**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 June 30, 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 August 17, 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, except share data)*
 
 **June
                    30,**
                
                
                **December
                    31,****2007**
                
                
                **2006****Assets****Current
                    Assets:**Unrestricted
                    cash and cash equivalents
                
                $
                75.3
                
                
                $
                57.4Restricted
                    cash
                
                
                1.3
                
                
                
                1.2Accounts
                        receivable, less allowances of $12.9 and $9.4
                
                
                384.4
                
                
                
                328.9Inventories:Raw materials
                
                
                93.0
                
                
                
                83.1Work in process
                
                
                33.6
                
                
                
                28.7Finished goods
                
                
                193.6
                
                
                
                166.8320.2
                
                
                
                278.6Prepaid
                    expenses
                
                
                13.5
                
                
                
                13.7Other
                    current
                    assets
                
                
                11.4
                
                
                
                24.4Prepaid
                    income taxes
                
                
                30.2
                
                
                
                21.2Total current assets
                
                
                836.3
                
                
                
                725.4**Property
                    and Equipment, at Cost:**Land
                
                
                9.9
                
                
                
                9.5Buildings
                    and
                    improvements
                
                
                104.1
                
                
                
                101.9Machinery
                    and
                    equipment
                
                
                192.8
                
                
                
                177.2306.8
                
                
                
                288.6Less
                    accumulated depreciation
                
                
                84.4
                
                
                
                66.1Total property and equipment, net
                
                
                222.4
                
                
                
                222.5**Other
                    Assets:**Goodwill
                
                
                1,509.3
                
                
                
                1,481.4Intangible
                        assets, less accumulated amortization of $65.2 and
                        $52.4
                
                
                142.0
                
                
                
                150.4Deferred
                    debt
                    expense
                
                
                34.6
                
                
                
                41.7Restricted
                    investments and marketable securities
                
                
                2.0
                
                
                
                3.3Other
                    assets
                
                
                12.7
                
                
                
                11.21,700.6
                
                
                
                1,688.0**Total
                    Assets**
                
                $
                2,759.3
                
                
                $
                2,635.9**Liabilities
                    and Stockholder’s Investment****Current
                    Liabilities:**Notes
                    payable
                    and other short-term obligations
                
                $
                99.4
                
                
                $
                23.3Current
                    maturities of long-term debt
                
                
                26.9
                
                
                
                20.0Accounts
                    payable
                
                
                243.8
                
                
                
                188.2Accrued
                    expenses and taxes, net
                
                
                236.2
                
                
                
                283.7Total current liabilities
                
                
                606.3
                
                
                
                515.2**Other
                    Liabilities:**Deferred
                    income taxes
                
                
                29.2
                
                
                
                35.9Other
                
                
                144.5
                
                
                
                128.8173.7
                
                
                
                164.7**Notes,
                        Mortgage Notes and Obligations**Payable, Less Current
                        Maturities
                
                
                1,892.5
                
                
                
                1,883.2**Stockholder’s
                    Investment:**Common
                        stock,
                        $0.01 par value, authorized 3,000 shares; 3,000 issued and
                        outstanding
                      at June 30, 2007 and December 31, 2006
                
                
                ---
                
                
                
                ---Additional
                    paid-in capital
                
                
                21.5
                
                
                
                21.3Retained
                    earnings
                
                
                45.2
                
                
                
                39.9Accumulated
                    other comprehensive income
                
                
                20.1
                
                
                
                11.6Total stockholder's investment
                
                
                86.8
                
                
                
                72.8**Total
                    Liabilities and Stockholder's Investment**
                
                $
                2,759.3
                
                
                $
                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 second quarter ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Net
                    Sales**
                
                $
                644.3
                
                
                $
                563.8**Costs
                    and Expenses:**Cost of products sold
                
                
                452.1
                
                
                
                393.7Selling, general and administrative expense, net (see Note
                    D)
                
                
                121.1
                
                
                
                67.3Amortization of intangible assets
                
                
                6.4
                
                
                
                5.8579.6
                
                
                
                466.8Operating
                    earnings
                
                
                64.7
                
                
                
                97.0Interest
                    expense
                
                
                (48.7
                )
                
                
                (42.3
                )Investment
                    income
                
                
                0.5
                
                
                
                0.5Earnings
                    before provision for income taxes
                
                
                16.5
                
                
                
                55.2Provision
                    for
                    income taxes
                
                
                9.2
                
                
                
                21.3**Net
                    earnings**
                
                $
                7.3
                
                
                $
                33.9
 
 *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 first six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Net
                    Sales**
                
                $
                1,196.8
                
                
                $
                1,098.3**Costs
                    and Expenses:**Cost of products sold
                
                
                836.7
                
                
                
                764.2Selling, general and administrative expense, net (see Note
                    D)
                
                
                238.2
                
                
                
                162.6Amortization of intangible assets
                
                
                12.4
                
                
                
                10.01,087.3
                
                
                
                936.8Operating
                    earnings
                
                
                109.5
                
                
                
                161.5Interest
                    expense
                
                
                (91.0
                )
                
                
                (78.4
                )Investment
                    income
                
                
                0.9
                
                
                
                1.2Earnings
                    before provision for income taxes
                
                
                19.4
                
                
                
                84.3Provision
                    for
                    income taxes
                
                
                10.9
                
                
                
                32.6**Net
                    earnings**
                
                $
                8.5
                
                
                $
                51.7
  *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 six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Cash
                    Flows from operating activities:**Net
                    earnings
                
                $
                8.5
                
                
                $
                51.7**Adjustments
                        to reconcile net earnings to net cash provided by operating
                        activities:**Depreciation
                    and amortization expense
                
                
                31.1
                
                
                
                28.3Non-cash
                    interest expense, net
                
                
                33.8
                
                
                
                19.9Non-cash
                    stock-based compensation expense
                
                
                0.2
                
                
                
                0.2Gain
                    from
                    curtailment of post-retirement medical benefits
                
                
                ---
                
                
                
                (35.9
                )Loss
                    on
                    property and equipment
                
                
                0.2
                
                
                
                1.8Deferred
                    federal income tax (benefit) provision
                
                
                (5.5
                )
                
                
                16.9**Changes
                        in certain assets and liabilities, net of**effects from
                        acquisitions and dispositions:Accounts
                    receivable, net
                
                
                (47.2
                )
                
                
                (28.5
                )Inventories
                
                
                (33.7
                )
                
                
                (37.9
                )Prepaids
                    and
                    other current assets
                
                
                2.3
                
                
                
                5.3Accounts
                    payable
                
                
                49.5
                
                
                
                27.4Accrued
                    expenses and taxes
                
                
                7.6
                
                
                
                1.0Long-term
                    deferred compensation
                
                
                ---
                
                
                
                (54.0
                )Long-term
                    assets, liabilities and other, net
                
                
                (0.7
                )
                
                
                7.8Total adjustments to net earnings
                
                
                37.6
                
                
                
                (47.7
                )Net cash provided by operating activities
                
                
                46.1
                
                
                
                4.0**Cash
                    Flows from investing activities:**Capital
                    expenditures
                
                
                (14.1
                )
                
                
                (22.7
                )Net
                    cash paid
                    for businesses acquired
                
                
                (76.3
                )
                
                
                (56.9
                )Proceeds
                    from
                    the sale of property and equipment
                
                
                0.1
                
                
                
                2.6Change
                    in
                    restricted cash and marketable securities
                
                
                1.2
                
                
                
                ---Other,
                    net
                
                
                (0.6
                )
                
                
                (2.6
                )Net cash used in investing activities
                
                
                (89.7
                )
                
                
                (79.6
                )**Cash
                    Flows from financing activities:**Increase
                    in
                    borrowings
                
                
                89.0
                
                
                
                68.9Payment
                    of
                    borrowings
                
                
                (23.0
                )
                
                
                (40.0
                )Payment
                    in
                    connection with senior unsecured loan facility rollover
                
                
                (4.5
                )
                
                
                ---Borrowing
                    under the senior unsecured loan facility
                
                
                ---
                
                
                
                200.8Dividends
                
                
                ---
                
                
                
                (174.9
                )Other,
                    net
                
                
                ---
                
                
                
                (1.5
                )Net cash provided by financing activities
                
                
                61.5
                
                
                
                53.3Net
                    change in
                    unrestricted cash and cash equivalents
                
                
                17.9
                
                
                
                (22.3
                )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
                
                $
                75.3
                
                
                $
                54.9**Supplemental
                    disclosure of cash flow information:**Interest
                    paid
                
                $
                52.8
                
                
                $
                57.7Income
                    taxes
                    (refunded) paid, net
                
                $
                (0.4
                )
                
                $
                14.4
  *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 SECOND QUARTER ENDED JULY 1, 2006**
 *(Dollar
        amounts in millions)*
 
 **Accumulated****Additional**
                
                
                
                
                
                **Other****Paid-in**
                
                
                **Retained**
                
                
                **Comprehensive**
                
                
                **Comprehensive****Capital**
                
                
                **Earnings**
                
                
                **Income**
                
                
                **Income****Balance,
                    April 1, 2006**
                
                $
                130.3
                
                
                $
                70.6
                
                
                $
                8.1
                
                
                $
                ---Net
                    earnings
                
                
                ---
                
                
                
                33.9
                
                
                
                ---
                
                
                
                33.9Other
                    comprehensive income:Currency translation adjustment
                
                
                ---
                
                
                
                ---
                
                
                
                6.3
                
                
                
                6.3Comprehensive
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                40.2Dividends
                
                
                (104.3
                )
                
                
                (70.6
                )
                
                
                ---Adjustment
                    of
                    carryover basis of continuingmanagement investors in the THL Transaction
                
                
                (4.9
                )
                
                
                ---
                
                
                
                ---Stock-based
                    compensation
                
                
                0.1
                
                
                
                ---
                
                
                
                ---**Balance,
                    July 1, 2006**
                
                $
                21.2
                
                
                $
                33.9
                
                
                $
                14.4
 *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 SIX MONTHS ENDED JULY 1, 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
                
                
                ---
                
                
                
                51.7
                
                
                
                ---
                
                
                
                51.7Other
                    comprehensive income:Currency translation adjustment
                
                
                ---
                
                
                
                ---
                
                
                
                6.9
                
                
                
                6.9Comprehensive
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                58.6Dividends
                
                
                (104.3
                )
                
                
                (70.6
                )
                
                
                ---Adjustment
                    of
                    carryover basis of continuingmanagement investors in the THL Transaction
                
                
                (4.9
                )
                
                
                ---
                
                
                
                ---Stock-based
                    compensation
                
                
                0.2
                
                
                
                ---
                
                
                
                ---**Balance,
                    July 1, 2006**
                
                $
                21.2
                
                
                $
                33.9
                
                
                $
                14.4
 
 *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 SECOND QUARTER ENDED JUNE 30, 2007**
 *(Dollar
        amounts in millions)*
 
 **Accumulated****Additional**
                
                
                
                
                
                **Other****Paid-in**
                
                
                **Retained**
                
                
                **Comprehensive**
                
                
                **Comprehensive****Capital**
                
                
                **Earnings**
                
                
                **Income
                    (Loss)**
                
                
                **Income
                    (Loss)****Balance,
                    March 31, 2007**
                
                $
                21.4
                
                
                $
                37.9
                
                
                $
                13.0
                
                
                $
                ---Net
                    earnings
                
                
                ---
                
                
                
                7.3
                
                
                
                ---
                
                
                
                7.3Other
                    comprehensive income (loss):Currency translation adjustment
                
                
                ---
                
                
                
                ---
                
                
                
                7.2
                
                
                
                7.2Pension liability adjustment
                
                
                ---
                
                
                
                ---
                
                
                
                (0.1
                )
                
                
                (0.1
                )Comprehensive
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                14.4Stock-based
                    compensation
                
                
                0.1
                
                
                
                ---
                
                
                
                ---**Balance,
                    June 30, 2007**
                
                $
                21.5
                
                
                $
                45.2
                
                
                $
                20.1
 
 *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 SIX MONTHS ENDED JUNE 30, 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
                    earnings
                
                
                ---
                
                
                
                8.5
                
                
                
                ---
                
                
                
                8.5Other
                    comprehensive income (loss):Currency translation adjustment
                
                
                ---
                
                
                
                ---
                
                
                
                8.6
                
                
                
                8.6Pension liability adjustment
                
                
                ---
                
                
                
                ---
                
                
                
                (0.1
                )
                
                
                (0.1
                )Comprehensive
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                17.0Adoption
                    of
                    FIN 48 (see Note F)
                
                
                ---
                
                
                
                (3.2
                )
                
                
                ---Stock-based
                    compensation
                
                
                0.2
                
                
                
                ---
                
                
                
                ---**Balance,
                    June 30, 2007**
                
                $
                21.5
                
                
                $
                45.2
                
                
                $
                20.1
  *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**
 **JUNE
          30, 2007 AND JULY 1, 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, 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 “Offering”).  Although the Company has
        not withdrawn its registration statement on Form S-1, there can be no assurance
        that the Company will complete the Offering in the foreseeable
        future.
 
 **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
        June
        30, 2007, certain employees and consultants held approximately 23,059 C-1
        units
        and approximately 45,232 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 20,523 and 16,720
        were vested at June 30, 2007 and December 31, 2006, respectively.  The
        total fair value of the C-1 units is approximately $1.1 million and
        approximately $0.2 million remains to be amortized at June 30,
        2007.  The C-2 units only vest in the event that certain
        performance-based criteria, as defined, are met.  At June 30,
        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
        second
        quarters ended June 30, 2007 and July 1, 2006, respectively, and approximately
        $0.2 million for each of the first six months ended June 30, 2007 and July
        1,
        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
        six
        months ended June 30, 2007:
 
 *(Amounts
                  in millions)***Balance
                  at December 31, 2006**
              
              **$**
              **1,481.4**Acquisitions
                  during the first six months ended June 30, 2007
              
              
              22.9Adoption
                  of FIN 48 (see Note F)
              
              
              3.8Realization
                  of FIN 48 reserves
              
              
              (0.2
              )Purchase
                  accounting adjustments
              
              
              0.1Impact
                  of foreign currency translation
              
              
              1.3**Balance
                  at June 30, 2007**
              
              **$**
              **1,509.3**
 
 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 $9.7 million and $62.3 million of
        goodwill associated with certain companies acquired during the first six
        months
        ended June 30, 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.
 
 **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
            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 over seven years.
 
 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 June 30, 2007, the senior unsecured loan facility had
            an actual interest rate of approximately 9.9%.  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 $5.3 million and $10.0 million of accrued
            interest for the second quarter and first six months ended June 30, 2007,
            respectively, and approximately $2.2 million of accrued interest for
            the second
            quarter and first six months ended July 1, 2006 as additional indebtedness
            relating to the senior unsecured loan facility.  At June 30, 2007 and
            December 31, 2006, the actual outstanding principal balance on the senior
            unsecured loan facility was approximately $226.0 million and $216.0 million,
            respectively. The amount recorded as of June 30, 2007, net of unamortized
            debt discount, is approximately $221.6 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
        June
        30, 2007, Nortek had approximately $84.0 million outstanding and approximately
        $84.3 million of additional borrowing capacity under the U.S. revolving portion
        of its senior secured credit facility, 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 the Company had no outstanding borrowings and approximately
        $10.0 million of additional 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.  Subsequent to June 30, 2007, Nortek repaid approximately $5.0
        million of outstanding borrowings under the U.S. revolving portion of its
        senior
        secured credit facility.
 
 At
        June
        30, 2007, the Company had approximately $60.2 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 $167.9 million at June 30,
        2007.
 
 (C)
              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, of which approximately $2.3
                  million
                  will be paid in the third quarter of 2007.  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 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).  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 $35.2 million, $4.9 million and $1.6 million to
        net
        sales, operating earnings and depreciation and amortization expense,
        respectively, for the second quarter ended June 30, 2007 and contributed
        approximately $88.9 million, $15.1 million and $4.3 million to net sales,
        operating earnings and depreciation and amortization expense, respectively,
        for
        the first six months ended June 30, 2007.  With the exception of
        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 end of 2007.
 
 On
        July
        23, 2007, the Company, through Linear, acquired the assets and certain
        liabilities of Aigis Mechtronics LLC (“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).  Aigis is located in Winston-Salem, NC and manufactures
        and sells equipment, such as cameras, and housings into the close-circuit
        television portion of the global security market.  Aigis will be
        included in the Home Technology Products segment in the Company’s segment
        reporting.
 
 On
        July
        27, 2007, the Company acquired all of the ownership units of HomeLogic LLC
        (“HomeLogic”) for an initial purchase price of approximately $5.0 million
        (utilizing approximately $3.0 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.  HomeLogic will be included in the Home
        Technology Products segment in the Company’s segment reporting.
 
 As
        described above, $48.1 million of contingent consideration was paid in April
        2007 related to the Secure Wireless and the Huntair and Cleanpak
        acquisitions.  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.  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 second quarter ended June 30, 2007 and July 1, 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 second quarter ended *****June
                  30, 2007**
              
              
              **July
                  1, 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)
              
              
              0.8
              
              
              
              3.5Charges
                  related to the closure of the Company’s Mammoth, Inc. Chaska, MN
                  facility
              
              
              0.3
              
              
              
              ---Legal
                  and other professional fees and expenses incurred in connection
                  with
                  matters
                related to certain subsidiaries based in Italy and Poland
              
              
              0.3
              
              
              
              ---Reserve
                  for amounts due from a customer in the HTP segment
              
              
              0.5
              
              
              
              ---Product
                  safety upgrade reserves in the RVP and HTP segments (2)
              
              
              (0.2
              )
              
              
              4.0Gain
                  on settlement of litigation in the HVAC segment
              
              
              ---
              
              
              
              (0.4
              )Non-cash
                  foreign exchange loss (gain) related to intercompany
                debt not indefinitely invested in the Company’s
                  subsidiaries
              
              
              0.3
              
              
              
              (0.2
              )$
              2.0
              
              
              $
              (29.0
              )
 
 *
              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 second quarter ended June 30, 2007, all charges related to
                  the closure
                  of NuTone were recorded in selling, general and administrative
                  expense,
                  net.  For the second quarter ended July 1, 2006, approximately
                  $1.4 million of the charges related to the closure of NuTone was
                  recorded
                  in cost of products sold and approximately $2.1 million was charged
                  to
                  selling, general and administrative expense,
                  net.
 
 (2)
              The
                  RVP and HTP segments recorded these product safety upgrade reserves
                  in
                  cost of products sold (see Note G).
 
 During
        the first six months ended June 30, 2007 and July 1, 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 six months ended *****June
                  30, 2007**
              
              
              **July
                  1, 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)
              
              
              1.4
              
              
              
              3.5Charges
                  related to the closure of the Company’s Mammoth, Inc. Chaska, MN
                  facility
              
              
              0.3
              
              
              
              ---Legal
                  and other professional fees and expenses incurred in connection
                  with
                  matters
                related to certain subsidiaries based in Italy and Poland
              
              
              1.3
              
              
              
              ---Product
                  safety upgrade reserves in the RVP and HTP segments (2)
              
              
              (0.2
              )
              
              
              5.5Reserve
                  for amounts due from customers in the HTP and HVAC
                  segments
              
              
              2.3
              
              
              
              ---Gain
                  on settlement of litigation in the HVAC segment
              
              
              ---
              
              
              
              (0.4
              )Non-cash
                  foreign exchange loss (gain) related to intercompany
                debt not indefinitely invested in the Company’s
                  subsidiaries
              
              
              0.1
              
              
              
              (0.3
              )$
              5.2
              
              
              $
              (27.6
              )
 
 *
              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 six months ended June 30, 2007, all charges related to
                  the
                  closure of NuTone were recorded in selling, general and administrative
                  expense, net.  For the first six months ended July 1, 2006,
                  approximately $1.4 million of the charges related to the closure
                  of NuTone
                  was recorded in cost of products sold and approximately $2.1 million
                  was
                  charged to selling, general and administrative expense,
                  net.
 
 (2)
              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 second quarters ended June 30, 2007 and July 1, 2006,
        respectively, and expensed approximately $1.0 million and $1.2 million for
        the
        first six months ended June 30, 2007 and July 1, 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 second quarter ended June 30, 2007 and July 1, 2006 were as
        follows:
 
 **For
                    the second quarter ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Net
                    sales:**Residential
                    ventilation products
                
                $
                206.1
                
                
                $
                207.3Home
                    technology products
                
                
                143.9
                
                
                
                115.1Air
                    conditioning and heating products
                
                
                294.3
                
                
                
                241.4Consolidated net sales
                
                $
                644.3
                
                
                $
                563.8**Operating
                    earnings:**Residential
                    ventilation products (1)
                
                $
                26.0
                
                
                $
                69.8Home
                    technology products (2)
                
                
                23.3
                
                
                
                14.4Air
                    conditioning and heating products (3)
                
                
                22.7
                
                
                
                19.3Subtotal
                
                
                72.0
                
                
                
                103.5**Unallocated:**Stock-based
                    compensation charges
                
                
                (0.1
                )
                
                
                (0.1
                )Foreign
                    exchange gain on intercompany debt
                
                
                0.2
                
                
                
                0.2Unallocated,
                    net
                
                
                (7.4
                )
                
                
                (6.6
                )Consolidated operating earnings
                
                
                64.7
                
                
                
                97.0Interest
                    expense
                
                
                (48.7
                )
                
                
                (42.3
                )Investment
                    income
                
                
                0.5
                
                
                
                0.5Earnings before provision for income taxes
                
                $
                16.5
                
                
                $
                55.2
  (1)
              The
                  operating results of the RVP segment for the second quarter ended
                  June 30,
                  2007 include an approximate $0.8 million charge related to the
                  closure of
                  the Company’s NuTone, Inc. Cincinnati, Ohio 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 $0.3 million (see Note G) and a non-cash foreign
                  exchange
                  loss of approximately $0.5 million related to intercompany debt
                  not
                  indefinitely invested in the Company’s subsidiaries.  The
                  operating results of the RVP segment for the second quarter ended
                  July 1,
                  2006 include an approximate $35.9 million curtailment gain related
                  to
                  post-retirement medical benefits and an approximate $3.5 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 second quarter ended
                  June 30,
                  2007 include a charge of approximately $0.5 million related to
                  a reserve
                  for amounts due from a customer and a decrease in warranty expense
                  of
                  approximately $0.2 million related to a product safety
                  upgrade.  The operating results of the HTP segment for the
                  second quarter ended July 1, 2006 include an increase in warranty
                  expense
                  of approximately $4.0 million related to a product safety
                  upgrade.
 
 (3)
              The
                  operating results of the HVAC segment for the second quarter ended
                  June
                  30, 2007 include a charge of approximately $0.3 million related
                  to the
                  planned closure of the Company’s Mammoth, Inc. Chaska, Minnesota
                  manufacturing facility (see Note
                  H).
  Unaudited
        net sales, operating earnings and pre-tax earnings for the Company’s segments
        for the first six months ended June 30, 2007 and July 1, 2006 were as
        follows:
 
 **For
                    the first six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Net
                    sales:**Residential
                    ventilation products
                
                $
                414.8
                
                
                $
                418.9Home
                    technology products
                
                
                267.1
                
                
                
                222.6Air
                    conditioning and heating products
                
                
                514.9
                
                
                
                456.8Consolidated net sales
                
                $
                1,196.8
                
                
                $
                1,098.3**Operating
                    earnings:**Residential
                    ventilation products (1)
                
                $
                51.2
                
                
                $
                105.9Home
                    technology products (2)
                
                
                39.8
                
                
                
                31.7Air
                    conditioning and heating products (3)
                
                
                32.5
                
                
                
                37.2Subtotal
                
                
                123.5
                
                
                
                174.8**Unallocated:**Stock-based
                    compensation charges
                
                
                (0.2
                )
                
                
                (0.2
                )Foreign
                    exchange gain on intercompany debt
                
                
                0.3
                
                
                
                0.3Unallocated,
                    net
                
                
                (14.1
                )
                
                
                (13.4
                )Consolidated operating earnings
                
                
                109.5
                
                
                
                161.5Interest
                    expense
                
                
                (91.0
                )
                
                
                (78.4
                )Investment
                    income
                
                
                0.9
                
                
                
                1.2Earnings before provision for income taxes
                
                $
                19.4
                
                
                $
                84.3
  (1)
              The
                  operating results of the RVP segment for the first six months ended
                  June
                  30, 2007 include an approximate $1.4 million charge related to
                  the closure
                  of the Company’s NuTone, Inc. Cincinnati, Ohio 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 $1.3 million (see Note G) and a non-cash foreign
                  exchange
                  loss of approximately $0.4 million related to intercompany debt
                  not
                  indefinitely invested in the Company’s subsidiaries.  The
                  operating results of the RVP segment for the first six months ended
                  July
                  1, 2006 include an approximate $35.9 million curtailment gain related
                  to
                  post-retirement medical benefits, an approximate $3.5 million charge
                  related to the planned closure of the Company’s NuTone, Inc. Cincinnati,
                  Ohio facility (see Note H) and an increase in warranty expense
                  of
                  approximately $1.5 million related to a product safety
                  upgrade.
 
 (2)
              The
                  operating results of the HTP segment for the first six months ended
                  June
                  30, 2007 include a charge of approximately $0.5 million related
                  to a
                  reserve for amounts due from a customer and a decrease in warranty
                  expense
                  of approximately $0.2 million related to a product safety
                  upgrade.  The operating results of the HTP segment for the first
                  six months ended July 1, 2006 include an increase in warranty expense
                  of
                  approximately $4.0 million related to a product safety
                  upgrade.
 
 (3)
              The
                  operating results of the HVAC segment for the first six months
                  ended June
                  30, 2007 include a charge of approximately $0.3 million related
                  to the
                  planned closure of the Company’s Mammoth, Inc. Chaska, Minnesota
                  manufacturing facility (see Note H) and a charge of approximately
                  $1.8
                  million related to a reserve for amounts due from a
                  customer.
 
 Unaudited
        depreciation expense, amortization expense and capital expenditures for the
        Company’s segments for the second quarter ended June 30, 2007 and July 1, 2006
        were as follows:
 
 **For
                    the second quarter ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Depreciation
                    Expense:**Residential
                    ventilation products
                
                $
                4.1
                
                
                $
                3.3Home
                    technology products
                
                
                1.4
                
                
                
                0.9Air
                    conditioning and heating products
                
                
                4.5
                
                
                
                3.8Other
                
                
                0.1
                
                
                
                0.2Consolidated depreciation expense
                
                $
                10.1
                
                
                $
                8.2**Amortization
                    expense:**Residential
                    ventilation products
                
                $
                1.3
                
                
                $
                1.5Home
                    technology products
                
                
                3.2
                
                
                
                2.3Air
                    conditioning and heating products (1)
                
                
                1.8
                
                
                
                3.9Other
                
                
                0.1
                
                
                
                0.2Consolidated amortization expense
                
                $
                6.4
                
                
                $
                7.9**Capital
                    Expenditures:**Residential
                    ventilation products
                
                $
                3.3
                
                
                $
                4.8Home
                    technology products
                
                
                1.4
                
                
                
                1.5Air
                    conditioning and heating products
                
                
                2.6
                
                
                
                4.3Other
                
                
                ---
                
                
                
                ---Consolidated capital expenditures
                
                $
                7.3
                
                
                $
                10.6
 (1)
              Includes
                  amortization of approximately $2.1 million for the second quarter
                  ended
                  July 1, 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 six months ended June 30, 2007 and July 1, 2006
        were as follows:
 
 **For
                    the first six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Depreciation
                    Expense:**Residential
                    ventilation products
                
                $
                7.1
                
                
                $
                6.5Home
                    technology products
                
                
                2.7
                
                
                
                1.8Air
                    conditioning and heating products
                
                
                8.6
                
                
                
                7.5Other
                
                
                0.3
                
                
                
                0.3Consolidated depreciation expense
                
                $
                18.7
                
                
                $
                16.1**Amortization
                    expense:**Residential
                    ventilation products
                
                $
                2.6
                
                
                $
                3.0Home
                    technology products (1)
                
                
                5.9
                
                
                
                4.4Air
                    conditioning and heating products (2)
                
                
                3.7
                
                
                
                4.5Other
                
                
                0.2
                
                
                
                0.3Consolidated amortization expense
                
                $
                12.4
                
                
                $
                12.2**Capital
                    Expenditures:**Residential
                    ventilation products
                
                $
                5.7
                
                
                $
                9.4Home
                    technology products
                
                
                2.6
                
                
                
                3.4Air
                    conditioning and heating products
                
                
                5.8
                
                
                
                9.8Other
                
                
                ---
                
                
                
                0.1Consolidated capital expenditures
                
                $
                14.1
                
                
                $
                22.7
  (1)
              Includes
                  amortization of approximately $0.1 million for the first six months
                  ended
                  July 1, 2006 of excess purchase price allocated to inventory recorded
                  as a
                  non-cash charge to cost of products
                  sold.
 
 (2)
              Includes
                  amortization of approximately $2.1 million for the first six months
                  ended
                  July 1, 2006 of excess purchase price allocated to inventory recorded
                  as a
                  non-cash charge to cost of products
                  sold.
 
 
 (F)
              The
                  Company provides income taxes on an interim basis based upon the
                  estimated
                  annual effective income tax rate.  The following reconciles the
                  federal statutory income tax rate to the estimated effective tax
                  rate of
                  approximately 56.2% and 38.7% for the first six months ended June
                  30, 2007
                  and July 1, 2006:
 
 **For
                  the first six months ended****June
                  30, 2007**
              
              
              **July
                  1, 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
              
              
              5.8
              
              
              
              ---State
                  income tax provision, net of federalincome
                  tax effect
              
              
              5.1
              
              
              
              1.9Tax
                  effect resulting from foreign activities
              
              
              7.9
              
              
              
              0.9Non-deductible
                  expenses
              
              
              1.5
              
              
              
              0.6Other,
                  net
              
              
              0.9
              
              
              
              0.3Income
                  tax provision at estimated effective rate
              
              
              56.2
              %
              
              
              38.7
              %
 
 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 income taxes has increased by
        approximately $1.5 million in the first six months ended June 30,
        2007.
 
 During
        the first six months ended June 30, 2007, the Company made payments of
        approximately $0.7 million related to amounts covered by the liability for
        uncertain tax positions.  The Company expects that approximately $5.1
        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.
 
 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 June 30, 2007, the total
        amount of accrued interest and penalties is approximately $6.1
        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
                  June 30, 2007, the Company’s former subsidiary, Ply Gem, has guaranteed
                  approximately $20.5 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 $0.9 million at June 30,
                  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 $11.3 million
        and $12.0 million at June 30, 2007 and December 31, 2006,
        respectively.  Approximately $5.0 million of short-term liabilities
        and approximately $6.3 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 June 30, 2007 related to
        these
        indemnifications.
 
 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 liabilities during
        the second quarter ended June 30, 2007 and July 1, 2006 are as
        follows:
  **For
                  the second quarter ended****June
                  30, 2007**
              
              
              **July
                  1, 2006***(Amounts
                  in millions)*Balance,
                  beginning of period
              
              $
              41.5
              
              
              $
              38.2Warranties
                  provided during period
              
              
              7.8
              
              
              
              10.2Settlements
                  made during period
              
              
              (7.0
              )
              
              
              (5.8
              )Changes
                  in liability estimate, including expirations and
                  acquisitions
              
              
              1.1
              
              
              
              0.8Balance,
                  end of period
              
              $
              43.4
              
              
              $
              43.4
 
 Changes
        in the Company’s combined short-term and long-term warranty liabilities during
        the first six months ended June 30, 2007 and July 1, 2006 are as
        follows:
 
 **For
                  the first six months ended****June
                  30, 2007**
              
              
              **July
                  1, 2006***(Amounts
                  in millions)*Balance,
                  beginning of period
              
              $
              41.2
              
              
              $
              34.8Warranties
                  provided during period
              
              
              13.3
              
              
              
              17.5Settlements
                  made during period
              
              
              (12.6
              )
              
              
              (10.0
              )Changes
                  in liability estimate, including expirations and
                  acquisitions
              
              
              1.5
              
              
              
              1.1Balance,
                  end of period
              
              $
              43.4
              
              
              $
              43.4
 
 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 kitchen range hood subsidiaries based in Italy
            and Poland experienced financial difficulties in January 2007 and subsequently
            filed for settlement with creditors to prevent bankruptcy.  The
            Company has secured alternative sources for all but two of these suppliers
            and
            has negotiated the purchase of the two remaining businesses from the
            trustee
            appointed by the local court in the settlement procedures.  The
            purchase price of the businesses to be acquired is approximately $7.8
            million
            plus the assumption of indebtedness (estimated to be approximately $2.8
            million).  The closing of these acquisitions is expected to occur in 2007.
 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.  However, there can be no assurance that the
            Company will be able to complete the pending acquisitions.  If these
            acquisitions are not completed and these suppliers are declared bankrupt
            and are
            unable to continue in operation, the Company will be required to find
            alternative sources or vertically integrate similar operations into its
            existing
            business.  The Company is proceeding with such alternative plans in the
            unlikely event the acquisitions are not consummated.  If the Company is
            unable to integrate these operations into its business or find alternative
            suppliers for a lengthy period of time, the Company could experience
            a material
            adverse effect on its 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 $0.3 million and $1.3 million of legal and other professional
            fees
            and expenses in connection with these suppliers in the second quarter
            and first
            six 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.
 
 Within
        the RVP segment, the Company, in the second quarter and first six months
        of
        2007, recorded liabilities of approximately $0.8 million and $1.4 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
        and approximately 58 employees will be terminated.  It is currently
        anticipated that the closure of the NuTone facility and related payments
        will
        occur during the third quarter of 2007.  Prior to August 2006, this
        facility supported manufacturing, warehousing and distribution activities
        for
        NuTone.
 
 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
        June 30, 2007 and the accompanying unaudited condensed statement of operations
        for the second quarter and first six months ended June 30,
        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**
 
 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.
 
 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.  Approximately
        $0.3 million was paid related to severance payments to union employees in
        the
        second quarter of 2007 and was recorded to selling, general and administrative
        expense, net.  It is anticipated that the manufacturing operations at
        Chaska will cease during the third 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 $3.0 million and $3.6
        million.
 
 (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
        $2.0
        million and $3.0 million for the second quarter ended June 30, 2007 and July
        1,
        2006, respectively, and aggregated approximately $4.4 million and $5.3 million
        for the first six months ended June 30, 2007 and July 1, 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 June 30, 2007, the Company revised
        its estimated contributions to its defined benefit pension plans to
        approximately $8.3 million, of which approximately $4.3 million have been
        made.  It is estimated that the remaining balance of approximately
        $4.0 million will be paid in the third quarter of 2007.
 
 The
        Company’s unaudited net periodic benefit cost for its defined benefit plans for
        the second quarter ended June 30, 2007 and July 1, 2006 consists of the
        following components:
 
 **For
                  the second quarter ended****June
                  30, 2007**
              
              
              **July
                  1, 2006***(Dollar
                  amounts in millions)*Service
                  cost
              
              $
              0.2
              
              
              $
              0.3Interest
                  cost
              
              
              2.4
              
              
              
              2.2Expected
                  return on plan assets
              
              
              (2.5
              )
              
              
              (2.2
              )Net
                  periodic benefit cost
              
              $
              0.1
              
              
              $
              0.3
 
 The
        Company’s unaudited net periodic benefit cost for its defined benefit plans for
        the first six months ended June 30, 2007 and July 1, 2006 consists of the
        following components:
 
 **For
                  the first six months ended****June
                  30, 2007**
              
              
              **July
                  1, 2006***(Dollar
                  amounts in millions)*Service
                  cost
              
              $
              0.3
              
              
              $
              0.6Interest
                  cost
              
              
              4.8
              
              
              
              4.5Expected
                  return on plan assets
              
              
              (5.0
              )
              
              
              (4.5
              )Net
                  periodic benefit cost
              
              $
              0.1
              
              
              $
              0.6
 
 The
        Company’s unaudited net periodic benefit cost for its subsidiary’s
        Post-Retirement Health Benefit Plan for the second quarter ended June 30,
        2007
        and July 1, 2006 consists of the following components:
 
 **For
                  the second quarter ended****June
                  30, 2007**
              
              
              **July
                  1, 2006***(Dollar
                  amounts in millions)*Interest
                  cost
              
              $
              ---
              
              
              $
              0.2Amortization
                  of prior service cost
              
              
              ---
              
              
              
              (0.4
              )Curtailment
                  gain
              
              
              ---
              
              
              
              (35.9
              )Net
                  periodic post-retirement health income
              
              $
              ---
              
              
              $
              (36.1
              )
 
 The
        Company’s unaudited net periodic benefit cost for its subsidiary’s
        Post-Retirement Health Benefit Plan for the first six months ended June 30,
        2007
        and July 1, 2006 consists of the following components:
 
 **For
                  the first six months ended****June
                  30, 2007**
              
              
              **July
                  1, 2006***(Dollar
                  amounts in millions)*Service
                  cost
              
              $
              ---
              
              
              $
              0.1Interest
                  cost
              
              
              0.1
              
              
              
              0.5Amortization
                  of prior service cost
              
              
              (0.1
              )
              
              
              (1.4
              )Curtailment
                  gain
              
              
              ---
              
              
              
              (35.9
              )Net
                  periodic post-retirement health income
              
              $
              ---
              
              
              $
              (36.7
              )
 
 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.  Accordingly, this resulted in the Company
        recording 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 SECOND QUARTER AND FIRST SIX MONTHS ENDED JUNE 30,
          2007**
 **AND
          THE SECOND QUARTER AND FIRST SIX MONTHS ENDED JULY 1,
          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
                  ofAcquisition
              Primary
                  Businessof
                  Acquired Company
              Reporting
                SegmentHome
                  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 cameras, and 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
 ·
              Prepaid
                  Income Tax Assets and Deferred Tax
                  Liabilities
 ·
              Goodwill
                  and Other Long-Lived Assets
 ·
              Pensions
                  and Post-Retirement Health Benefits
 ·
              Insurance
                  Liabilities, and
 ·
              Contingencies
 
 Further
        detail regarding the Company’s critical accounting policies can be found in the
        consolidated financial statements and the notes included in the Company’s latest
        annual report on Form 10-K as filed with the Securities and Exchange Commission
        (“SEC”).
 
 The
        “Results of Operations” and “Liquidity and Capital Resources” sections which
        follow contain various tables that are intended to assist the reader in
        reconciling current results with the prior period.
  **Results
        of Operations**
  The
        following table presents the financial information for the Company’s reporting
        segments for the second quarter ended June 30, 2007 and July 1,
        2006:
  **For
                    the second quarter ended**
                
                
                **Net
                    Change****June
                    30, 2007**
                
                
                **July
                    1, 2006**
                
                
                **$**
                
                
                
                **%***(Dollar
                    amounts in millions)***Net
                    sales:**Residential
                    ventilation products
                
                $
                206.1
                
                
                $
                207.3
                
                
                $
                (1.2
                )
                
                
                (0.6
                )%Home
                    technology products
                
                
                143.9
                
                
                
                115.1
                
                
                
                28.8
                
                
                
                25.0Air
                    conditioning and heating products
                
                
                294.3
                
                
                
                241.4
                
                
                
                52.9
                
                
                
                21.9Consolidated net sales
                
                $
                644.3
                
                
                $
                563.8
                
                
                $
                80.5
                
                
                
                14.3
                %**Operating
                    earnings:**Residential
                    ventilation products (1)
                
                $
                26.0
                
                
                $
                69.8
                
                
                $
                (43.8
                )
                
                
                (62.8
                )%Home
                    technology products (2)
                
                
                23.3
                
                
                
                14.4
                
                
                
                8.9
                
                
                
                61.8Air
                    conditioning and heating products (3)
                
                
                22.7
                
                
                
                19.3
                
                
                
                3.4
                
                
                
                17.6Subtotal
                
                
                72.0
                
                
                
                103.5
                
                
                
                (31.5
                )
                
                
                (30.4
                )**Unallocated:**Stock-based
                    compensation charges
                
                
                (0.1
                )
                
                
                (0.1
                )
                
                
                ---
                
                
                
                ---Foreign
                    exchange gain on intercompany debt
                
                
                0.2
                
                
                
                0.2
                
                
                
                ---
                
                
                
                ---Unallocated,
                    net
                
                
                (7.4
                )
                
                
                (6.6
                )
                
                
                (0.8
                )
                
                
                (12.1
                )Consolidated operating earnings
                
                $
                64.7
                
                
                $
                97.0
                
                
                $
                (32.3
                )
                
                
                (33.3
                )%**Depreciation
                    and amortization expense:**Residential
                    ventilation products
                
                $
                5.4
                
                
                $
                4.8
                
                
                $
                0.6
                
                
                
                12.5
                %Home
                    technology products
                
                
                4.6
                
                
                
                3.2
                
                
                
                1.4
                
                
                
                43.8Air
                    conditioning and heating products (4)
                
                
                6.3
                
                
                
                7.7
                
                
                
                (1.4
                )
                
                
                (18.2
                )Unallocated
                
                
                0.2
                
                
                
                0.4
                
                
                
                (0.2
                )
                
                
                (50.0
                )$
                16.5
                
                
                $
                16.1
                
                
                $
                0.4
                
                
                
                2.5
                %**Operating
                    earnings margin:**Residential
                    ventilation products (1)
                
                
                12.6
                %
                
                
                33.7
                %Home
                    technology products (2)
                
                
                16.2
                
                
                
                12.5Air
                    conditioning and heating products (3)
                
                
                7.7
                
                
                
                8.0Consolidated
                
                
                10.0
                %
                
                
                17.2
                %**Depreciation
                        and amortization**expense as a % of net
                        sales:Residential
                    ventilation products
                
                
                2.6
                %
                
                
                2.3
                %Home
                    technology products
                
                
                3.2
                
                
                
                2.8Air
                    conditioning and heating products (4)
                
                
                2.1
                
                
                
                3.2Consolidated
                
                
                2.6
                %
                
                
                2.9
                %
 (1)
              The
                  operating results of the RVP segment for the second quarter ended
                  June 30,
                  2007 include an approximate $0.8 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),
                  legal and other professional fees and expenses incurred in connection
                  with
                  matters related to certain subsidiaries based in Italy and Poland
                  of
                  approximately $0.3 million (see Note G of the Notes to the Unaudited
                  Financial Statements included elsewhere herein) and a non-cash
                  foreign
                  exchange loss of approximately $0.5 million related to intercompany
                  debt
                  not indefinitely invested in the Company’s subsidiaries.  The
                  operating results of the RVP segment for the second quarter ended
                  July 1,
                  2006 include an approximate $35.9 million curtailment gain related
                  to
                  post-retirement medical benefits and an approximate $3.5 million
                  charge
                  related to the planned closure of the Company’s NuTone, Inc. Cincinnati,
                  Ohio facility.
 
 (2)
              The
                  operating results of the HTP segment for the second quarter ended
                  June 30,
                  2007 include a charge of approximately $0.5 million related to
                  a reserve
                  for amounts due from a customer and a decrease in warranty expense
                  of
                  approximately $0.2 million related to a product safety
                  upgrade.  The operating results of the HTP segment for the
                  second quarter ended July 1, 2006 include an increase in warranty
                  expense
                  of approximately $4.0 million related to a product safety
                  upgrade.
 
 (3) The
        operating results of the HVAC segment for the second quarter ended June 30,
        2007
        include a charge of approximately $0.3 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).
 
 (4) Includes
        amortization of approximately $2.1 million for the second quarter ended July
        1,
        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 six months ended June 30, 2007 and July 1,
        2006:
  **For
                    the first six months ended**
                
                
                **Net
                    Change****June
                    30, 2007**
                
                
                **July
                    1, 2006**
                
                
                **$**
                
                
                
                **%***(Dollar
                    amounts in millions)***Net
                    sales:**Residential
                    ventilation products
                
                $
                414.8
                
                
                $
                418.9
                
                
                $
                (4.1
                )
                
                
                (1.0
                )%Home
                    technology products
                
                
                267.1
                
                
                
                222.6
                
                
                
                44.5
                
                
                
                20.0Air
                    conditioning and heating products
                
                
                514.9
                
                
                
                456.8
                
                
                
                58.1
                
                
                
                12.7Consolidated net sales
                
                $
                1,196.8
                
                
                $
                1,098.3
                
                
                $
                98.5
                
                
                
                9.0
                %**Operating
                    earnings:**Residential
                    ventilation products (1)
                
                $
                51.2
                
                
                $
                105.9
                
                
                $
                (54.7
                )
                
                
                (51.7
                )%Home
                    technology products (2)
                
                
                39.8
                
                
                
                31.7
                
                
                
                8.1
                
                
                
                25.6Air
                    conditioning and heating products (3)
                
                
                32.5
                
                
                
                37.2
                
                
                
                (4.7
                )
                
                
                (12.6
                )Subtotal
                
                
                123.5
                
                
                
                174.8
                
                
                
                (51.3
                )
                
                
                (29.3
                )**Unallocated:**Stock-based
                    compensation charges
                
                
                (0.2
                )
                
                
                (0.2
                )
                
                
                ---
                
                
                
                ---Foreign
                    exchange gain on intercompany debt
                
                
                0.3
                
                
                
                0.3
                
                
                
                ---
                
                
                
                ---Unallocated,
                    net
                
                
                (14.1
                )
                
                
                (13.4
                )
                
                
                (0.7
                )
                
                
                (5.2
                )Consolidated operating earnings
                
                $
                109.5
                
                
                $
                161.5
                
                
                $
                (52.0
                )
                
                
                (32.2
                )%**Depreciation
                    and amortization expense:**Residential
                    ventilation products
                
                $
                9.7
                
                
                $
                9.5
                
                
                $
                0.2
                
                
                
                2.1
                %Home
                    technology products (4)
                
                
                8.6
                
                
                
                6.2
                
                
                
                2.4
                
                
                
                38.7Air
                    conditioning and heating products (5)
                
                
                12.3
                
                
                
                12.0
                
                
                
                0.3
                
                
                
                2.5Unallocated
                
                
                0.5
                
                
                
                0.6
                
                
                
                (0.1
                )
                
                
                (16.7
                )$
                31.1
                
                
                $
                28.3
                
                
                $
                2.8
                
                
                
                9.9
                %**Operating
                    earnings margin:**Residential
                    ventilation products (1)
                
                
                12.3
                %
                
                
                25.3
                %Home
                    technology products (2)
                
                
                14.9
                
                
                
                14.2Air
                    conditioning and heating products (3)
                
                
                6.3
                
                
                
                8.1Consolidated
                
                
                9.1
                %
                
                
                14.7
                %**Depreciation
                        and amortization** expense as a % of net
                        sales:Residential
                    ventilation products
                
                
                2.3
                %
                
                
                2.3
                %Home
                    technology products (4)
                
                
                3.2
                
                
                
                2.8Air
                    conditioning and heating products (5)
                
                
                2.4
                
                
                
                2.6Consolidated
                
                
                2.6
                %
                
                
                2.6
                %
 (1)
              The
                  operating results of the RVP segment for the first six months ended
                  June
                  30, 2007 include an approximate $1.4 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),
                  legal and other professional fees and expenses incurred in connection
                  with
                  matters related to certain subsidiaries based in Italy and Poland
                  of
                  approximately $1.3 million (see Note G of the Notes to the Unaudited
                  Financial Statements included elsewhere herein) and a non-cash
                  foreign
                  exchange loss of approximately $0.4 million related to intercompany
                  debt
                  not indefinitely invested in the Company’s subsidiaries.  The
                  operating results of the RVP segment for the first six months ended
                  July
                  1, 2006 include an approximate $35.9 million curtailment gain related
                  to
                  post-retirement medical benefits, an approximate $3.5 million charge
                  related to the planned closure of the Company’s NuTone, Inc. Cincinnati,
                  Ohio facility and an increase in warranty expense of approximately
                  $1.5
                  million related to a product safety
                  upgrade.
  (2)
              The
                  operating results of the HTP segment for the second quarter ended
                  June 30,
                  2007 include a charge of approximately $0.5 million related to
                  a reserve
                  for amounts due from a customer and a decrease in warranty expense
                  of
                  approximately $0.2 million related to a product safety
                  upgrade.  The operating results of the HTP segment for the first
                  six months ended July 1, 2006 include an increase in warranty expense
                  of
                  approximately $4.0 million related to a product safety
                  upgrade.
  (3)
              The
                  operating results of the HVAC segment for the first six months
                  ended June
                  30, 2007 include a charge of approximately $0.3 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 a charge of approximately
                  $1.8
                  million related to a reserve for amounts due from a
                  customer.
  (4)
              Includes
                  amortization of approximately $0.1 million for the first six months
                  ended
                  July 1, 2006 of excess purchase price allocated to inventory recorded
                  as a
                  non-cash charge to cost of products
                  sold.
  (5)
              Includes
                  amortization of approximately $2.1 million for the first six months
                  ended
                  July 1, 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 second quarter
        ended
        June 30, 2007 and July 1, 2006.  The results of operations for the
        second quarter ended June 30, 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
                    second quarter 2007****as
                    compared to the****For
                    the second quarter ended**
                
                
                **second
                    quarter 2006****June
                    30, 2007**
                
                
                **July
                    1, 2006**
                
                
                **$**
                
                
                
                **%***(Dollar
                    amounts in millions)*Net
                    sales
                
                $
                644.3
                
                
                $
                563.8
                
                
                $
                80.5
                
                
                
                14.3
                %Cost
                    of
                    products sold
                
                
                452.1
                
                
                
                393.7
                
                
                
                (58.4
                )
                
                
                (14.8
                )Selling,
                    general and administrative expense, net
                
                
                121.1
                
                
                
                67.3
                
                
                
                (53.8
                )
                
                
                (79.9
                )Amortization
                    of intangible assets
                
                
                6.4
                
                
                
                5.8
                
                
                
                (0.6
                )
                
                
                (10.3
                )Operating
                    earnings
                
                
                64.7
                
                
                
                97.0
                
                
                
                (32.3
                )
                
                
                (33.3
                )Interest
                    expense
                
                
                (48.7
                )
                
                
                (42.3
                )
                
                
                (6.4
                )
                
                
                (15.1
                )Investment
                    income
                
                
                0.5
                
                
                
                0.5
                
                
                
                ---
                
                
                
                ---Earnings
                    before provision for income taxes
                
                
                16.5
                
                
                
                55.2
                
                
                
                (38.7
                )
                
                
                (70.1
                )Provision
                    for
                    income taxes
                
                
                9.2
                
                
                
                21.3
                
                
                
                12.1
                
                
                
                56.8Net
                    earnings
                
                $
                7.3
                
                
                $
                33.9
                
                
                $
                (26.6
                )
                
                
                (78.5
                )%
 
 **Change
                    in percentage for****Percentage
                    of net sales**
                
                
                **the
                    second quarter 2007****second
                    quarter ended**
                
                
                **as
                    compared to the****June
                    30, 2007**
                
                
                **July
                    1, 2006**
                
                
                **second
                    quarter 2006**Net
                    sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                ---
                %Cost
                    of
                    products sold
                
                
                70.2
                
                
                
                69.8
                
                
                
                (0.4
                )Selling,
                    general and administrative expense, net
                
                
                18.8
                
                
                
                12.0
                
                
                
                (6.8
                )Amortization
                    of intangible assets
                
                
                1.0
                
                
                
                1.0
                
                
                
                ---Operating
                    earnings
                
                
                10.0
                
                
                
                17.2
                
                
                
                (7.2
                )Interest
                    expense
                
                
                (7.6
                )
                
                
                (7.5
                )
                
                
                (0.1
                )Investment
                    income
                
                
                0.1
                
                
                
                0.1
                
                
                
                ---Earnings
                    before provision for income taxes
                
                
                2.5
                
                
                
                9.8
                
                
                
                (7.3
                )Provision
                    for
                    income taxes
                
                
                1.4
                
                
                
                3.8
                
                
                
                2.4Net
                    earnings
                
                
                1.1
                %
                
                
                6.0
                %
                
                
                (4.9
                )%
  The
        following table presents the financial information for the first six months
        ended June 30, 2007 and July 1, 2006.  The results of operations for
        the first quarter ended June 30, 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 six months 2007****as
                    compared to the****For
                    the first six months ended**
                
                
                **first
                    six months 2006****June
                    30, 2007**
                
                
                **July
                    1, 2006**
                
                
                **$**
                
                
                
                **%***(Dollar
                    amounts in millions)*Net
                    sales
                
                $
                1,196.8
                
                
                $
                1,098.3
                
                
                $
                98.5
                
                
                
                9.0
                %Cost
                    of
                    products sold
                
                
                836.7
                
                
                
                764.2
                
                
                
                (72.5
                )
                
                
                (9.5
                )Selling,
                    general and administrative expense, net
                
                
                238.2
                
                
                
                162.6
                
                
                
                (75.6
                )
                
                
                (46.5
                )Amortization
                    of intangible assets
                
                
                12.4
                
                
                
                10.0
                
                
                
                (2.4
                )
                
                
                (24.0
                )Operating
                    earnings
                
                
                109.5
                
                
                
                161.5
                
                
                
                (52.0
                )
                
                
                (32.2
                )Interest
                    expense
                
                
                (91.0
                )
                
                
                (78.4
                )
                
                
                (12.6
                )
                
                
                (16.1
                )Investment
                    income
                
                
                0.9
                
                
                
                1.2
                
                
                
                (0.3
                )
                
                
                (25.0
                )Earnings
                    before provision for income taxes
                
                
                19.4
                
                
                
                84.3
                
                
                
                (64.9
                )
                
                
                (77.0
                )Provision
                    for
                    income taxes
                
                
                10.9
                
                
                
                32.6
                
                
                
                21.7
                
                
                
                66.6Net
                    earnings
                
                $
                8.5
                
                
                $
                51.7
                
                
                $
                (43.2
                )
                
                
                (83.6
                )%
  **Change
                      in percentage for****Percentage
                      of net sales**
                  
                  
                  **the
                      first six months 2007****first
                      six months ended**
                  
                  
                  **as
                      compared to the****June
                      30, 2007**
                  
                  
                  **July
                      1, 2006**
                  
                  
                  **first
                      six months 2006**Net
                      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  ---
                  %Cost
                      of
                      products sold
                  
                  
                  69.9
                  
                  
                  
                  69.6
                  
                  
                  
                  (0.3
                  )Selling,
                      general and administrative expense, net
                  
                  
                  19.9
                  
                  
                  
                  14.8
                  
                  
                  
                  (5.1
                  )Amortization
                      of intangible assets
                  
                  
                  1.0
                  
                  
                  
                  0.9
                  
                  
                  
                  (0.1
                  )Operating
                      earnings
                  
                  
                  9.2
                  
                  
                  
                  14.7
                  
                  
                  
                  (5.5
                  )Interest
                      expense
                  
                  
                  (7.6
                  )
                  
                  
                  (7.1
                  )
                  
                  
                  (0.5
                  )Investment
                      income
                  
                  
                  0.1
                  
                  
                  
                  0.1
                  
                  
                  
                  ---Earnings
                      before provision for income taxes
                  
                  
                  1.7
                  
                  
                  
                  7.7
                  
                  
                  
                  (6.0
                  )Provision
                      for
                      income taxes
                  
                  
                  1.0
                  
                  
                  
                  3.0
                  
                  
                  
                  2.0Net
                      earnings
                  
                  
                  0.7
                  %
                  
                  
                  4.7
                  %
                  
                  
                  (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.
 
 The
        operating results of the Company were impacted in the first six months of
        2007
        by a decline in sales to the built-in products and residential air conditioning
        products wholesale channels as the housing market continues to be
        weak.  Higher material costs, which were partially offset by continued
        strategic sourcing initiatives as well as sales price increases, also impacted
        the first six months of 2007.
 
 *Net
        Sales.*Consolidated net sales increased approximately $80.5
        million or 14.3% for the second quarter ended June 30, 2007 as compared to
        the
        second quarter ended July 1, 2006 and increased approximately $98.5 million
        or
        9.0% for the first six months ended June 30, 2007 as compared to the first
        six
        months ended July 1, 2006 as discussed further in the following
        paragraphs.  Acquisitions contributed approximately $35.2 million and
        $88.9 million to net sales for the second quarter and first six months ended
        June 30, 2007, respectively.
 
 In
        the
        RVP segment, net sales decreased approximately $1.2 million or 0.6% for the
        second quarter ended June 30, 2007 as compared to the second quarter ended
        July
        1, 2006 and decreased approximately $4.1 million or 1.0% for the first six
        months ended June 30, 2007 as compared to the first six months ended July
        1,
        2006.  Net sales in the RVP segment for the second quarter and first
        six months ended June 30, 2007 reflects an increase of approximately $3.1
        million and $6.4 million, respectively, attributable to the effect of changes
        in
        foreign currency exchange rates and includes approximately $6.6 million and
        $13.6 million, respectively, attributable to acquisitions.
 
 Excluding
        the effect of acquisitions and foreign exchange, net sales in the RVP segment
        decreased approximately $10.9 million in the second quarter of 2007 as compared
        to the second quarter of 2006 and decreased approximately $24.1 million in
        the
        first six months of 2007 as compared to the first six months of
        2006.  The decrease in net sales in the RVP segment for the second
        quarter and first six months ended June 30, 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
        price increases in the second quarter and first six months of 2007 of kitchen
        range hoods and bathroom exhaust fans.  Higher average unit sales
        prices also contributed to offset the decline in net sales.  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 80.8% and 81.2% of the total RVP segment’s net
        sales for the second quarter and first six months ended June 30,
        2007.  Excluding the effect of acquisitions and foreign currency
        exchange rates, sales of range hoods and bathroom exhaust fans decreased
        approximately 3.7% and 5.0% in the second quarter and first six months of
        2007,
        respectively, for the RVP segment’s domestic subsidiaries and decreased
        approximately 1.6% and 0.2% in the second quarter and first six months of
        2007,
        respectively, for the RVP segment’s foreign subsidiaries.
 
 In
        the
        HTP segment, net sales increased approximately $28.8 million or 25.0% for
        the
        second quarter ended June 30, 2007 as compared to the second quarter ended
        July
        1, 2006 and increased approximately $44.5 million or 20.0% for the first
        six
        months ended June 30, 2007 as compared to the first six months ended July
        1,
        2006.  The increase in net sales in the HTP segment for the second
        quarter and first six months ended June 30, 2007 includes approximately $24.1
        million and $41.2 million, respectively, attributable to acquisitions and
        an
        increase of approximately $0.1 million and $0.3 million, respectively,
        attributable to the effect of changes in foreign currency exchange
        rates.  The remaining increase in net sales in the HTP segment is due
        to increased sales volume of audio and video distribution equipment and
        speakers, partially offset by, a decline in sales of certain security and
        access
        control products.
 
 In
        the
        HVAC segment, net sales increased approximately $52.9 million or 21.9% for
        the
        second quarter ended June 30, 2007 as compared to the second quarter ended
        July
        1, 2006 and increased approximately $58.1 million or 12.7% for the first
        six
        months ended June 30, 2007 as compared to the first six months ended July
        1,
        2006.  Net sales in the HVAC segment for the second quarter and first
        six months ended June 30, 2007 include an increase of approximately $4.5
        million
        and $34.1 million, respectively, attributable to acquisitions and an increase
        of
        approximately $2.1 million and $4.4 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 second quarter ended June
        30,
        2007 as compared to the same period of 2006 includes higher sales volume
        for
        products sold to both residential site-built and manufactured housing customers,
        as well as, higher sales volume of HVAC products sold to commercial
        customers.  The remaining increase in net sales in the HVAC segment
        for the first six months ended June 30, 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.  Sales of products to
        residential site-built customers increased approximately 13.4% over the second
        quarter ended July 1, 2006 and decreased approximately 8.5% over the first
        six
        months ended July 1, 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 5.0% and 4.7% of the Company’s consolidated
        net sales for the second quarter ended June 30, 2007 and July 1, 2006,
        respectively, and constituted approximately 4.6% and 5.5% of the Company’s
        consolidated net sales for the first six months ended June 30, 2007 and July
        1,
        2006, respectively.
 
 Foreign
        net sales, which are attributed based on the location of the Company’s
        subsidiary responsible for the sale, were approximately 19.9% and 19.2% of
        consolidated net sales for the second quarter ended June 30, 2007 and July
        1,
        2006, respectively, and were approximately 20.9% and 18.9% of consolidated
        net
        sales for the first six months ended June 30, 2007 and July 1, 2006,
        respectively.  Net sales from the Company’s Canadian subsidiaries were
        approximately 7.9% and 7.8% of consolidated net sales for the second quarter
        ended June 30, 2007 and July 1, 2006, respectively, and were approximately
        8.2%
        and 8.1% of consolidated net sales for the first six months ended June 30,
        2007
        and July 1, 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 9.1% and 9.6% of consolidated net sales for the second quarter
        ended June 30, 2007 and July 1, 2006, respectively, and were approximately
        10.2%
        and 9.3% of consolidated net sales for the first six months ended June 30,
        2007
        and July 1, 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 $452.1 million for the second quarter ended June 30, 2007 as
        compared to approximately $393.7 million for the second quarter ended July
        1,
        2006 and was approximately $836.7 million for the first six months ended
        June
        30, 2007 as compared to approximately $764.2 million for the first six months
        ended July 1, 2006.  Cost of products sold, as a percentage of net
        sales, increased from approximately 69.8% for the second quarter ended July
        1,
        2006 to approximately 70.2% for the second quarter ended June 30, 2007 and
        increased from approximately 69.6% for the first six months ended July 1,
        2006
        to approximately 69.9% for the first six months ended June 30, 2007, primarily
        as a result of the factors that follow.
 
 Overall,
        consolidated material costs were approximately 47.5% and 44.7% of net sales
        for
        the second quarter ended June 30, 2007 and July 1, 2006, respectively, and
        were
        approximately 46.4% and 44.3% of net sales for the first six months ended
        June
        30, 2007 and July 1, 2006, respectively.  As compared to the second
        quarter and first six months of 2006, the Company experienced higher material
        costs related to purchases of steel, copper and related purchased components,
        such as motors.  These material cost increases in the second quarter
        of 2007 as compared to the same period of 2006 were offset by decreases in
        other
        material costs related to purchases of aluminum, plastics and purchased
        components, such as fans and blowers, and in the first six months of 2007,
        the
        Company experienced decreases in material costs related to purchases of
        aluminum.  Cost increases during the second quarter and first six
        months of 2007 as compared to the same periods of 2006 were partially offset
        by
        continued strategic sourcing initiatives and improvements in manufacturing
        efficiency, as well as sales price increases.
 
 During
        the second quarter of 2007, the Company realized a reduction in freight costs
        due to its strategic sourcing initiatives including obtaining favorable shipping
        rates for lower cost “full truckload” shipments and higher dollars per shipment
        based on increased volumes, as well as through other cost reduction
        measures.  These cost reduction measures reduce the overall effect of
        freight costs on cost of goods sold as a percentage of net sales.
 
 Overall,
        changes in the cost of products sold as a percentage of net sales for one
        period
        as compared to another period may reflect a number of factors including changes
        in the relative mix of products sold, the effect of changes in sales prices,
        material costs and changes in productivity levels.
 
 In
        the
        RVP segment, cost of products sold for the second quarter ended June 30,
        2007
        was approximately $143.4 million, or 69.6% as a percentage of the RVP segment’s
        net sales, as compared to approximately $139.9 million, or 67.5% as a percentage
        of the RVP segment’s net sales for the second quarter ended July 1,
        2006.  In the RVP segment, cost of products sold for the first six
        months ended June 30, 2007 was approximately $288.9 million, or 69.6% as
        a
        percentage of the RVP segment’s net sales, as compared to approximately $284.5
        million, or 67.9% as a percentage of the RVP segment’s net sales for the first
        six months ended July 1, 2006.  Cost of products sold in the RVP
        segment for the second quarter and first six months ended June 30, 2007 includes
        (1) an increase of approximately $2.5 million and $5.3 million, respectively,
        related to the effect of changes in foreign currency exchange rates and (2)
        approximately $3.9 million and $8.3 million, respectively, of cost of products
        sold from acquisitions.  Cost of products sold in the RVP segment for
        the second quarter and first six months ended July 1, 2006 includes
        approximately $1.4 million of severance charges recorded in the second quarter
        of 2006 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) and increased warranty expense of approximately $1.5 million related
        to
        a product safety upgrade recorded in the first six months of
        2006.  The increase in the percentage of cost of products sold to net
        sales for the second quarter and first six months ended June 30, 2007 over
        the
        same periods of 2006 reflects 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 second quarter ended June 30,
        2007
        was approximately $76.0 million, or 52.8% as a percentage of the HTP segment’s
        net sales, as compared to approximately $65.0 million, or 56.5% as a percentage
        of the HTP segment’s net sales for the second quarter ended July 1,
        2006.  In the HTP segment, cost of products sold for the first six
        months ended June 30, 2007 was approximately $141.8 million, or 53.1% as
        a
        percentage of the HTP segment’s net sales, as compared to approximately $121.7
        million, or 54.7% as a percentage of the HTP segment’s net sales for the first
        six months ended July 1, 2006.  Cost of products sold in the HTP
        segment for the second quarter and first six months ended June 30, 2007 reflects
        (1) approximately $12.7 million and $21.9 million, respectively, of cost
        of
        products sold contributed from acquisitions, (2) a decrease in warranty expense
        of approximately $0.2 million related to a product safety upgrade recorded
        in
        the second quarter of 2007 and (3) an increase of approximately $0.1 million
        related to the effect of changes in foreign currency exchange rates in the
        first
        six months of 2007.  Cost of products sold in the HTP segment for the
        second quarter and first six months ended July 1, 2006 includes (1) increased
        warranty costs of approximately $4.0 million related to a product safety
        upgrade
        recorded in the second quarter of 2006 and (2) a non-cash charge of
        approximately $0.1 million 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 second quarter and first six months ended
        June 30, 2007 as compared to the second quarter and first six months ended
        July
        1, 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 second quarter ended June 30,
        2007
        was approximately $232.7 million, or 79.1% as a percentage of the HVAC segment’s
        net sales, as compared to approximately $188.8 million, or 78.2% as a percentage
        of the HVAC segment’s net sales for the second quarter ended July 1,
        2006.  In the HVAC segment, cost of products sold for the first six
        months ended June 30, 2007 was approximately $406.0 million, or 78.9% as
        a
        percentage of the HVAC segment’s net sales, as compared to approximately $358.0
        million, or 78.4% as a percentage of the HVAC segment’s net sales for the first
        six months ended July 1, 2006.  Cost of products sold in the HVAC
        segment for the second quarter and first six months ended June 30, 2007 includes
        (1) an increase of approximately $3.1 million and $21.0 million, respectively,
        attributable to acquisitions and (2) an increase of approximately $1.6 million
        and $3.5 million, respectively, related to the effect of changes in foreign
        currency exchange rates as compared to the second quarter and first six months
        of 2006.  Cost of products sold in the HVAC segment for the second
        quarter and first six months ended July 1, 2006 includes a non-cash charge
        of
        approximately $2.1 million related to the amortization of purchase price
        allocated to inventory.  The increase in cost of products sold as a
        percentage of net sales for the second quarter and first six months ended
        June
        30, 2007 as compared to the same periods of 2006 reflects the effect of higher
        material costs related primarily to purchases of copper, steel and purchased
        components such as motors.
 
 *Selling,
        General and Administrative Expense, Net.*Consolidated selling,
        general and administrative expense, net (“SG&A”) was approximately $121.1
        million for the second quarter ended June 30, 2007 as compared to approximately
        $67.3 million for the second quarter ended July 1, 2006 and was approximately
        $238.2 million for the first six months ended June 30, 2007 as compared to
        approximately $162.6 million for the first six months ended July 1,
        2006.  SG&A as a percentage of net sales increased from
        approximately 12.0% for the second quarter ended July 1, 2006 to approximately
        18.8% for the second quarter ended June 30, 2007 and increased from
        approximately 14.8% for the first six months ended July 1, 2006 to approximately
        19.9% for the first six months ended June 30, 2007.  This increase in
        SG&A as a percentage of net sales is principally due to the effect of a
        curtailment gain in the second quarter of 2006 of approximately $35.9 million
        in
        the RVP segment related to post-retirement medical and life insurance benefits
        from the final implementation of a union contract that no longer provides
        such
        benefits.
 
 SG&A
        for the second quarter and first six months ended June 30, 2007 also includes
        (1) approximately $9.3 million and $19.2 million, respectively, from
        acquisitions in all three of the Company’s segments, (2) an increase of
        approximately $1.6 million and $4.7 million, respectively, of displays expense
        in the RVP segment, (3) charges of approximately $0.5 million and $2.3 million,
        respectively, related to reserves or amounts due from customers in the HTP
        and
        HVAC segments, (4) an increase of approximately $0.8 million (of which
        approximately $0.3 million is included in the RVP segment, approximately
        $0.1
        million is included in the HTP segment and approximately $0.4 million is
        included in the HVAC segment) and $1.8 million (of which approximately $0.7
        million is included in the RVP segment, approximately $0.3 million is included
        in the HTP segment and approximately $0.8 million is included in the HVAC
        segment), respectively, related to the effect of changes in foreign currency
        exchange rates, (5) approximately $0.8 million and $1.4 million, respectively,
        of severance charges related to the 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), (6) approximately $0.3 million recorded
        in the second quarter ended June 30, 2007 of severance charges related to
        the
        closure of the Company’s Mammoth facility within the HTP segment (see Note H of
        the Notes to the Unaudited Financial Statements included elsewhere herein),
        (7)
        approximately $0.3 million and $1.3 million, respectively, of legal and other
        professional fees and expenses incurred in connection with matters related
        to
        certain subsidiaries based in Italy and Poland in the RVP segment, (8) a
        non-cash foreign exchange loss of approximately $0.3 million (of which
        approximately $0.5 million is included in the RVP segment) and $0.1 million
        (of
        which approximately $0.4 million is included in the RVP segment), respectively,
        related to intercompany debt not indefinitely invested in the Company’s
        subsidiaries and (9) approximately $0.1 million and $0.2 million, respectively,
        of stock-based compensation expense, which is recorded in
        Unallocated.
 
 SG&A
        for the second quarter and first six months ended July 1, 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 $2.1 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) approximately $0.1 million and
        $0.2
        million, respectively, of stock-based compensation expense, which is recorded
        in
        Unallocated and (2) a non-cash foreign exchange gain of approximately $0.2
        million and $0.3 million, respectively, all of which is included in Unallocated,
        related to intercompany debt not indefinitely invested in the Company’s
        subsidiaries.
 
 *Amortization
        of Intangible Assets.*Amortization of intangible assets
        increased approximately $0.6 million from approximately $5.8 million for
        the
        second quarter ended July 1, 2006 to approximately $6.4 million for the second
        quarter ended June 30, 2007 and increased approximately $2.4 million from
        approximately $10.0 million for the first six months ended July 1, 2006 to
        approximately $12.4 million for the first six months ended June 30,
        2007.  The change in amortization of intangible assets is due to the
        impact of acquisitions, which contributed approximately $1.3 million and
        $3.4
        million to the increase in the second quarter and first six months ended
        June
        30, 2007, respectively, offset by higher amortization expense in the prior
        periods as a result of accelerated amortization methods.
 
 *Depreciation
        Expense.*Depreciation expense increased approximately $1.9
        million from approximately $8.2 million for the second quarter ended July
        1,
        2006 to approximately $10.1 million for the second quarter ended June 30,
        2007
        and increased approximately $2.6 million from approximately $16.1 million
        for
        the first six months ended July 1, 2006 to approximately $18.7 million for
        the
        first six months ended June 30, 2007.  This increase is primarily
        attributable to capital expenditures, and to a lesser extent the impact of
        acquisitions in the second quarter and first six months of 2007, which
        represented approximately $0.3 million and $0.9 million, respectively, of
        the
        increase.
 
 *Operating
        Earnings.*Consolidated operating earnings decreased by
        approximately $32.3 million from approximately $97.0 million for the second
        quarter ended July 1, 2006 to approximately $64.7 million for the second
        quarter
        ended June 30, 2007 and decreased approximately $52.0 million from approximately
        $161.5 million for the first six months ended July 1, 2006 to approximately
        $109.5 million for the first six months ended June 30,
        2007.  Acquisitions contributed approximately $4.9 million and $15.1
        million to operating earnings for the second quarter and first six months
        ended
        June 30, 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 17.2% for the second quarter ended July 1, 2006 to
        approximately 10.0% for the second quarter ended June 30, 2007 and decreased
        from approximately 14.7% for the first six months ended July 1, 2006 to
        approximately 9.2% for the first six months ended June 30, 2007.
 
 Operating
        earnings of the RVP segment for the second quarter ended June 30, 2007 were
        approximately $26.0 million as compared to approximately $69.8 million for
        the
        second quarter ended July 1, 2006 and were approximately $51.2 million for
        the
        first six months ended June 30, 2007 as compared to approximately $105.9
        million
        for the first six months ended July 1, 2006.  Operating earnings of
        the RVP segment for the second quarter and first six months ended June 30,
        2007
        reflects (1) approximately $0.8 million and $1.4 million, respectively, of
        severance charges related to the closure of the Company’s NuTone facility, (2)
        an increase of approximately $1.6 million and $4.7 million, respectively,
        of
        displays expense, (3) an increase in earnings of approximately $0.3 million
        and
        $0.4 million, respectively, from the effect of foreign currency exchange
        rates,
        (4) approximately $0.3 million and $1.3 million, respectively, of legal and
        other professional fees and expenses incurred in connection with matters
        related
        to certain subsidiaries based in Italy and Poland, (5) approximately $0.8
        million and $0.6 million, respectively, of increased depreciation expense
        of
        property and equipment and approximately $0.2 million and $0.4 million,
        respectively, of decreased amortization of intangible assets, (6) a decrease
        of
        approximately $0.1 million in the second quarter of 2007 and an increase
        of
        approximately $0.2 million in the first six months of 2007 attributable to
        acquisitions and (7) a non-cash foreign exchange loss of approximately $0.5
        million and $0.4 million, respectively, related to intercompany debt not
        indefinitely invested in the Company’s subsidiaries.
 
 Operating
        earnings of the RVP segment for the second quarter and first six months ended
        July 1, 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 $3.5 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 (see Note H of the Notes to the Unaudited Financial
        Statements included elsewhere herein) and (3) increased warranty expense
        of
        approximately $1.5 million related to a product safety upgrade recorded in
        the
        first six months of 2006.
 
 The
        remaining decrease in operating earnings in the RVP segment for the second
        quarter and first six months ended June 30, 2007 as compared to the same
        periods
        in 2006 is a result of the factors noted previously including the $35.9 million
        curtailment gain recorded in the second quarter of 2006, as well as lower
        sales
        volume of kitchen range hoods and bathroom exhaust fans, partially offset
        by
        price increases in the second quarter and first six months of 2007.
 
 Operating
        earnings of the HTP segment for the second quarter ended June 30, 2007 were
        approximately $23.3 million as compared to approximately $14.4 million for
        the
        second quarter ended July 1, 2006 and were approximately $39.8 million in
        the
        first six months ended June 30, 2007 as compared to approximately $31.7 million
        for the first six months ended July 1, 2006.  Operating earnings of
        the HTP segment for the second quarter and first six months ended June 30,
        2007
        reflects (1) approximately $4.4 million and $7.2 million, respectively, of
        operating earnings contributed by acquisitions, (2) approximately $0.5 million
        and $0.9 million, respectively, of increased depreciation expense of property
        and equipment and approximately $0.9 million and $1.5 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 related to a reserve for
        amounts due from a customer recorded in the second quarter of 2007, (4) a
        decrease in warranty expense of approximately $0.2 million related to a product
        safety upgrade and (5) a decrease in earnings of approximately $0.1 million
        in
        the first six months of 2007 from the effect of foreign currency exchange
        rates.
 
 Operating
        earnings of the HTP segment for the second quarter and first six months ended
        July 1, 2006 reflects (1) increased warranty costs of approximately $4.0
        million
        related to a product safety upgrade recorded in the second quarter of 2006
        and
        (2) a non-cash charge of approximately $0.1 million related to the amortization
        of purchase price allocated to inventory recorded in the first six months
        of
        2006.
 
 The
        remaining increase in operating earnings in the HTP segment for the second
        quarter ended June 30, 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 six months ended June 30, 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 $22.7 million for the second
        quarter ended June 30, 2007 as compared to approximately $19.3 million for
        the
        second quarter ended July 1, 2006 and were approximately $32.5 million for
        the
        first six months ended June 30, 2007 as compared to approximately $37.2 million
        for the first six months ended July 1, 2006.  Operating earnings of
        the HVAC segment for the second quarter and first six months ended June 30,
        2007
        reflect (1) approximately $0.6 million and $7.7 million, respectively, of
        operating earnings contributed by acquisitions, (2) a charge of approximately
        $1.8 million related to a reserve for amounts due from a customer recorded
        in
        the first six months of 2007, (3) approximately $0.3 million recorded in
        the
        second quarter ended June 30, 2007 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 $0.7 million
        and $1.1 million, respectively, of increased depreciation expense of property
        and equipment and approximately $2.1 million and $0.8 million, respectively,
        of
        decreased amortization of intangible assets primarily attributable to
        acquisitions, both of which are included in the impact of acquisitions noted
        above and (5) an increase in earnings of approximately $0.1 million in the
        second quarter and first six months of 2007 from the effect of foreign
        currency exchange rates.
 
 Operating
        earnings of the HVAC segment for the second quarter and first six months
        ended
        July 1, 2006 reflects a non-cash charge of approximately $2.1 million related
        to
        the amortization of purchase price allocated to inventory recorded in the
        second
        quarter of 2006.
 
 The
        remaining decrease in operating earnings in the HVAC segment for the first
        six
        months ended June 30, 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 11.2% and 10.1% of operating earnings (before unallocated and
        corporate expenses) for the second quarter ended June 30, 2007 and July 1,
        2006,
        respectively, and were approximately 13.9% and 10.4% of operating earnings
        (before unallocated and corporate expenses) for the first six months ended
        June
        30, 2007 and July 1, 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 $6.4 million or approximately 15.1% during
        the
        second quarter ended June 30, 2007 as compared to the second quarter ended
        July
        1, 2006 and increased approximately $12.6 million or approximately 16.1%
        during
        the first six months ended June 30, 2007 as compared to the first six months
        ended July 1, 2006.  During the second quarter and first six months
        ended June 30, 2007, the Company experienced increases in interest expense
        primarily as a result of (1) approximately $3.9 million 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 $2.2 million and $3.0 million, respectively, from
        increased borrowings and interest rates related to Nortek’s senior secured
        credit facility, (3) approximately $3.1 million and $7.8 million, respectively,
        of debt accretion relating to the PIK option on the Company’s senior unsecured
        loan facility issued in May 2006, (4) approximately $0.8 million and $1.6
        million, respectively, of additional interest expense as compared to the
        second
        quarter and first six months ended July 1, 2006 related to the accretion
        of NTK
        Holdings’ 10 3/4% Senior Discount Notes, (5) an increase of approximately $0.4
        million and $0.7 million, respectively, related to increased borrowings at
        the
        Company’s subsidiaries, primarily as a result of acquisitions and (6) an
        increase of approximately $0.3 million and $0.6 million, respectively, related
        to the amortization of deferred financing costs.  These increases were
        partially offset by a decrease of approximately $4.3 million and $5.0 million,
        respectively, in interest expense related to the amortization of the Nortek
        Holdings deferred compensation plan, which was fully paid in May
        2006.
  *Investment
        Income.*Investment income was approximately $0.5 million for
        each of the second quarters ended June 30, 2007 and July 1, 2006, respectively
        and was approximately $0.9 million and $1.2 million for the first six months
        ended June 30, 2007 and July 1, 2006, respectively.
 
 *Provision
        for Income Taxes.*The provision for income taxes was
        approximately $9.2 million for the second quarter ended June 30, 2007 as
        compared to approximately $21.3 million for the second quarter ended July
        1,
        2006 and was approximately $10.9 million for the first six months ended June
        30,
        2007 as compared to approximately $32.6 million for the first six months
        ended
        July 1, 2006.  The effective income tax rates of 56.2% and 38.7% for
        the first six months ended June 30, 2007 and July 1, 2006, respectively,
        differed from the United States Federal statutory rate of 35% principally
        as a
        result of the effect of non-deductible expenses, the impact of interest,
        foreign
        tax rates on foreign earnings and state income tax provisions.  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
        $26.6 million from approximately $33.9 million for the second quarter ended
        July
        1, 2006 to approximately $7.3 million for the second quarter ended June 30,
        2007
        and decreased by approximately $43.2 million from approximately $51.7 million
        for the first six months ended July 1, 2006 to approximately $8.5 million
        for
        the first six months ended June 30, 2007.  The decrease in the second
        quarter and first six months ended June 30, 2007 was primarily due to the
        factors discussed above which included a decrease of approximately $32.3
        million
        and $52.0 million, respectively, in consolidated operating earnings, an increase
        of approximately $6.4 million and $12.6 million, respectively, in interest
        expense and a decrease of approximately $0.3 million in investment income
        for
        the first six months of 2007, offset by a decrease of approximately $12.1
        million and $21.7 million, respectively, in the provision for income
        taxes.
 
 *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 earnings, which is the
        most
        directly comparable GAAP operating performance measure, to EBITDA for the
        second
        quarter ended June 30, 2007 and July 1, 2006:
  **For
                    the second quarter ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)*Net
                    earnings
                    (1), (2)
                
                $
                7.3
                
                
                $
                33.9Provision for income taxes
                
                
                9.2
                
                
                
                21.3Interest expense  (3)
                
                
                48.7
                
                
                
                42.3Investment income
                
                
                (0.5
                )
                
                
                (0.5
                )Depreciation expense
                
                
                10.1
                
                
                
                8.2Amortization expense
                
                
                6.4
                
                
                
                7.9EBITDA
                
                $
                81.2
                
                
                $
                113.1
 (1)
              In
                  the RVP segment, net earnings for the second quarter ended June
                  30, 2007
                  include an approximate $0.8 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),
                  legal
                  and other professional fees and expenses incurred in connection
                  with
                  matters related to certain subsidiaries based in Italy and Poland
                  of
                  approximately $0.3 million (see Note G of the Notes to the Unaudited
                  Financial Statements included elsewhere herein) and a non-cash
                  foreign
                  exchange loss of approximately $0.5 million related to intercompany
                  debt
                  not indefinitely invested in the Company’s subsidiaries.  In the
                  HTP segment, net earnings for the second quarter ended June 30,
                  2007
                  include a charge of approximately $0.5 million related to a reserve
                  for
                  amounts due from a customer and a decrease in warranty expense
                  of
                  approximately $0.2 million related to a product safety
                  upgrade.  In the HVAC segment, net earnings for the second
                  quarter ended June 30, 2007 include a charge of approximately $0.3
                  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).  In
                  Unallocated, net earnings for the second quarter ended June 30,
                  2007
                  includes a non-cash foreign exchange gain of approximately $0.2
                  million
                  related to intercompany debt not indefinitely invested in the Company’s
                  subsidiaries and stock-based compensation charges of approximately
                  $0.1
                  million.
 
 (2)
              In
                  the RVP segment, net earnings for the second quarter ended July
                  1, 2006
                  include an approximate $35.9 million curtailment gain related to
                  post-retirement medical benefits and an approximate $3.5 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).  In the HTP segment, net
                  earnings for the second quarter ended July 1, 2006 include an increase
                  in
                  warranty expense of approximately $4.0 million related to a product
                  safety
                  upgrade.  In Unallocated, net earnings for the second quarter
                  ended July 1, 2006 includes a non-cash foreign exchange gain of
                  approximately $0.2 million related to intercompany debt not indefinitely
                  invested in the Company’s subsidiaries and stock-based compensation
                  charges of approximately $0.1
                  million.
 
 (3)
              Interest
                  expense for the second quarter of 2007 includes cash interest of
                  approximately $29.4 million and non-cash interest of approximately
                  $19.3
                  million.  Interest expense for the second quarter of 2006
                  includes cash interest of approximately $31.1 million (including
                  approximately $3.9 million relating to the accelerated amortization
                  of the
                  Nortek Holdings deferred compensation plan) and non-cash interest
                  of
                  approximately $11.2 million.
   The
        following table presents a reconciliation from net earnings, which is the
        most
        directly comparable GAAP operating performance measure, to EBITDA for the
        first
        six months ended June 30, 2007 and July 1, 2006:
 
 **For
                    the first six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)*Net
                    earnings
                    (1), (2)
                
                $
                8.5
                
                
                $
                51.7Provision for income taxes
                
                
                10.9
                
                
                
                32.6Interest expense  (3)
                
                
                91.0
                
                
                
                78.4Investment income
                
                
                (0.9
                )
                
                
                (1.2
                )Depreciation expense
                
                
                18.7
                
                
                
                16.1Amortization expense
                
                
                12.4
                
                
                
                12.2EBITDA
                
                $
                140.6
                
                
                $
                189.8
  (1)
              In
                  the RVP segment, net earnings for the first six months ended June
                  30, 2007
                  include an approximate $1.4 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),
                  legal
                  and other professional fees and expenses incurred in connection
                  with
                  matters related to certain subsidiaries based in Italy and Poland
                  of
                  approximately $1.3 million (see Note G of the Notes to the Unaudited
                  Financial Statements included elsewhere herein) and a non-cash
                  foreign
                  exchange loss of approximately $0.4 million related to intercompany
                  debt
                  not indefinitely invested in the Company’s subsidiaries.  In the
                  HTP segment, net earnings for the first six months ended June 30,
                  2007
                  include a charge of approximately $0.5 million related to a reserve
                  for
                  amounts due from a customer and a decrease in warranty expense
                  of
                  approximately $0.2 million related to a product safety
                  upgrade.  In the HVAC segment, net earnings for the first six
                  months ended June 30, 2007 include a charge of approximately $0.3
                  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 a charge of
                  approximately $1.8 million related to a reserve for amounts due
                  from a
                  customer.  In Unallocated, net earnings for the first six months
                  ended June 30, 2007 includes a non-cash foreign exchange gain of
                  approximately $0.3 million related to intercompany debt not indefinitely
                  invested in the Company’s subsidiaries and stock-based compensation
                  charges of approximately $0.2
                  million.
 
 (2)
              In
                  the RVP segment, net earnings for the first six months ended July
                  1, 2006
                  include an approximate $35.9 million curtailment gain related to
                  post-retirement medical benefits, an approximate $3.5 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) and an increase in warranty
                  expense
                  of approximately $1.5 million related to a product safety
                  upgrade.  In the HTP segment, net earnings for the first six
                  months ended July 1, 2006 include an increase in warranty expense
                  of
                  approximately $4.0 million related to a product safety
                  upgrade.  In Unallocated, net earnings for the first six months
                  ended July 1, 2006 includes a non-cash foreign exchange gain of
                  approximately $0.3 million related to intercompany debt not indefinitely
                  invested in the Company’s subsidiaries and stock-based compensation
                  charges of approximately $0.2
                  million.
 
 (3)
              Interest
                  expense for the first six months of 2007 includes cash interest
                  of
                  approximately $57.2 million and non-cash interest of approximately
                  $33.8
                  million.  Interest expense for the first six months of 2006
                  includes cash interest of approximately $58.5 million (including
                  approximately $3.9 million relating to the accelerated amortization
                  of the
                  Nortek Holdings deferred compensation plan) and non-cash interest
                  of
                  approximately $19.9 million.
  **Liquidity
        and Capital Resources**
 
 Certain
            sole source suppliers of various fabricated material components and
            sub-assemblies to the Company’s kitchen range hood subsidiaries based in Italy
            and Poland experienced financial difficulties in January 2007 and subsequently
            filed for settlement with creditors to prevent bankruptcy.  The
            Company has secured alternative sources for all but two of these suppliers
            and
            has negotiated the purchase of the two remaining businesses from the
            trustee
            appointed by the local court in the settlement procedures.  The
            purchase price of the businesses to be acquired is approximately $7.8
            million
            plus the assumption of indebtedness (estimated to be approximately $2.8
            million).  The closing of these acquisitions is expected to occur in 2007.
 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.  However, there can be no assurance that the
            Company will be able to complete the pending acquisitions.  If these
            acquisitions are not completed and these suppliers are declared bankrupt
            and are
            unable to continue in operation, the Company will be required to find
            alternative sources or vertically integrate similar operations into its
            existing
            business.  The Company is proceeding with such alternative plans in the
            unlikely event the acquisitions are not consummated.  If the Company is
            unable to integrate these operations into its business or find alternative
            suppliers for a lengthy period of time, the Company could experience
            a material
            adverse effect on its operations.  These subsidiaries based in Italy
            and Poland accounted for approximately 5.8% and 6.4% of the Company’s
            consolidated net sales and 4.1% and 3.2%, of consolidated operating earnings,
            before Unallocated, for the second quarter and first six months ended
            June 30,
            2007, respectively, and accounted for approximately 6.4% of the Company’s
            consolidated net sales and 4.4% of consolidated operating earnings, before
            Unallocated, for the second quarter and first six months ended July 1,
            2006,
            respectively.  Additionally, these subsidiaries based in Italy and
            Poland accounted for approximately 6.2% and 6.5% of consolidated assets
            at June
            30, 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 $0.3 million and $1.3 million of legal and other professional
            fees
            and expenses in connection with these suppliers in the second quarter
            and first
            six 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 over seven years (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 “Offering”).  Although the Company has
        not withdrawn its registration statement on Form S-1, there can be no assurance
        that the Company will complete the Offering in the foreseeable
        future.
 
 The
        Company regularly acquires companies, typically utilizing cash and proceeds
        from
        additional indebtedness to finance these acquisitions.  Companies
        acquired and the payment of contingent consideration during the first six
        months
        ended June 30, 2007 and the impact on cash flows were as follows:
 
 ·
              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, of which approximately $2.3 million
                  will be
                  paid in the third quarter of 2007.
 ·
              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.
 
 On
        July
        23, 2007, the Company, through Linear, acquired the assets and certain
        liabilities of Aigis Mechtronics LLC (“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).  Aigis is located in Winston-Salem, NC and manufactures
        and sells equipment, such as cameras, and housings into the close-circuit
        television portion of the global security market.  Aigis will be
        included in the Home Technology Products segment in the Company’s segment
        reporting.
 
 On
        July
        27, 2007, the Company acquired all of the ownership units of HomeLogic
        LLC (“HomeLogic”) for an initial purchase price of approximately $5.0 million
        (utilizing approximately $3.0 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.  HomeLogic will be included in the Home
        Technology Products segment in the Company’s segment reporting.
 
 As
        described above, $48.1 million of contingent consideration was paid in April
        2007 related to the Secure Wireless and the Huntair and Cleanpak
        acquisitions.  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.  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 June 30, 2007, of approximately $2,018.8
        million consisting of (i) $126.3 million of short-term borrowings and current
        maturities of long-term debt, (ii) $40.9 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) $673.7 million of long-term debt outstanding
        under Nortek’s senior secured credit facility, (vi) $321.3 million of the
        Company’s 10 3/4% Senior Discount Notes and (vii) $221.6 million under the
        Company’s unsecured term loan facility.
 
 During
        the first six months ended June 30, 2007, the Company had a net increase
        in its
        consolidated debt of approximately $92.3 million resulting from:
 
 *(Amounts
                in millions)*Net
                  borrowings under the revolving portion of Nortek’s senior secured credit
                  facility
              
              $
              74.0Debt
                  accretion related to the 10 3/4% Senior Discount Notes
              
              
              16.4Debt
                  accretion relating to the PIK option on the senior unsecured loan
                  facility
              
              
              10.0Debt
                discount
                relating to the senior unsecured loan facility
              
              
              (4.4
              )Additional
                  borrowings related primarily to the Company’s foreign
                  subsidiaries
              
              
              5.7Issuance
                  of unsecured notes related to acquisitions in the first half of
                  2007
              
              
              3.0Foreign
                  currency translation
              
              
              0.6Principal
                  payments
              
              
              (13.0
              )Net
                  change in consolidated debt
              
              $
              92.3
 
 The
        Company’s debt to equity ratio was approximately 23.3:1 at June 30, 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 net earnings of approximately $8.5 million for the first
        six months ended June 30, 2007, offset by an increase in indebtedness as
        noted
        above.
 
 At
        August 17, 2007, Nortek had approximately $79.0 million outstanding and
        approximately $88.6 million of additional borrowing capacity under the U.S.
        revolving portion of its senior secured credit facility, with approximately
        $22.4 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 the Company had no outstanding borrowings
        and
        approximately $10.0 million of additional 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 $1.6 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.
 
 At
        June
        30, 2007, the Company had approximately $60.2 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 $167.9 million at June 30,
        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, 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 $75.3 million at June 30, 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 June 30, 2007, approximately
        $3.3 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 warranty liabilities increased from
        approximately $41.2 million at December 31, 2006 to approximately $43.4 million
        at June 30, 2007.  Warranty expense decreased from approximately $10.2
        million for the second quarter ended July 1, 2006 to approximately $7.8 million
        for the second quarter ended June 30, 2007 and decreased from approximately
        $17.5 million for the first six months ended July 1, 2006 to approximately
        $13.3
        million for the first six months ended June 30, 2007.  The decrease in
        warranty expense for the second quarter and first six months ended June 30,
        2007
        as compared to the same periods of 2006 is primarily as a result of
        approximately $4.0 million and $5.5 million recorded in the second quarter
        and
        first six months of 2006 in the RVP and HTP segments related to product safety
        upgrades.  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.
 
 Capital
        expenditures were approximately $7.3 million for the second quarter ended
        June
        30, 2007 as compared to approximately $10.6 million for the second quarter
        ended
        July 1, 2006 and were approximately $14.1 million for the first six months
        ended
        June 30, 2007 as compared to approximately $22.7 million for the first six
        months ended July 1, 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 $230.0 million at June 30, 2007, while
        the
        current ratio remained unchanged from December 31, 2006 to June 30, 2007
        at
        1.4:1.  This increase in working capital for the first six months
        ended June 30, 2007 was primarily a result of seasonal increases in accounts
        receivable and inventory and a decrease in accrued expenses, offset by increases
        in accounts payable and in short-term borrowings under the revolving portion
        of
        Nortek’s senior secured credit facility.  The increase in cash from
        December 31, 2006 to June 30, 2007 was also a contributing factor to the
        increase in working capital.
 
 Accounts
        receivable increased approximately $55.5 million, or approximately 16.9%,
        between December 31, 2006 and June 30, 2007, while net sales increased
        approximately $103.2 million, or approximately 19.1%, in the second 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,
        acquisitions.  Acquisitions contributed approximately $14.6 million to
        the increase in net sales in the second quarter of 2007 as compared to the
        fourth quarter of 2006 and approximately $3.4 million to the increase in
        accounts receivable at June 30, 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 June 30,
        2007
        as compared to December 31, 2006.  Accounts receivable from customers
        related to foreign operations increased approximately 6.8% to $105.5 million
        at
        June 30, 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 six months
        of
        2007.
 
 Inventories
        increased approximately $41.6 million, or approximately 14.9%, between December
        31, 2006 and June 30, 2007 to support future sales levels, as well as increased
        material costs principally for steel and copper, and to a lesser extent
        acquisitions.  Acquisitions contributed approximately $5.8 million to
        the increase at June 30, 2007.
 
 Accounts
        payable increased approximately $55.6 million, or 29.5%, between December
        31,
        2006 and June 30, 2007 due primarily to increased inventory levels and timing
        of
        payments.  Acquisitions contributed approximately $3.3 million to the
        increase in accounts payable at June 30, 2007.
 
 Accrued
        expenses and taxes decreased approximately $47.5 million, or approximately
        16.7%, between December 31, 2006 and June 30, 2007 primarily as a result
        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 were paid in 2007.
 
 Changes
        in certain working capital accounts, as noted above, between December 31,
        2006
        and June 30, 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 six months ended June
        30,
        2007 increased by approximately $42.1 million to approximately $46.1 million
        of
        net cash provided by operating activities from approximately $4.0 million
        for
        the first six months ended July 1, 2006, primarily due to a reduction in
        payments of approximately $54.0 million related to the Company's deferred
        compensation plan, a decrease in net earnings and the use of cash for other
        working capital needs.  Net cash flows used in investing activities
        for the first six months ended June 30, 2007 increased by approximately $10.1
        million to net cash used in investing activities of approximately $89.7 million
        from approximately $79.6 million for the first six months ended July 1, 2006,
        primarily due to an increase in payments for acquisitions of approximately
        $19.4
        million, partially offset by a decrease in capital expenditures of approximately
        $8.6 million.  Net cash flows provided by financing activities for the
        first six months ended June 30, 2007 increased by approximately $8.2 million
        to
        net cash provided by financing activities of approximately $61.5 million
        from
        approximately $53.3 million for the first six months ended July 1, 2006
        resulting from a reduction in dividends paid of approximately $174.9 million,
        offset by a decrease in net borrowing proceeds of approximately $163.7
        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 $17.9 million and decreased
        approximately $22.3 million from December 31, 2006 to June 30, 2007 and from
        December 31, 2005 to July 1, 2006, respectively, principally as a result
        of the
        following:
 
 **Condensed
                    Consolidated****Cash
                    Flows (1)****For
                    the first six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)***Operating
                    Activities:**Cash flow from operations, net
                
                $
                68.3
                
                
                $
                82.9Change in accounts receivable, net
                
                
                (47.2
                )
                
                
                (28.5
                )Change in inventories
                
                
                (33.7
                )
                
                
                (37.9
                )Change in prepaids and other current assets
                
                
                2.3
                
                
                
                5.3Change in accounts payable
                
                
                49.5
                
                
                
                27.4Change in accrued expenses and taxes
                
                
                7.6
                
                
                
                1.0Change
                    in long-term deferred compensation
                
                
                ---
                
                
                
                (54.0
                )**Investing
                    Activities:**Capital expenditures
                
                
                (14.1
                )
                
                
                (22.7
                )Net cash paid for businesses acquired
                
                
                (76.3
                )
                
                
                (56.9
                )Proceeds from the sale of property and equipment
                
                
                0.1
                
                
                
                2.6Change in restricted cash and marketable securities
                
                
                1.2
                
                
                
                ---**Financing
                    Activities:**Change in borrowings, net
                
                
                66.0
                
                
                
                28.9Payment in connection with senior unsecured loan facility
                    rollover
                
                
                (4.5
                )
                
                
                ---Borrowing under the senior unsecured loan facility
                
                
                ---
                
                
                
                200.8Dividends
                
                
                ---
                
                
                
                (174.9
                )Other,
                    net
                
                
                (1.3
                )
                
                
                3.7$
                17.9
                
                
                $
                (22.3
                )
  (1)
              Summarized
                  from the Company’s Unaudited Condensed Consolidated Statement of Cash
                  Flows for the first six months ended June 30, 2007 and July 1,
                  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 used in operating
        activities, which is the most directly comparable GAAP liquidity measure,
        to
        EBITDA for the first six months ended June 30, 2007 and July 1,
        2006:
 
 **For
                    the first six months ended****June
                    30, 2007**
                
                
                **July
                    1, 2006***(Dollar
                    amounts in millions)*Net cash provided by operating activities
                
                $
                46.1
                
                
                $
                4.0Cash used by working capital and other long-term asset and
                        liability
                        changes
                
                
                22.2
                
                
                
                78.9Deferred federal income tax benefit (provision)
                
                
                5.5
                
                
                
                (16.9
                )Loss on property and equipment
                
                
                (0.2
                )
                
                
                (1.8
                )Non-cash interest expense, net
                
                
                (33.8
                )
                
                
                (19.9
                )Non-cash stock-based compensation expense
                
                
                (0.2
                )
                
                
                (0.2
                )Gain from curtailment of post-retirement medical benefits
                
                
                ---
                
                
                
                35.9Provision for income taxes
                
                
                10.9
                
                
                
                32.6Interest expense (1)
                
                
                91.0
                
                
                
                78.4Investment income
                
                
                (0.9
                )
                
                
                (1.2
                )EBITDA
                    (2),
                    (3)
                
                $
                140.6
                
                
                $
                189.8
  (1)
              Interest
                  expense for the first six months of 2007 includes cash interest
                  of
                  approximately $57.2 million and non-cash interest of approximately
                  $33.8
                  million.  Interest expense for the first six months of 2006
                  includes cash interest of approximately $58.5 million (including
                  approximately $3.9 million relating to the accelerated amortization
                  of the
                  Nortek Holdings deferred compensation plan) and non-cash interest
                  of
                  approximately $19.9 million.
 
 (2)
              In
                  the RVP segment, EBITDA for the first six months ended June 30,
                  2007
                  include an approximate $1.4 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),
                  legal
                  and other professional fees and expenses incurred in connection
                  with
                  matters related to certain subsidiaries based in Italy and Poland
                  of
                  approximately $1.3 million (see Note G of the Notes to the Unaudited
                  Financial Statements included elsewhere herein) and a non-cash
                  foreign
                  exchange loss of approximately $0.4 million related to intercompany
                  debt
                  not indefinitely invested in the Company’s subsidiaries.  In the
                  HTP segment, net earnings for the first six months ended June 30,
                  2007
                  include a charge of approximately $0.5 million related to a reserve
                  for
                  amounts due from a customer and a decrease in warranty expense
                  of
                  approximately $0.2 million related to a product safety
                  upgrade.  In the HVAC segment, EBITDA for the first six months
                  ended June 30, 2007 include a charge of approximately $0.3 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 a charge of approximately
                  $1.8
                  million related to a reserve for amounts due from a
                  customer.  In Unallocated, EBITDA for the first six months ended
                  June 30, 2007 includes a non-cash foreign exchange gain of approximately
                  $0.3 million related to intercompany debt not indefinitely invested
                  in the
                  Company’s subsidiaries.
 
 (3)
              In
                  the RVP segment, EBITDA for the first six months ended July 1,
                  2006
                  include an approximate $35.9 million curtailment gain related to
                  post-retirement medical benefits, an approximate $3.5 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) and an increase in warranty
                  expense
                  of approximately $1.5 million related to a product safety
                  upgrade.  In the HTP segment, EBITDA for the first six months
                  ended July 1, 2006 include an increase in warranty expense of
                  approximately $4.0 million related to a product safety
                  upgrade.  In Unallocated, EBITDA for the first six months ended
                  July 1, 2006 includes a non-cash foreign exchange gain of approximately
                  $0.3 million related to 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, inflation, consumer confidence and
        unemployment.  During the first half of 2007, the Company’s
        performance was impacted by weak industry demand in the residential HVAC
        market,
        as well as, lower levels of housing activity.
 
 The
        demand for the Company’s products is seasonal, particularly in the Northeast and
        Midwest regions of the United States where inclement weather during the winter
        months usually reduces the level of building and remodeling activity in both
        the
        home improvement and new construction markets.  The Company’s lower
        sales levels usually occur during the first and fourth
        quarters.  Since a high percentage of the Company’s manufacturing
        overhead and operating expenses are relatively fixed throughout the year,
        operating income and net earnings tend to be lower in quarters with lower
        sales
        levels.  In addition, the demand for cash to fund the working capital
        of the Company’s subsidiaries is greater from late in the first quarter until
        early in the fourth quarter.
 
 Although
        the Company is subject to the effects of changing prices, the impact of
        inflation has not been a significant factor in 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 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
        June
        30, 2007, approximately 5.9% of the Company’s workforce was subject to various
        collective bargaining agreements.
 
 Within
        the RVP segment, the Company, in the second quarter and first six months
        of
        2007, recorded liabilities of approximately $0.8 million and $1.4 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
        and approximately 58 employees will be terminated.  It is currently
        anticipated that the closure of the NuTone facility and related payments
        will
        occur during the third quarter of 2007.  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.  Approximately
        $0.3 million was paid related to severance payments to union employees in
        the
        second quarter of 2007 and was recorded to selling, general and administrative
        expense, net.  It is anticipated that the manufacturing operations at
        Chaska will cease during the third 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 $3.0 million and $3.6
        million.
 
 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 June 30, 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
        June 30, 2007, approximately 50.4% 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 second quarter and first six 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 $7.2 million and $8.6 million for the second
        quarter
        and first six months ended June 30, 2007.  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 June 30, 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 June 30, 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
 
 
 August
        20, 2007