PROVIDENCE, R.I., May 9 /PRNewswire-FirstCall/ -- Nortek, Inc. ("Nortek"), a leading diversified global manufacturer of innovative, branded residential and commercial ventilation, HVAC and home technology convenience and security products, today announced first-quarter financial results. Nortek reported sales of $540 million and operating earnings of $23.4 million for the quarter ended March 29, 2008.
Key financial highlights for the first quarter of 2008 included:
-- Net sales of $540 million, compared to the $553 million recorded in
2007.
-- Operating earnings of $23.4 million compared to $44.9 million in the
first quarter of 2007.
-- Depreciation and amortization expense of $17.4 million compared to
$14.6 million in last year's first quarter.
-- Acquisitions contributed approximately $11.2 million in net sales and
reduced operating earnings by $1.2 million for the quarter ended
March 29, 2008.
Richard L. Bready, Chairman and Chief Executive Officer, said, "Nortek continues to manage its business well in this difficult housing market. However, operating results were adversely impacted as the housing market continued to weaken. Additionally, operating earnings were also impacted in the first quarter of 2008 by higher commodity and transportation costs, which were only partially offset by continued strategic sourcing initiatives and improvements in manufacturing efficiency."
As of March 29, 2008, Nortek had approximately $53 million in unrestricted cash, cash equivalents and marketable securities and had $45 million of borrowings outstanding under its revolving credit facility.
Mr. Bready added, "We expect the existing home sales market and the continued instability in the troubled mortgage market will continue to have a negative impact on consumer spending on home remodeling and repair expenditures throughout 2008."
Nortek* (a wholly owned subsidiary of Nortek Holdings, Inc., which is a wholly owned subsidiary of NTK Holdings, Inc.) is a leading diversified global manufacturer of innovative, branded residential and commercial ventilation, HVAC and home technology convenience and security products. Nortek offers a broad array of products including: range hoods, bath fans, indoor air quality systems, medicine cabinets and central vacuums, heating and air conditioning systems, and home technology offerings, including audio, video, access control, security and other products.
*As used herein, the term "Nortek" refers to Nortek, Inc., together with its subsidiaries, unless the context indicates otherwise. This term is used for convenience only and is not intended as a precise description of any of the separate corporations, each of which manages its own affairs.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on Nortek's current plans and expectations and involve risks and uncertainties 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 impacting such forward-looking statements include the availability and cost of raw materials and purchased components, the level of construction and remodeling activity, changes in general economic conditions, the rate of sales growth and product liability claims. Nortek undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. For further information, please refer to the reports and filings of Nortek with the Securities and Exchange Commission.
NORTEK, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS
For the first quarter ended
March 29, 2008 March 31, 2007
(Dollar amounts in millions)
Net Sales $540.2 $552.5
Costs and Expenses:
Cost of products sold 391.6 384.6
Selling, general and administrative
expense, net (see Note B) 118.5 117.0
Amortization of intangible assets 6.7 6.0
516.8 507.6
Operating earnings 23.4 44.9
Interest expense (27.4) (29.2)
Investment income 0.2 0.4
(Loss) earnings before provision
for income taxes (3.8) 16.1
Provision for income taxes 0.3 6.9
Net (loss) earnings $(4.1) $9.2
The accompanying notes are an integral part of this unaudited condensed consolidated summary of operations.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
SUMMARY OF OPERATIONS
(A) The unaudited condensed consolidated summary of operations includes
the accounts of Nortek, Inc. and all of its wholly-owned subsidiaries
(individually and collectively, the "Company" or "Nortek"), after
elimination of intercompany accounts and transactions, without audit
and, in the opinion of management, reflects all adjustments of a
normal recurring nature necessary for a fair statement of the interim
periods presented. It is suggested that this unaudited condensed
consolidated summary of operations be read in conjunction with the
consolidated financial statements and the notes included in the
Company's latest quarterly report on Form 10-Q, its annual report on
Form 10-K and its Current Reports on Form 8-K as filed with the
Securities and Exchange Commission ("SEC").
(B) During the first quarter ended March 29, 2008 and March 31, 2007, the
Company's results of operations include the following expense items
recorded in selling, general and administrative expense, net in the
accompanying unaudited condensed consolidated summary of operations:
For the first quarter ended
March 29, 2008 March 31, 2007
(Amounts in millions)
Charges related to the closure of the
Company's NuTone, Inc. Cincinnati, OH facility $--- $0.6
Legal and other professional fees and expenses
incurred in connection with matters related to
certain subsidiaries based in Italy and Poland --- 1.0
Fees and expenses incurred in the HTP segment
in connection with a dispute with one of its
suppliers 0.2 ---
Reserve for amounts due from customers in the
HVAC segment --- 1.8
Foreign exchange losses related to transactions,
including intercompany debt not indefinitely
invested in the Company's subsidiaries 0.1 0.3
$0.3 $3.7
(C) 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 Note D for liquidity
measure disclosures with respect to EBITDA and a reconciliation from
net cash flows from operating activities to EBITDA.
EBITDA is defined as net earnings (loss) before interest, taxes,
depreciation and amortization expense. EBITDA is not a measure of
operating performance under U.S. generally accepted accounting
principles ("GAAP") and should not be considered as an alternative or
substitute for GAAP profitability measures such as operating earnings
(loss) from continuing operations, discontinued operations,
extraordinary items and net earnings (loss). EBITDA as an operating
performance measure has material limitations since it excludes, among
other things, the statement of operations impact of depreciation and
amortization expense, interest expense and the provision (benefit)
for income taxes and therefore does not necessarily represent an
accurate measure of profitability, particularly in situations where a
company is highly leveraged or has a disadvantageous tax structure.
The Company uses a significant amount of capital assets and
depreciation and amortization expense is a necessary element of the
Company's costs and ability to generate revenue and therefore its
exclusion from EBITDA is a material limitation. The Company has a
significant amount of debt and interest expense is a necessary
element of the Company's costs and ability to generate revenue and
therefore its exclusion from EBITDA is a material limitation. The
Company generally incurs significant U.S. federal, state and foreign
income taxes each year and the provision (benefit) for income taxes
is a necessary element of the Company's costs and therefore its
exclusion from EBITDA is a material limitation. As a result, EBITDA
should be evaluated in conjunction with net earnings (loss) for a
more complete analysis of the Company's profitability, as net
earnings (loss) includes the financial statement impact of these
items and is the most directly comparable GAAP operating performance
measure to EBITDA. As EBITDA is not defined by GAAP, the Company's
definition of EBITDA may differ from and therefore may not be
comparable to similarly titled measures used by other companies,
thereby limiting its usefulness as a comparative measure. Because of
the limitations that EBITDA has as an analytical tool, investors
should not consider it in isolation, or as a substitute for analysis
of the Company's operating results as reported under GAAP.
Company management uses EBITDA as a supplementary non-GAAP operating
performance measure to assist with its overall evaluation of Company
and subsidiary operating performance (including the performance of
subsidiary management) relative to outside peer group companies. In
addition, the Company uses EBITDA as an operating performance measure
in financial presentations to the Company's Board of Directors,
shareholders, various banks participating in 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
summary of operations for a complete evaluation of the Company's
operating performance.
The following table presents a reconciliation from net (loss) earnings, which is the most directly comparable GAAP operating performance measure, to EBITDA for the first quarter ended March 29, 2008 and March 31, 2007:
For the first quarter ended
March 29, 2008 March 31, 2007
(Dollar amounts in millions)
Net (loss) earnings (1),(2) $(4.1) $9.2
Provision for income taxes 0.3 6.9
Interest expense (3) 27.4 29.2
Investment income (0.2) (0.4)
Depreciation expense 10.7 8.6
Amortization expense 6.7 6.0
EBITDA $40.8 $59.5
(1) In the RVP segment, net loss for the first quarter ended March 29,
2008 includes net foreign exchange losses of approximately $0.5
million related to transactions, including intercompany debt not
indefinitely invested in the Company's subsidiaries.
In the HTP segment, net loss for the first quarter ended March 29,
2008 includes approximately $0.2 million of fees and expenses
incurred in connection with a dispute with a supplier.
In the HVAC segment, net loss for the first quarter ended March 29,
2008 includes net foreign exchange gains of approximately $0.3
million related to transactions, including intercompany debt not
indefinitely invested in the Company's subsidiaries.
(2) In the RVP segment, net earnings for the first quarter ended March
31, 2007 include an approximate $0.6 million charge related to the
closure of the Company's NuTone, Inc. Cincinnati, Ohio facility,
legal and other professional fees and expenses incurred in connection
with matters related to certain subsidiaries based in Italy and
Poland of approximately $1.0 million and net foreign exchange losses
of approximately $0.2 million related to transactions, including
intercompany debt not indefinitely invested in the Company's
subsidiaries.
In the HVAC segment, net earnings for the first quarter ended March
31, 2007 include a charge of approximately $1.8 million related to
reserves for amounts due from customers and net foreign exchange
losses of approximately $0.2 million related to transactions,
including intercompany debt not indefinitely invested in the
Company's subsidiaries.
(3) Interest expense for the first quarter ended March 29, 2008 includes
cash interest of approximately $26.0 million and non-cash interest of
approximately $1.4 million. Interest expense for the first quarter
ended March 31, 2007 includes cash interest of approximately $27.8
million and non-cash interest of approximately $1.4 million.
(D) The Company uses EBITDA as both a liquidity and operating performance
measure. Liquidity measure disclosures with respect to EBITDA are
provided below. Refer to Note C for operating performance measure
disclosures with respect to EBITDA and a reconciliation from net
earnings (loss) to EBITDA.
EBITDA is defined as net earnings (loss) before interest, taxes,
depreciation and amortization expense. EBITDA is not a measure of
cash flow under U.S. generally accepted accounting principles
("GAAP") and should not be considered as an alternative or substitute
for GAAP cash flow measures such as cash flows from operating,
investing and financing activities. EBITDA does not necessarily
represent an accurate measure of cash flow performance because it
excludes, among other things, capital expenditures, working capital
requirements, significant debt service for principal and interest
payments, income tax payments and other contractual obligations,
which may have a significant adverse impact on a company's cash flow
performance thereby limiting its usefulness when evaluating the
Company's cash flow performance. The Company uses a significant
amount of capital assets and capital expenditures are a significant
component of the Company's annual cash expenditures and therefore
their exclusion from EBITDA is a material limitation. The Company
has significant working capital requirements during the year due to
the seasonality of its business, which require significant cash
expenditures and therefore its exclusion from EBITDA is a material
limitation. The Company has a significant amount of debt and the
Company has significant cash expenditures during the year related to
principal and interest payments and therefore their exclusion from
EBITDA is a material limitation. The Company generally pays
significant U.S. federal, state and foreign income taxes each year
and therefore its exclusion from EBITDA is a material limitation. As
a result, EBITDA should be evaluated in conjunction with net cash
from operating, investing and financing activities for a more
complete analysis of the Company's cash flow performance, as they
include the financial statement impact of these items. Although
depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the
future and EBITDA does not reflect any cash requirements for
replacements. As EBITDA is not defined by GAAP, the Company's
definition of EBITDA may differ from and therefore may not be
comparable to similarly titled measures used by other companies
thereby limiting its usefulness as a comparative measure. Because of
the limitations that EBITDA has as an analytical tool, investors
should not consider it in isolation, or as a substitute for analysis
of the Company's cash flows as reported under GAAP.
Company management uses EBITDA as a supplementary non-GAAP liquidity
measure to allow the Company to evaluate its operating units cash-
generating ability to fund income tax payments, corporate overhead,
capital expenditures and increases in working capital. EBITDA is
also used by management to allocate resources for growth among its
businesses, to identify possible impairment charges, to evaluate the
Company's ability to service its debt and to raise capital for growth
opportunities, including acquisitions. In addition, the Company uses
EBITDA as a liquidity measure in financial presentations to the
Company's Board of Directors, shareholders, various banks
participating in 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 summary of operations for a complete evaluation of
the Company's cash flow performance.
The following table presents a reconciliation from net cash provided by (used in) operating activities, which is the most directly comparable GAAP liquidity measure, to EBITDA for the first quarter ended March 29, 2008 and March 31, 2007:
For the first quarter ended
March 29, 2008 March 31, 2007
(Dollar amounts in millions)
Net cash provided by (used in) operating
activities $0.5 $(13.3)
Cash used by working capital and other
long-term asset and liability changes 10.8 39.9
Deferred federal income tax benefit
(provision) 3.4 (1.3)
Non-cash interest expense, net (1.4) (1.4)
Non-cash stock-based compensation expense --- (0.1)
Provision for income taxes 0.3 6.9
Interest expense (1) 27.4 29.2
Investment income (0.2) (0.4)
EBITDA (2),(3) $40.8 $59.5
(1) Interest expense for the first quarter ended March 29, 2008 includes
cash interest of approximately $26.0 million and non-cash interest of
approximately $1.4 million. Interest expense for the first quarter
ended March 31, 2007 includes cash interest of approximately $27.8
million and non-cash interest of approximately $1.4 million.
(2) In the RVP segment, EBITDA for the first quarter ended March 29, 2008
includes net foreign exchange losses of approximately $0.5 million
related to transactions, including intercompany debt not indefinitely
invested in the Company's subsidiaries.
In the HTP segment, EBITDA for the first quarter ended March 29, 2008
includes approximately $0.2 million of fees and expenses incurred in
connection with a dispute with a supplier.
In the HVAC segment, EBITDA for the first quarter ended March 29,
2008 includes net foreign exchange gains of approximately $0.3
million related to transactions, including intercompany debt not
indefinitely invested in the Company's subsidiaries.
(3) In the RVP segment, EBITDA for the first quarter ended March 31, 2007
includes an approximate $0.6 million charge related to the closure of
the Company's NuTone, Inc. Cincinnati, Ohio facility, legal and other
professional fees and expenses incurred in connection with matters
related to certain subsidiaries based in Italy and Poland of
approximately $1.0 million and net foreign exchange losses of
approximately $0.2 million related to transactions, including
intercompany debt not indefinitely invested in the Company's
subsidiaries.
In the HVAC segment, EBITDA for the first quarter ended March 31,
2007 includes a charge of approximately $1.8 million related to
reserves for amounts due from customers and net foreign exchange
gains of approximately $0.3 million related to transactions,
including intercompany debt not indefinitely invested in the
Company's subsidiaries.
(E) At March 29, 2008, the Company had unrestricted cash and cash
equivalents of approximately $53.0 million, outstanding borrowings
under the U.S. revolving portion of its senior secured credit
facility of approximately $45.0 million and total indebtedness
(including the outstanding borrowings noted above) of approximately
$1,457.0 million. In April 2008, the Company incurred additional
indebtedness of approximately $22.5 million, net of payments related
to certain contingent consideration earn-outs and other acquisition
payments.
CONTACT: Richard L. Bready, Chairman and CEO
Edward J. Cooney, Vice President and Treasurer, of Nortek, Inc.,
401-751-1600
Nortek, Inc.
