ended September 29, 2007 and September 30, 2006, respectively.  Sales
      and earnings derived from international markets are subject to, among others,
      the risks of currency fluctuations.





*Interest
      Expense.*Interest expense increased approximately $4.6 million
      or approximately 11.0% during the third quarter ended September 29, 2007 as
      compared to the third quarter ended September 30, 2006 and increased
      approximately $17.2 million or approximately 14.3% during the first nine months
      ended September 29, 2007 as compared to the first nine months ended September
      30, 2006.  During the third quarter and first nine months ended
      September 29, 2007, the Company experienced increases in interest expense
      primarily as a result of (1) approximately $3.9 million in the first nine months
      of 2007 of additional non-cash interest expense related to the Company’s senior
      unsecured loan facility (see Note B of the Notes to the Unaudited Financial
      Statements included elsewhere herein), (2) approximately $1.3 million and $4.3
      million, respectively, from increased borrowings and higher interest rates
      related to Nortek’s senior secured credit facility, (3) approximately $2.5
      million and $10.3 million, respectively, of debt accretion relating to the
      PIK
      option on the Company’s senior unsecured loan facility issued in May 2006, (4)
      approximately $0.9 million and $2.5 million, respectively, of additional
      interest expense related to the accretion of NTK Holdings’ 10 3/4% Senior
      Discount Notes, (5) an increase of approximately $0.1 million and $0.8 million,
      respectively, related to increased borrowings at the Company’s subsidiaries,
      primarily as a result of acquisitions and (6) an increase of approximately
      $0.4
      million related to the amortization of deferred financing costs in the first
      nine months of 2007.  These increases were partially offset by a
      decrease of approximately $5.0 million related to the amortization of the Nortek
      Holdings deferred compensation plan, which was fully paid in May 2006, as well
      as, a decrease of approximately $0.2 million related to the amortization of
      deferred financing costs in the third quarter of 2007.





*Investment
      Income.*Investment income was approximately $0.6 million and
      $0.4 million for the third quarter ended September 29, 2007 and September 30,
      2006, respectively and was approximately $1.5 million and $1.6 million for
      the
      first nine months ended September 29, 2007 and September 30, 2006,
      respectively.





*Provision
      for Income Taxes.*The provision for income taxes was
      approximately $0.5 million for the third quarter ended September 29, 2007 as
      compared to approximately $10.9 million for the third quarter ended September
      30, 2006 and was approximately $11.4 million for the first nine months ended
      September 29, 2007 as compared to approximately $43.5 million for the first
      nine
      months ended September 30, 2006.  The effective income tax rates of
      101.8% and 39.4% for the first nine months ended September 29, 2007 and
      September 30, 2006, respectively, differed from the United States Federal
      statutory rate of 35% principally as a result of the effect of foreign tax
      rates
      on foreign earnings, the impact of interest related to uncertain tax positions,
      state income tax provisions and non-deductible expenses.  The increase
      in the effective income tax rates between periods is primarily due to the
      inclusion of discrete interest on uncertain tax provisions in accordance with
      the provisions of FIN 48, which the Company adopted in the first quarter of
      2007
      (see Note F of the Notes to the Unaudited Financial Statements included
      elsewhere herein).





*Net
      Earnings.*  Consolidated net earnings decreased by approximately
      $23.9 million from net earnings of approximately $15.2 million, or 2.6% as
      a
      percentage of net sales, for the third quarter ended September 30, 2006 to
      a net
      loss of approximately $8.7 million for the third quarter ended September 29,
      2007 and decreased by approximately $67.1 million from approximately $66.9
      million, or 4.0% as a percentage of net sales, for the first nine months ended
      September 30, 2006 to a net loss of approximately $0.2 million for the first
      nine months ended September 29, 2007.  The decrease in the third
      quarter and first nine months ended September 29, 2007 was primarily due to
      the
      factors discussed above, which included a decrease of approximately $29.9
      million and $81.9 million, respectively, in consolidated operating earnings,
      an
      increase of approximately $4.6 million and $17.2 million, respectively, in
      interest expense and a decrease in investment income of approximately $0.1
      million for the first nine months of 2007 as compared to the first nine months
      of 2006, offset by a decrease of approximately $10.4 million and $32.1 million,
      respectively, in the provision for income taxes and an increase in investment
      income of approximately $0.2 million for the third quarter of 2007 as compared
      to the third quarter of 2006.




*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 therefore, 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 therefore, 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 Nortek’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 (loss) earnings, which is
      the
      most directly comparable GAAP operating performance measure, to EBITDA for
      the
      third quarter ended September 29, 2007 and September 30, 2006:




**For
                  the third quarter ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)*Net
                  (loss)
                  earnings (1), (2)
              
              $
              (8.7
              )
              
              $
              15.2Provision for income taxes
              
              
              0.5
              
              
              
              10.9Interest expense  (3)
              
              
              46.4
              
              
              
              41.8Investment income
              
              
              (0.6
              )
              
              
              (0.4
              )Depreciation expense
              
              
              9.3
              
              
              
              8.7Amortization expense
              
              
              6.5
              
              
              
              7.2EBITDA
              
              $
              53.4
              
              
              $
              83.4




(1)
            In
                the RVP segment, the net loss for the third quarter ended September
                29,
                2007 includes an increase in product liability expense of approximately
                $5.5 million as compared to the third quarter ended September 30,
                2006, a
                pre-tax charge to warranty expense of approximately $0.5 million
                related
                to a product safety upgrade, an approximate $0.4 million pre-tax
                charge
                related to the closure of the Company’s NuTone, Inc. Cincinnati, Ohio
                facility (see Note H of the Notes to the Unaudited Financial Statements
                included elsewhere herein), an approximate $0.2 million pre-tax charge
                related to the closure of the Company’s Jensen, Inc. Vernon, California
                facility (see Note H of the Notes to the Unaudited Financial Statements
                included elsewhere herein), legal and other professional fees and
                expenses
                incurred in connection with matters related to certain subsidiaries
                based
                in Italy and Poland of approximately $0.9 million (see Note G of
                the Notes
                to the Unaudited Financial Statements included elsewhere herein),
                an
                approximate $1.9 million pre-tax loss related to the settlement of
                litigation and foreign exchange losses of approximately $0.6 million
                related to transactions, including intercompany debt not indefinitely
                invested in the Company’s
                subsidiaries.





In
      the
      HTP segment, the net loss for the third quarter ended September 29, 2007
      includes a pre-tax charge to warranty expense of approximately $0.3 million
      related to a product safety upgrade and foreign exchange gains of approximately
      $0.1 million related to transactions.





In
      the
      HVAC segment, the net loss for the third quarter ended September 29, 2007
      includes a pre-tax charge of approximately $2.3 million related to the planned
      closure of the Company’s Mammoth, Inc. Chaska, Minnesota manufacturing facility
      (see Note H of the Notes to the Unaudited Financial Statements included
      elsewhere herein) and foreign exchange losses of approximately $1.0 million
      related to transactions, including intercompany debt not indefinitely invested
      in the Company’s subsidiaries.





(2)
            In
                the RVP segment, net earnings for the third quarter ended September
                30,
                2006 include an approximate $0.3 million pre-tax charge related to
                the
                planned closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility
                (see Note H of the Notes to the Unaudited Financial Statements included
                elsewhere herein).





In
      the
      HVAC segment, net earnings for the third quarter ended September 30, 2006
      include an approximate $1.2 million pre-tax gain related to the settlement
      of
      litigation.





(3)
            Interest
                expense for the third quarter of 2007 includes cash interest of
                approximately $29.8 million and non-cash interest of approximately
                $16.6
                million.  Interest expense for the third quarter of 2006
                includes cash interest of approximately $28.4 million and non-cash
                interest of approximately $13.4
                million.






The
      following table presents a reconciliation from net (loss) earnings, which is
      the
      most directly comparable GAAP operating performance measure, to EBITDA for
      the
      first nine months ended September 29, 2007 and September 30, 2006:





**For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)*Net
                  (loss)
                  earnings (1), (2)
              
              $
              (0.2
              )
              
              $
              66.9Provision for income taxes
              
              
              11.4
              
              
              
              43.5Interest expense  (3)
              
              
              137.4
              
              
              
              120.2Investment income
              
              
              (1.5
              )
              
              
              (1.6
              )Depreciation expense
              
              
              28.0
              
              
              
              24.8Amortization expense
              
              
              18.9
              
              
              
              19.4EBITDA
              
              $
              194.0
              
              
              $
              273.2




(1)
            In
                the RVP segment, the net loss for the first nine months ended September
                29, 2007 includes an increase in product liability expense of
                approximately $7.3 million as compared to the first nine months ended
                September 30, 2006, a pre-tax charge to warranty expense of approximately
                $0.5 million related to a product safety upgrade, an approximate
                $1.8
                million pre-tax charge related to the closure of the Company’s NuTone,
                Inc. Cincinnati, Ohio facility (see Note H of the Notes to the Unaudited
                Financial Statements included elsewhere herein), an approximate $0.2
                million pre-tax charge related to the closure of the Company’s Jensen,
                Inc. Vernon, California facility (see Note H of the Notes to the
                Unaudited
                Financial Statements included elsewhere herein), legal and other
                professional fees and expenses incurred in connection with matters
                related
                to certain subsidiaries based in Italy and Poland of approximately
                $2.2
                million (see Note G of the Notes to the Unaudited Financial Statements
                included elsewhere herein), an approximate $1.9 million pre-tax loss
                related to the settlement of litigation and foreign exchange losses
                of
                approximately $1.5 million related to transactions, including intercompany
                debt not indefinitely invested in the Company’s
                subsidiaries.





In
      the
      HTP segment, the net loss for the first nine months ended September 29, 2007
      includes a pre-tax charge of approximately $0.5 million related to a reserve
      for
      amounts due from a customer, a pre-tax charge to warranty expense of
      approximately $0.1 million related to a product safety upgrade and foreign
      exchange gains of approximately $0.2 million related to
      transactions.





In
      the
      HVAC segment, the net loss for the first nine months ended September 29, 2007
      includes a pre-tax charge of approximately $2.6 million related to the planned
      closure of the Company’s Mammoth, Inc. Chaska, Minnesota manufacturing facility
      (see Note H of the Notes to the Unaudited Financial Statements included
      elsewhere herein), a pre-tax charge of approximately $1.8 million related to
      reserves for amounts due from customers and foreign exchange losses of
      approximately $2.4 million related to transactions, including intercompany
      debt
      not indefinitely invested in the Company’s subsidiaries.





(2)
            In
                the RVP segment, net earnings for the first nine months ended September
                30, 2006 include an approximate $35.9 million pre-tax curtailment
                gain
                related to post-retirement medical benefits, an approximate $4.1
                million
                pre-tax charge related to the planned closure of the Company’s NuTone,
                Inc. Cincinnati, Ohio facility (see Note H of the Notes to the Unaudited
                Financial Statements included elsewhere herein), a pre-tax charge
                to
                warranty expense of approximately $1.5 million related to a product
                safety
                upgrade and foreign exchange losses of approximately $0.2 million
                related
                to transactions, including intercompany debt not indefinitely invested
                in
                the Company’s subsidiaries.





In
      the
      HTP segment, net earnings for the first nine months ended September 30, 2006
      include a pre-tax charge to warranty expense of approximately $4.0 million
      related to a product safety upgrade and foreign exchange gains of approximately
      $0.1 million related to transactions.




In
      the
      HVAC segment, net earnings for the first nine months ended September 30, 2006
      include an approximate $1.6 million pre-tax gain related to the settlement
      of
      litigation and foreign exchange losses of approximately $0.2 million related
      to
      transactions, including intercompany debt not indefinitely invested in the
      Company’s subsidiaries.





(3)
            Interest
                expense for the first nine months of 2007 includes cash interest
                of
                approximately $87.0 million and non-cash interest of approximately
                $50.4
                million.  Interest expense for the first nine months of 2006
                includes cash interest of approximately $86.9 million (including
                approximately $3.9 million relating to the accelerated amortization
                of the
                Nortek Holdings deferred compensation plan) and non-cash interest
                of
                approximately $33.3 million.






**Liquidity
      and Capital Resources**





Certain
      sole source suppliers of various fabricated material components and
      sub-assemblies to the Company’s Italian and Polish kitchen range hood
      subsidiaries (the “Best Subsidiaries”) experienced financial difficulties in
      January 2007 and subsequently filed for settlement with creditors to prevent
      bankruptcy.  The Company secured alternative sources for all but two
      of these suppliers and negotiated the purchase of the two remaining businesses,
      Stilpol and Metaltecnica, from the trustee appointed by the local court in
      the
      settlement procedures.  As discussed previously, the closing of these
      two acquisitions occurred on September 18, 2007 for a purchase price of
      approximately $7.9 million plus the assumption of indebtedness (estimated to
      be
      approximately $4.5 million at September 29, 2007).  The Company’s Best
      subsidiaries borrowed the cash portion of the purchase price from banks in
      Italy.  The Company has not experienced any significant disruption in
      the manufacture of its products or shipments to its customers as a result of
      these supplier difficulties and believes it can successfully integrate these
      acquired businesses into its existing operations.  The Best
      Subsidiaries accounted for approximately 6.0% and 6.3% of the Company’s
      consolidated net sales and approximately (3.2)% and 1.5%, of consolidated
      operating (loss) earnings, before Unallocated, for the third quarter and first
      nine months ended September 29, 2007, respectively, and accounted for
      approximately 6.2% and 6.3% of the Company’s consolidated net sales and
      approximately 4.8% and 4.5% of consolidated operating earnings, before
      Unallocated, for the third quarter and first nine months ended September 30,
      2006, respectively.  Additionally, these subsidiaries based in Italy
      and Poland accounted for approximately 5.2% and 6.5% of consolidated assets
      at
      September 29, 2007 and December 31, 2006, respectively.  The Company
      recorded approximately $16.0 million of estimated losses in the RVP segment
      in
      the fourth quarter of 2006 in selling, general and administrative expense,
      net,
      resulting from the likelihood that these suppliers will be unable to repay
      the
      advances from our subsidiaries based in Italy and Poland and amounts due under
      other arrangements.  While the Company has recorded its best estimate
      of the losses related to these suppliers, the actual losses may be different
      than the amounts recorded at December 31, 2006.  The Company has
      incurred approximately $0.9 million and $2.2 million of legal and other
      professional fees and expenses in connection with these suppliers in the third
      quarter and first nine months of 2007, respectively.





On
      May
      10, 2007, the Company exercised an option to extend the maturity date of the
      senior unsecured loan facility to March 1, 2014 (the “Option”) and paid a loan
      extension fee of approximately $4.5 million.  As a result, the Company
      recorded approximately $4.5 million as debt discount and recorded approximately
      $3.9 million of additional non-cash interest expense in the second quarter
      and
      first six months of 2007 related primarily to the decrease in the fair value
      of
      the Option.  The debt discount is being amortized as non-cash interest
      expense using the interest method through March 1, 2014 (see Note B of the
      Notes
      to the Unaudited Financial Statements included elsewhere herein).





On
      May
      5, 2006, the Company filed a registration statement on Form S-1 (most recently
      amended on September 15, 2006) with the SEC for an initial public offering
      of
      shares of its common stock.  The Company requested the withdrawal of
      its registration statement on Form S-1 in a filing with the SEC on November
      13,
      2007 due to the unsettled market conditions.





The
      Company periodically acquires companies, utilizing cash and proceeds from
      additional indebtedness to finance these acquisitions.  Companies
      acquired and the payment of contingent consideration during the first nine
      months ended September 29, 2007 and the impact on cash flows were as
      follows:





·
            On
                September 18, 2007, the Company acquired all the capital stock of
                Stilpol
                and certain assets and liabilities of Metaltecnica for approximately
                $7.9
                million in cash and the assumption of indebtedness (estimated to
                be
                approximately $4.5 million at September 29, 2007) through its kitchen
                range hood subsidiaries, based in Italy and Poland (“Best
                Subsidiaries”).  The Company’s Best subsidiaries borrowed the
                cash portion of the purchase price from banks in
                Italy.


·
            On
                August 1, 2007, the Company, through its wholly-owned subsidiary
                Jensen,
                Inc., acquired certain assets of Triangle for approximately $1.7
                million
                of cash.


·
            On
                July 27, 2007, the Company acquired all of the ownership units of
                HomeLogic for an initial purchase price of approximately $5.1 million
                (utilizing approximately $3.1 million of cash and issuing unsecured
                6%
                subordinated notes totaling approximately $2.0 million due July 2011)
                plus
                contingent consideration, which may be payable in future
                years.


·
            On
                July 23, 2007, the Company, through Linear, acquired the assets and
                certain liabilities of Aigis for an initial purchase price of
                approximately $2.8 million (utilizing approximately $2.2 million
                of cash
                and issuing unsecured 6% subordinated notes totaling approximately
                $0.6
                million due July 2011).


·
            On
                June 25, 2007, the Company, through Linear, acquired IEI through
                a cash
                tender offer to purchase all of the outstanding shares of common
                stock of
                IEI at a price of $6.65 per share.  The total purchase price was
                approximately $13.8 million.


·
            On
                April 10, 2007, the Company, through Linear, acquired the assets
                and
                certain liabilities of All Star for an initial purchase price of
                approximately $2.8 million (utilizing approximately $2.3 million
                of cash
                and issuing unsecured 6% subordinated notes totaling $0.5 million
                due
                April 2009).


·
            On
                March 2, 2007, the Company, through Linear, acquired the stock of
                LiteTouch for approximately $10.5 million (utilizing approximately
                $8.0
                million of cash and issuing unsecured 6% subordinated notes totaling
                $2.5
                million due March 2009) plus contingent consideration, which may
                be
                payable in future years.


·
            On
                June 26, 2006, the Company, through Linear, acquired the stock of
                Secure
                Wireless and ABT through two mergers for approximately $10.5 million,
                plus
                contingent consideration of approximately $18.1 million that was
                earned by
                Secure Wireless in 2006 and was paid in April 2007.  Additional
                contingent consideration may be payable in future
                years.


·
            On
                April 14, 2006, the Company, through two newly formed subsidiaries
                of its
                HVAC segment, acquired the assets and certain liabilities of Huntair
                and
                Cleanpak, for approximately $48.4 million (utilizing approximately
                $38.4
                million of cash and issuing unsecured 6% subordinated notes totaling
                $10.0
                million due April 2008) plus contingent consideration of approximately
                $30.0 million which was earned in 2006 and was paid in April
                2007.


·
            During
                the first half of 2007, additional purchase price of approximately
                $1.5
                million was paid related to the acquisition of Gefen,
                Inc.


·
            Contingent
                consideration of approximately $7.5 million related to the acquisition
                of
                OmniMount, which was accrued for at December 31, 2006, was paid in
                the
                first quarter of 2007.





Approximately
      $55.6 million of contingent consideration was paid in the first nine months
      of
      2007 related to the Secure Wireless, Huntair, Cleanpak and OmniMount
      acquisitions.  The remaining estimated total maximum potential amount
      of contingent consideration that may be paid in the future for all completed
      acquisitions is approximately $95.2 million (see Note C of the Notes to the
      Unaudited Financial Statements included elsewhere herein).





The
      Company had consolidated debt at September 29, 2007, of approximately $2,050.0
      million consisting of (i) $139.8 million (including borrowings of approximately
      $89.0 million under the U.S. revolving portion of Nortek’s senior secured credit
      facility) of short-term borrowings and current maturities of long-term debt,
      (ii) $45.9 million of long-term notes, mortgage notes and other indebtedness,
      (iii) $10.0 million of Nortek’s 9 7/8% Senior Subordinated Notes due 2011, (iv)
      $625.0 million of Nortek’s 8 1/2% Senior Subordinated Notes due 2014, (v) $672.0
      million of long-term debt outstanding under Nortek’s senior secured credit
      facility, (vi) $329.8 million of the Company’s 10 3/4% Senior Discount Notes and
      (vii) $227.5 million under the Company’s unsecured term loan
      facility.





During
      the first nine months ended September 29, 2007, the Company had a net increase
      in its consolidated debt of approximately $123.5 million resulting
      from:





*(Amounts
                in millions)*Borrowings
                under the revolving portion of Nortek’s senior secured credit
                facility
            
            $
            94.0Payments
                made related the revolving portion of Nortek’s senior secured credit
                facility
            
            
            (15.0
            )Debt
                accretion related to the 10 3/4% Senior Discount Notes
            
            
            24.9Debt
                accretion relating to the PIK option on the senior unsecured loan
                facility
            
            
            15.8Debt
                discount relating to the senior unsecured loan facility
            
            
            (4.3
            )Additional
                borrowings related primarily to the Company’s foreign
                subsidiaries
            
            
            15.6Issuance
                of unsecured notes and debt assumed related to acquisitions in the
                first
                nine months of 2007
            
            
            11.4Foreign
                currency translation
            
            
            2.6Principal
                payments
            
            
            (21.5
            )Net
                change in consolidated debt
            
            $
            123.5





The
      Company’s debt to equity ratio was approximately 23.8:1 at September 29, 2007 as
      compared to approximately 26.5:1 at December 31, 2006.  The decrease
      in the ratio was a result of an increase in stockholder’s investment, primarily
      due to the effect of foreign exchange rates, partially offset by an increase
      in
      indebtedness as noted above.





Subsequent
      to September 29, 2007, Nortek repaid approximately $29.0 million of outstanding
      borrowings under the U.S. revolving portion of its senior secured credit
      facility, reducing the amount outstanding to approximately $60.0 million and
      providing Nortek with approximately $108.3 million of available borrowing
      capacity, with approximately $21.7 million in outstanding letters of
      credit.  Borrowings under the revolving portion of the senior secured
      credit facility are used for general working capital purposes.  Under
      the Canadian revolving portion of its senior secured credit
      facility, Nortek had no outstanding borrowings and approximately $10.0
      million of available borrowing capacity.  Letters of credit have been
      issued under Nortek’s revolving credit facility as additional security for (1)
      approximately $17.2 million relating to certain of the Company’s insurance
      programs, (2) approximately $3.6 million relating to leases outstanding for
      certain of the Company’s manufacturing facilities and (3) approximately $0.9
      million relating to certain of the subsidiaries’ purchases and other
      requirements.  Letters of credit reduce borrowing availability under
      Nortek’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 Nortek’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.  For a complete description, see the Company’s latest annual
      report on Form 10-K as filed with the SEC.





At
      September 29, 2007, the Company had approximately $57.7 million available for
      the payment of cash dividends, stock purchases or other restricted payments
      (“Restricted Payments”) under the terms of the indenture governing the Company’s
      10 3/4% Senior Discount Notes’ and the agreement governing the Company’s senior
      unsecured loan facility.  Restricted Payments to NTK Holdings and
      Nortek Holdings from Nortek are limited by the terms of Nortek’s most
      restrictive loan agreement, Nortek’s senior secured credit
      facility.  The amount available for such payments under Nortek’s
      senior secured credit facility was approximately $172.4 million at September
      29,
      2007.





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 2007 and 2008,
      including debt repayments and acquisitions, from cash from operations, existing
      cash and cash equivalents and the use of Nortek’s senior secured credit
      facility.





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, 2006.





Unrestricted
      cash and cash equivalents increased from approximately $57.4 million at December
      31, 2006 to approximately $66.6 million at September 29, 2007.  The
      Company has classified as restricted, in the accompanying unaudited condensed
      consolidated balance sheet, certain cash and cash equivalents that are not
      fully
      available for use in its operations.  At September 29 2007,
      approximately $3.0 million (of which approximately $2.0 million 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 to
      fund certain benefit obligations relating to supplemental executive retirement
      plans.





The
      Company’s combined short-term and long-term product liability accruals increased
      from approximately $26.8 million at December 31, 2006 to approximately $35.0
      million at September 29, 2007.  Product liability expense increased
      from approximately $1.8 million for the third quarter ended September 30, 2006
      to approximately $7.4 million for the third quarter ended September 29, 2007
      and
      increased from approximately $5.6 million for the first nine months ended
      September 30, 2006 to approximately $12.6 million for the first nine months
      ended September 29, 2007.  The increase in product liability expense
      for the third quarter and first nine months ended September 29, 2007 as compared
      to the same periods of 2006 is primarily as a result of approximately $5.5
      million and $7.3 million of additional product liability accruals being recorded
      in the third quarter and first nine months of 2007, respectively, in the RVP
      segment.  The Company records insurance liabilities and related
      expenses for product and general liability losses in accordance with either
      the
      contractual terms of its policies or, if self-insured, the total liabilities
      that are estimable and probable as of the reporting date (see Note G of the
      Notes to the Unaudited Financial Statements included elsewhere
      herein).





The
      Company’s combined short-term and long-term warranty accruals increased from
      approximately $41.2 million at December 31, 2006 to approximately $44.0 million
      at September 29, 2007.  Warranty expense increased from approximately
      $5.0 million for the third quarter ended September 30, 2006 to approximately
      $7.9 million for the third quarter ended September 29, 2007 and decreased from
      approximately $22.5 million for the first nine months ended September 30, 2006
      to approximately $21.2 million for the first nine months ended September 29,
      2007.  The decrease in warranty expense for the first nine months
      ended September 29, 2007 as compared to the same period of 2006 is primarily
      as
      a result of approximately $5.5 million recorded in the first nine months of
      2006
      in the RVP and HTP segments related to product safety upgrades as compared
      to
      approximately $0.6 million recorded in the first nine months of
      2007.  The Company provides for estimated warranty liabilities at the
      time of sale and periodically assesses the adequacy of its recorded warranty
      liabilities and adjusts the amounts as necessary (see Note G of the Notes to
      the
      Unaudited Financial Statements included elsewhere herein).





Capital
      expenditures were approximately $10.0 million for the third quarter ended
      September 29, 2007 as compared to approximately $10.3 million for the third
      quarter ended September 30, 2006 and were approximately $24.1 million for the
      first nine months ended September 29, 2007 as compared to approximately $33.0
      million for the first nine months ended September 30, 2006.  Capital
      expenditures were approximately $42.3 million for the year ended December 31,
      2006 and are expected to be between approximately $35.0 million and $40.0
      million in 2007.  Under Nortek’s amended senior secured credit
      facility, capital expenditures are limited to approximately $67.0 million in
      2007.




The
      Company’s working capital increased from approximately $210.2 million at
      December 31, 2006 to approximately $223.0 million at September 29, 2007, while
      the current ratio remained unchanged from December 31, 2006 to September 29,
      2007 at 1.4:1.  This increase in working capital for the first nine
      months ended September 29, 2007 was primarily a result of increases in accounts
      receivable and inventory and a decrease in accrued expenses, offset by increases
      in accounts payable and short-term borrowings as described further below and
      previously.  The increase in cash from December 31, 2006 to September
      29, 2007 was also a contributing factor to the increase in working
      capital.





Accounts
      receivable increased approximately $27.6 million, or approximately 8.4%, between
      December 31, 2006 and September 29, 2007, while net sales increased
      approximately $61.1 million, or approximately 11.3%, in the third quarter of
      2007 as compared to the fourth quarter of 2006.  This increase in
      accounts receivable is primarily a result of increased sales level due to
      seasonality, primarily in the HVAC segment, and to a lesser extent, the effect
      of changes in foreign currency exchange rates and
      acquisitions.  Acquisitions contributed approximately $24.0 million to
      the increase in net sales in the third quarter of 2007 as compared to the fourth
      quarter of 2006 and approximately $5.0 million to the increase in accounts
      receivable at September 29, 2007.  The effect of changes in foreign
      currency exchange rates contributed approximately $9.6 million to the increase
      in accounts receivable at September 29, 2007.  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
      September 29, 2007 as compared to December 31, 2006.  Accounts
      receivable from customers related to foreign operations increased approximately
      15.0% to approximately $113.6 million at September 29, 2007 from December 31,
      2006.  The Company did not experience any significant overall changes
      in credit terms, collection efforts, credit utilization or delinquency in
      accounts receivable in the first nine months of 2007.





Inventories
      increased approximately $51.3 million, or approximately 18.4%, between December
      31, 2006 and September 29, 2007 as a result of inventory build-ups related
      to
      the closure of certain manufacturing facilities as previously discussed,
      increased material costs principally for steel, copper and aluminum, and to
      a
      lesser extent acquisitions.  The demand for the Company’s products is
      seasonal, as such, inventory levels in the fourth quarter have historically
      been
      substantially lower than inventory levels maintained through the third quarter,
      as was the situation on September 29, 2007 as compared to December 31,
      2006.  Acquisitions and the effect of changes in foreign currency
      exchange rates contributed approximately $10.1 million and $5.1 million,
      respectively, to the increase in inventories at September 29, 2007.





Accounts
      payable increased approximately $28.2 million, or 15.0%, between December 31,
      2006 and September 29, 2007 due primarily to increased inventory levels and
      timing of payments.  Acquisitions and the effect of changes in foreign
      currency exchange rates contributed approximately $6.4 million and $6.2 million,
      respectively, to the increase in accounts payable at September 29,
      2007.





Accrued
      expenses and taxes decreased approximately $48.3 million, or approximately
      17.0%, between December 31, 2006 and September 29, 2007 primarily as a result
      of
      contingent consideration payments of approximately $55.6 million related to
      OmniMount, Huntair, Cleanpak and Secure Wireless which were accrued for at
      December 31, 2006 and which were paid in 2007, offset by approximately $11.0
      million of increased insurance reserves primarily consisting of product
      liability accruals in the RVP segment as noted previously.





Changes
      in certain working capital accounts, as noted above, between December 31, 2006
      and September 29, 2007, 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 four preceding paragraphs and
      from
      other non-cash items, including among others, the effect of changes in foreign
      currency exchange rates.





Net
      cash flows from operating activities for the first nine months ended September
      29, 2007 increased by approximately $38.7 million to approximately $58.0 million
      of net cash provided by operating activities from approximately $19.3 million
      for the first nine months ended September 30, 2006, primarily due to the effect
      of payments in 2006 of approximately $54.0 million related to the Company’s
      deferred compensation plan and less of a use of cash for working capital needs,
      partially offset by a decrease in net earnings.  Net cash flows used
      in investing activities for the first nine months ended September 29, 2007
      increased by approximately $17.6 million to net cash used in investing
      activities of approximately $116.9 million from approximately $99.3 million
      for
      the first nine months ended September 30, 2006, primarily due to an increase
      of
      approximately $26.5 million in payments for acquisitions, partially offset
      by a
      decrease in the level of capital expenditures of approximately $8.9
      million.  Net cash flows provided by financing activities for the
      first nine months ended September 29, 2007 increased by approximately $9.1
      million to net cash provided by financing activities of approximately $68.1
      million from approximately $59.0 million for the first nine months ended
      September 30, 2006 resulting from a reduction in dividends paid in 2006 of
      approximately $174.9 million, offset by a decrease in net borrowing proceeds
      of
      approximately $165.3 million.  As discussed earlier, the Company
      generally uses cash flows from operations, and where necessary debt financing,
      to finance its capital expenditures and strategic acquisitions and to meet
      the
      service requirements of its existing indebtedness.





Unrestricted
      cash and cash equivalents increased approximately $9.2 million and decreased
      approximately $21.0 million from December 31, 2006 to September 29, 2007 and
      from December 31, 2005 to September 30, 2006, respectively, principally as
      a
      result of the following:





**Condensed
                  Consolidated****Cash
                  Flows (1)****For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)***Operating
                  Activities:**Cash flow from operations, net
              
              $
              89.0
              
              
              $
              120.4Change in accounts receivable, net
              
              
              (12.6
              )
              
              
              (43.4
              )Change in inventories
              
              
              (36.7
              )
              
              
              (37.9
              )Change in prepaids and other current assets
              
              
              1.4
              
              
              
              5.1Change in accounts payable
              
              
              16.3
              
              
              
              9.2Change in accrued expenses and taxes
              
              
              (3.5
              )
              
              
              19.6Change in long-term deferred compensation
              
              
              ---
              
              
              
              (54.0
              )**Investing
                  Activities:**Capital expenditures
              
              
              (24.1
              )
              
              
              (33.0
              )Net cash paid for businesses acquired
              
              
              (93.5
              )
              
              
              (67.0
              )Proceeds from the sale of property and equipment
              
              
              0.6
              
              
              
              3.4Change in restricted cash and marketable securities
              
              
              1.5
              
              
              
              0.4**Financing
                  Activities:**Change in borrowings, net
              
              
              72.6
              
              
              
              37.1Payment in connection with senior unsecured loan facility
                  rollover
              
              
              (4.5
              )
              
              
              ---Borrowing under the senior unsecured loan facility
              
              
              ---
              
              
              
              200.8Dividends
              
              
              ---
              
              
              
              (174.9
              )Payment of expenses in connection with IPO
              
              
              ---
              
              
              
              (2.4
              )Other,
                  net
              
              
              2.7
              
              
              
              (4.4
              )$
              9.2
              
              
              $
              (21.0
              )


(1)
            Summarized
                from the Company’s Unaudited Condensed Consolidated Statement of Cash
                Flows for the first nine months ended September 29, 2007 and September
                30,
                2006 (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 an 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, debt service, 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 Nortek’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 provided by operating
      activities, which is the most directly comparable GAAP liquidity measure, to
      EBITDA for the first nine months ended September 29, 2007 and September 30,
      2006:




**For
                  the first nine months ended****Sept.
                  29, 2007**
              
              
              **Sept.
                  30, 2006***(Dollar
                  amounts in millions)*Net cash provided by operating activities
              
              $
              58.0
              
              
              $
              19.3Cash used by working capital and other long-termasset and liability changes
              
              
              31.0
              
              
              
              101.1Deferred federal income tax benefit (provision)
              
              
              9.4
              
              
              
              (10.2
              )Loss on property and equipment
              
              
              (1.0
              )
              
              
              (1.4
              )Non-cash interest expense, net
              
              
              (50.4
              )
              
              
              (33.3
              )Non-cash stock-based compensation expense
              
              
              (0.3
              )
              
              
              (0.3
              )Gain from curtailment of post-retirement medical benefits
              
              
              ---
              
              
              
              35.9Provision for income taxes
              
              
              11.4
              
              
              
              43.5Interest expense (1)
              
              
              137.4
              
              
              
              120.2Investment income
              
              
              (1.5
              )
              
              
              (1.6
              )EBITDA
                  (2),
                  (3)
              
              $
              194.0
              
              
              $
              273.2


(1)
            Interest
                expense for the first nine months of 2007 includes cash interest
                of
                approximately $87.0 million and non-cash interest of approximately
                $50.4
                million.  Interest expense for the first nine months of 2006
                includes cash interest of approximately $86.9 million (including
                approximately $3.9 million relating to the accelerated amortization
                of the
                Nortek Holdings deferred compensation plan) and non-cash interest
                of
                approximately $33.3 million.





(2)
            In
                the RVP segment, EBITDA for the first nine months ended September
                29, 2007
                includes an increase in product liability expense of approximately
                $7.3
                million as compared to the first nine months ended September 30,
                2006, a
                pre-tax charge to warranty expense of approximately $0.5 million
                related
                to a product safety upgrade, an approximate $1.8 million pre-tax
                charge
                related to the closure of the Company’s NuTone, Inc. Cincinnati, Ohio
                facility (see Note H of the Notes to the Unaudited Financial Statements
                included elsewhere herein), an approximate $0.2 million pre-tax charge
                related to the closure of the Company’s Jensen, Inc. Vernon, California
                facility (see Note H of the Notes to the Unaudited Financial Statements
                included elsewhere herein), legal and other professional fees and
                expenses
                incurred in connection with matters related to certain subsidiaries
                based
                in Italy and Poland of approximately $2.2 million (see Note G of
                the Notes
                to the Unaudited Financial Statements included elsewhere herein),
                an
                approximate $1.9 million pre-tax loss related to the settlement of
                litigation and foreign exchange losses of approximately $1.5 million
                related to transactions, including intercompany debt not indefinitely
                invested in the Company’s
                subsidiaries.





In
      the
      HTP segment, EBITDA for the first nine months ended September 29, 2007 includes
      a pre-tax charge of approximately $0.5 million related to a reserve for amounts
      due from a customer, a pre-tax charge to warranty expense of approximately
      $0.1
      million related to a product safety upgrade and foreign exchange gains of
      approximately $0.2 million related to transactions.





In
      the
      HVAC segment, EBITDA for the first nine months ended September 29, 2007 includes
      a pre-tax charge of approximately $2.6 million related to the planned closure
      of
      the Company’s Mammoth, Inc. Chaska, Minnesota manufacturing facility (see Note H
      of the Notes to the Unaudited Financial Statements included elsewhere herein),
      a
      pre-tax charge of approximately $1.8 million related to reserves for amounts
      due
      from customers and foreign exchange losses of approximately $2.4 million related
      to transactions, including intercompany debt not indefinitely invested in the
      Company’s subsidiaries.





(3)
            In
                the RVP segment, EBITDA for the first nine months ended September
                30, 2006
                include an approximate $35.9 million pre-tax curtailment gain related
                to
                post-retirement medical benefits, an approximate $4.1 million pre-tax
                charge related to the planned closure of the Company’s NuTone, Inc.
                Cincinnati, Ohio facility (see Note H of the Notes to the Unaudited
                Financial Statements included elsewhere herein), a pre-tax charge
                to
                warranty expense of approximately $1.5 million related to a product
                safety
                upgrade and foreign exchange losses of approximately $0.2 million
                related
                to transactions, including intercompany debt not indefinitely invested
                in
                the Company’s subsidiaries.





In
      the
      HTP segment, EBITDA for the first nine months ended September 30, 2006 include
      a
      pre-tax charge to warranty expense of approximately $4.0 million related to
      a
      product safety upgrade and foreign exchange gains of approximately $0.1 million
      related to transactions.





In
      the
      HVAC segment, EBITDA for the first nine months ended September 30, 2006 include
      an approximate $1.6 million pre-tax gain related to the settlement of litigation
      and foreign exchange losses of approximately $0.2 million related to
      transactions, including intercompany debt not indefinitely invested in the
      Company’s subsidiaries.






**Inflation,
      Trends and General Considerations**





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





The
      Company’s performance is dependent to a significant extent upon the levels of
      new residential construction, residential replacement and remodeling and
      non-residential construction, all of which are affected by such factors as
      interest rates, credit availability, inflation, consumer confidence and
      unemployment, among others.  During the first nine months of 2007, the
      Company’s performance was impacted by weak industry demand in the residential
      HVAC market, as well as, lower levels of residential housing
      activity.





The
        Company has
        recently experienced a significant increase in the level of product liability
        expense, particularly in the RVP segment as discussed previously in management’s
        discussion and analysis.  The Company is unable to ascertain at this
        time whether this higher level of expense will continue at this level, increase
        or decrease.




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





The
      Company is subject to the effects of changing prices and for the past several
      years, the impact of inflation has had a significant adverse effect on its
      results of operations for the periods presented.  In some circumstances,
      market conditions or customer expectations may prevent the Company from
      increasing the prices of its products to offset the inflationary pressures
      that
      may increase costs in the future.  During 2007, the Company continued
      to experience higher material costs related primarily to purchases of copper,
      steel, aluminum and related purchased components such as
      motors.  These cost increases were partially offset by continued
      strategic sourcing initiatives and improvements in manufacturing efficiency,
      as
      well as sales price increases.





At
      September 29, 2007, approximately 7.1% of the Company’s workforce was subject to
      various collective bargaining agreements.





Within
      the RVP segment, the Company, in the third quarter and first nine months of
      2007, recorded liabilities of approximately $0.4 million and $1.8 million,
      respectively, in the accompanying unaudited condensed consolidated statement
      of
      operations related to the closure of its NuTone Cincinnati, OH facility and
      the
      relocation of such operations to certain other subsidiaries of the Company
      within this segment.  It is estimated that in total approximately $2.0
      million, including the amounts noted above, will be expensed in selling, general
      and administrative expense, net in conjunction with the closure of this
      facility.  The NuTone facility was shutdown in the third quarter of
      2007 and approximately 59 employees were terminated.  Prior to August
      2006, this facility supported manufacturing, warehousing and distribution
      activities for NuTone.





During
      the second quarter of 2007, after meeting and negotiating with the bargaining
      committee of the Teamsters Local 970, representing approximately 127 union
      employees of the Company’s wholly-owned subsidiary Mammoth, Inc. (“Mammoth”)
      located in Chaska, Minnesota, it was decided to shut down manufacturing
      operations at the Chaska plant and relocate such operations to other
      manufacturing facilities within the Commercial HVAC Group.  During the
      second quarter of 2007, Mammoth finalized its negotiations with the union over
      the severance benefits associated with the shutdown and approximately $0.3
      million was paid related to severance to the union employees.  In
      addition to the severance paid in the second quarter of 2007 related to the
      union employees, the Company recorded approximately $2.3 million in the third
      quarter of 2007 related to shutdown costs and asset write-offs associated with
      the anticipated cessation of manufacturing operations at Chaska during the
      fourth quarter of 2007.  The total costs of the shutdown, including
      severance, relocation expenses, facility lease costs and asset write-offs are
      estimated to be between $2.8 million and $3.7 million.





On
      August 8, 2007, after meeting and negotiating with the bargaining committee
      of
      the Steel, Paper House, Chemical Drivers and Helpers, Local No. 578, which
      represented approximately 64 union employees located at the Vernon, CA
      manufacturing facility of the Company’s wholly-owned subsidiary Jensen, Inc.
      (“Jensen”), it was decided to shut down manufacturing operations and relocate
      such operations to other manufacturing facilities within the RVP
      segment.  Additionally, on such date, Jensen finalized its
      negotiations with the union over the severance benefits associated with this
      shutdown.  The total costs of the shutdown, including severance,
      relocation expenses, facility lease costs and asset write-offs are estimated
      to
      be approximately $1.7 million, of which approximately $0.2 million was recorded
      in the third quarter of 2007.





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 or losses or the recognition of an asset
      impairment.  As agreements expire and until negotiations are
      completed, the Company does not know whether it 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, 2006
      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 September 29, 2007,
      the fair value of the Company’s unrestricted and restricted investments and
      marketable securities was not materially different from their cost
      basis.





The
      Company manages its borrowing exposure to changes in interest rates by
      optimizing the use of fixed rate debt with extended maturities.  At
      September 29, 2007, approximately 50.2% of the carrying values of the Company’s
      long-term debt were at fixed interest rates.





**B.           Foreign
      Currency Risk**





The
      Company’s results of operations are affected by fluctuations in the value of the
      U.S. dollar as compared to the value of currencies in foreign markets primarily
      related to changes in the Euro, the Canadian Dollar and the British
      Pound.  In the third quarter and first nine months of 2007, the net
      impact of foreign currency changes was not material to the Company’s financial
      condition or results of operations.  The impact of foreign currency
      changes related to translation resulted in an increase in stockholder’s
      investment of approximately $8.1 million and $16.7 million for the third quarter
      and first nine months ended September 29, 2007,
      respectively.  Additionally, the impact of foreign currency changes
      related to transactions resulted in an increase in foreign exchange losses
      recorded in selling, general and administrative expense, net of approximately
      $1.5 million and $3.4 million for the third quarter and first nine months ended
      September 29, 2007, respectively.  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 September 29, 2007, 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, glass 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 September 29, 2007, 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
      2.                      Unregistered
      Sales of Equity Securities and Use of Proceeds**





The
      Company and its subsidiaries, affiliates or significant shareholders may from
      time to time, in their sole discretion, purchase, repay, redeem or retire any
      of
      the Company’s outstanding debt (including publicly issued debt), in privately
      negotiated or open market transactions, by tender offer or
      otherwise.





**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.*
            32
            Certificate
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant
                to
                Section 906 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.








NTK
      HOLDINGS, INC.


(Registrant)














/s/
              Almon C. Hall


Almon
      C. Hall,


Vice
      President and Chief


Financial
      Officer





November
      13, 2007