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NORTEK REPORTS 3RD-QUARTER RESULTS
All Operating Groups Show Solid Operating Earnings Growth
PROVIDENCE, RI, October 29, 2002—Nortek, Inc. (NYSE:NTK), a leading international designer, manufacturer and distributor of high-quality, brand-name building products, today announced financial results for the third quarter of 2002.
Key financial highlights from continuing operations for the third quarter included:
Net sales of $507 million compared to $469 million for last year’s third quarter.
Operating earnings of $53.1 million compared to last year’s $38.8 million.
EBITDA of $63.9 million compared to $53.1 million for the prior year.
Earnings of $16.7 million, compared to $7.0 million for the comparable period last year.
Diluted earnings per share of $1.43, compared to $0.62 for the third quarter of last year.
For the first nine months of 2002, Nortek results from continuing operations included net sales of $1,458 million, up from last year’s $1,359 million; EBITDA of $186 million versus $160 million last year; operating earnings totaled $153 million compared to $117 million last year; and diluted per-share earnings for the first nine months of 2002 and 2001 were $4.30 per share and $2.18 per share, respectively.
Goodwill amortization included in operating earnings in the third quarter and for the first nine months of 2001 was approximately $4.0 million and $12.3 million as determined under generally accepted accounting principles in the United States in effect in 2001. Operating earnings for the comparable periods of 2002 did not include any amortization of goodwill. As adjusted, earnings per share from continuing operations for the third quarter and first nine months of 2001 would have been approximately $0.97 and $3.26 per share, respectively, excluding the after-tax effect of goodwill amortization.
Richard L. Bready, Chairman and Chief Executive Officer, said, “All three of the Company’s groups had solid sales and earnings growth in the quarter reflecting the continued strength of the residential building products markets. Operating earnings were particularly strengthened by the benefits of the continued implementation of manufacturing efficiencies and our strategic sourcing program that is creating significant cost savings across our three operating groups. We are also continuing to benefit from the strong brand recognition of products marketed by Nortek companies and their market leadership positions. Additionally, we ended the period with approximately $277 million in unrestricted cash, cash equivalents and marketable securities while total indebtedness was reduced by approximately $52 million during the third quarter.
“Going forward, we believe the overall residential construction and remodeling markets will remain strong for the seasonally slow fourth quarter. The softness in the market for commercial HVAC products is expected to continue into the first half of 2003. A general slowdown or a reversal in the general economic recovery in the U.S. would adversely impact our results. We continue to manage working capital closely and implement cost-reduction programs, such as strategic sourcing, to keep our costs in line with overall sales.”
Nortek* is a leading international manufacturer and distributor of high-quality, competitively priced building, remodeling and indoor environmental control products for the residential and commercial markets. The Company offers a broad array of products for improving the environments where people live and work. Its products include range hoods and other spot ventilation products; heating and air conditioning systems; vinyl products, including windows and doors, siding, decking, fencing and accessories; indoor air quality systems; and specialty electronic 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 the Company'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. The Company 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 Company's reports and filings with the Securities and Exchange Commission.
NORTEK, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS (In thousands except per share amounts)
Three Months Ended Nine Months Ended Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2002 2001 2002 2001 (Unaudited) Net sales $ 506,921 $ 468,674 $ 1,458,218 $ 1,358,901 Cost of products sold 367,357 346,622 1,049,383 1,009,210 Selling, general and administrative expenses 84,955 77,560 251,800 216,002 Amortization of goodwill and intangible assets 1,468 5,745 4,460 17,011 453,780 429,927 1,305,643 1,242,223 Operating earnings 53,141 38,747 152,575 116,678 Interest expense (23,993 ) (26,405 ) (72,383 ) (77,437 ) Investment income 1,852 4,058 5,508 8,259 Earnings from continuing operations before provision for income taxes 31,000 16,400 85,700 47,500 Provision for income taxes 14,300 9,400 36,000 23,100 Earnings from continuing operations 16,700 7,000 49,700 24,400 Earnings (loss) from discontinued operations -- (20,200 ) 5,300 (20,300 ) Extraordinary loss from debt retirement -- (3,600 ) -- (3,600 ) Net earnings (loss) $ 16,700 $ (16,800 ) $ 55,000 $ 500 Earnings (loss) per share of common stock: Earnings from continuing operations: Basic $ 1.52 $ .64 $ 4.52 $ 2.23 Diluted $ 1.43 $ .62 $ 4.30 $ 2.18 Earnings (loss) from discontinued operations: Basic $ -- $ (1.85 ) $ .48 $ (1.85 ) Diluted $ -- $ (1.80 ) $ .46 $ (1.82 ) Extraordinary loss from debt retirement: Basic $ -- $ (.33 ) $ -- $ (.33 ) Diluted $ -- $ (.32 ) $ -- $ (.32 ) Net earnings (loss): Basic $ 1.52 $ (1.54 ) $ 5.00 $ .05 Diluted $ 1.43 $ (1.50 ) $ 4.76 $ .04 Weighted average number of shares: Basic 11,003 10,941 10,993 10,927 Diluted 11,700 11,220 11,555 11,195 EBITDA $ 63,948 $ 53,141 $ 185,706 $ 159,989 Capital expenditures $ 5,889 $ 7,281 $ 16,161 $ 32,889
The accompanying notes are an integral part of this unaudited condensed consolidated summary of operations.
NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS
A. The unaudited condensed consolidated summary of operations for Nortek, Inc. and its subsidiaries (“the Company”), in the opinion of management, reflects all adjustments necessary for a fair statement of the periods presented. Effective in the third quarter of 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) and accordingly the presentation for all periods has been reclassified to conform with the new standard. See Notes G and I. Certain amounts in the prior periods unaudited condensed consolidated summary of operations have been reclassified to conform to the current presentation. 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 annual report on Form 10-K, its latest quarterly report on Form 10-Q, its latest Current Report on Form 8-K and its preliminary Proxy Statement dated October 11, 2002 as filed with the Securities and Exchange Commission (“SEC”). (See Note C.)
B. EBITDA from operations is operating earnings from continuing operations plus depreciation and amortization expense (other than amortization of deferred debt expense and debt discount).
C. On June 20, 2002, Nortek Holdings, Inc. (“Nortek Holdings”), a newly formed Delaware corporation and wholly-owned subsidiary of Nortek, entered into an Agreement and Plan of Recapitalization, as amended, (the “Recapitalization Agreement”) with the Company and K Holdings, Inc. (“K Holdings”), a Delaware corporation and affiliate of Kelso & Company, L.P. (“Kelso”), to effect a recapitalization (the “Recapitalization”) whereby the Company will be acquired by K Holdings and its designees and certain members of the Company’s management (the “Management Investors”) for cash of $46 per share of common and special common stock of the Company pursuant to the terms of the Recapitalization Agreement. The Recapitalization is subject to the satisfactory completion by all parties of the terms and conditions outlined in the Recapitalization Agreement, including the approval of the Company’s shareholders, the availability of certain financing and other customary conditions and is expected to close late in the fourth quarter of 2002 or early 2003. The aggregate estimated purchase price to redeem the Company’s common and special common stock and to cash out options to purchase common and special common stock is approximately $498,969,000.
The Company believes the Recapitalization will be accounted for as a purchase in accordance with the provisions of SFAS No. 141 “Business Combinations”, which will result in a new valuation for the assets and liabilities of the Company upon the completion of the Recapitalization. Transaction fees for investment, legal, accounting and other transaction costs associated with the Recapitalization are estimated to be approximately $43,000,000. A portion of these fees and expenses will be recorded in selling, general and administrative expenses, as they will become obligations of the Company prior to the Recapitalization. During the first nine months and third quarter of 2002, the Company recorded expenses of approximately $6,200,000 and $1,000,000, respectively related to the Recapitalization, primarily for fees and expenses related to legal and investment advice incurred by the Special Committee of the Company’s Board of Directors in their evaluation of the fairness of the transaction. Under certain circumstances, including the subsequent acceptance by the Company of a superior acquisition offer or a change in recommendation by the Company with respect to the Recapitalization, the Company may be liable to Kelso and K Holdings for additional fees and expenses in the range of approximately $0 to $24,000,000 in the event that the Recapitalization is not consummated.
Prior to the consummation of the Recapitalization, the Company will reorganize into a holding company structure and each outstanding share of the Company will be converted into an identical share of capital stock of Nortek Holdings with Nortek Holdings becoming the successor public company and the Company becoming a wholly owned subsidiary of Nortek Holdings.
If the amendment to the certificate of incorporation required to effect the Recapitalization is approved by the stockholders of the Company, the Company will declare and distribute to Nortek Holdings a dividend currently estimated to be approximately $120,000,000, which will be paid out of unrestricted cash and cash equivalents on hand. The amount of the estimated dividend to be paid is the estimated maximum amount at June 30, 2002 permissible under the most restrictive covenants with respect to the indentures of the Company’s 8 7/8% Senior Notes due 2008, 9 1/4% Senior Notes due 2007, 9 1/8% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2011 (collectively, the “Existing Notes”). Using certain of the proceeds from an equity investment by K Holdings and the dividend received from the Company, Nortek Holdings will redeem all outstanding shares of common and special common stock, with the exception of certain shares held by Management Investors, for $46 per share in cash.
The Company’s Board of Directors, based upon the recommendation of a Special Committee of disinterested directors, has approved the Recapitalization. A financial advisor to the Special Committee delivered its opinion that, as of the date of such opinion, and based upon and subject to the matters describe in that opinion, the $46 per share redemption payment to be received by the public shareholders of the Company, other than the Management Investors, was fair to such shareholders from a financial point of view.
In connection with the Recapitalization, Kelso has received a financing commitment, subject to certain terms and conditions, including the completion of the Recapitalization, from a bank for a senior unsecured term loan facility not to exceed $955,000,000 (the “Bridge Facility”). The Bridge Facility may be used to fund, if necessary, any change in control offers the Company may make in connection with the Recapitalization. The Company does not expect to use this Bridge Facility because the structure of the Recapitalization does not require the Company to make any change of control offers.
Under applicable rules and regulations of the Securities and Exchange Commission, the proxy statement to be delivered to stockholders in connection with the pending acquisition by Kelso and the Management Investors must include or incorporate by reference audited annual financial statements that reclassify any business sold, since the financial statements were originally published, as a discontinued operation for all periods presented in such statements. On April 2, 2002 the Company sold its Hoover Treated Wood Products, Inc. (“Hoover”) subsidiary. See Note I. Though this subsidiary was not a significant subsidiary within the meaning of applicable rules and regulations of the Securities and Exchange Commission, the rule requiring that Hoover be reclassified as a discontinued operation in the audited annual financial statements still applied. If the Company had not sold this subsidiary no re-audit of its historical audited annual financial statements would have been required in connection with the preparation of the proxy statement. The re-audit did not result from any inquiry made by the Securities and Exchange Commission or any other party, and would be required of any similarly situated public company. On October 11, 2002, the Company filed a Current Report on Form 8-K, which included the audited consolidated balance sheets of Nortek, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related audited consolidated statements of operations, stockholders’ investment, and cash flows for each of the three years in the period ended December 31, 2001 as a result of this re-audit. Except for the reclassification of Hoover as a discontinued operation, the re-audit confirmed, without change, the operating earnings, earnings per share, balance sheet and cash flow amounts previously reported. (See Notes D and I.)
Upon completion of the Recapitalization, Nortek Holdings will no longer be a public company and will apply to the New York Stock Exchange for the delisting of its shares of common stock and to the SEC for the deregistration of its shares of common stock under the Securities Exchange Act of 1934. Nortek Holdings will continue to file periodic reports with the SEC as required by the respective indentures of the Company’s Existing Notes.
Under the terms of one of the Company’s supplemental executive retirement plans, the Company is required to make one-time cash payments to participants in the plan in satisfaction of obligations under the plan upon a change of control transaction (as defined), such as the Recapitalization. Accordingly, upon completion of the Recapitalization, assuming the recapitalization closes on or after January 1, 2003, the Company will make payments under the plan of approximately $85,000,000 to the participants in the plan. The Company intends to satisfy approximately $10,200,000 of its obligation to one of the participants through the transfer of a life insurance policy with approximately $10,200,000 of cash surrender value. The Company believes that there will be sufficient assets in the supplemental executive retirement plan trust at the date of the Recapitalization to settle and pay all obligations under the plan due upon completion of the Recapitalization, except for those obligations under the plan that will be satisfied through the transfer of the life insurance policy.
On July 25, 2002, the Company entered into a $200,000,000 Senior Secured Credit Facility (the “Senior Secured Credit Facility”), which is syndicated among several banks. The Senior Secured Credit Facility is secured by substantially all of the Company’s accounts receivable and inventory, as well as certain intellectual property rights, and permits borrowings up to the lesser of $200,000,000 or the total of 85% of eligible accounts receivable, as defined, and 50% of eligible inventory, as defined. The outstanding principal balances under the Senior Secured Credit Facility accrue interest at the Company’s option at either LIBOR plus a margin ranging from 2.0% to 2.5% or the banks’ prime rate plus a margin ranging from 0.5% to 1.0% depending upon the excess available borrowing capacity, as defined, and the timing of the borrowing as the margin rates will be adjusted quarterly. The Senior Secured Credit Facility includes customary limitations and covenants, but does not require the Company to maintain any financial covenant unless excess available borrowing capacity, as defined, is less than $40,000,000 in which case the Company would be required to maintain, on a trailing four quarter basis, a minimum level of $175,000,000 of earnings before interest, taxes, depreciation and amortization, as defined. The Senior Secured Credit Facility permits the Company to complete the Recapitalization provided certain conditions are met. On July 25, 2002, proceeds from the Senior Secured Credit Facility were used to refinance the remaining approximately $42,700,000 due on the Ply Gem credit facility and provide for letters of credit totaling approximately $24,800,000, which were previously issued under the Ply Gem credit facility. In addition, the Company refinanced approximately $3,800,000 of subsidiary debt. At September 28, 2002 there were no outstanding borrowings under the Senior Secured Credit Facility.
A preliminary Proxy Statement was filed with the SEC for its review on October 11, 2002 relative to the Recapitalization. The Proxy Statement is in preliminary form and is subject to completion or amendment. Upon completion of the SEC’s review, the Company will file an amendment and, in connection with the solicitation of proxies with respect to the special meeting of stockholders of the Company concerning the proposed Recapitalization, will furnish to security holders, a final definitive proxy statement, which security holders are advised to carefully read in its entirety as it will contain important information.
D. In the second quarter of 2002, approximately $4,400,000 was charged to operating earnings and is included in selling, general and administrative expenses relating to incentive earned by certain of the Company’s officers under the Company’s 1999 Equity Performance Plan. In addition, as discussed in Note C, the Company has recorded expenses of approximately $6,200,000 and $1,000,000 in selling, general and administrative expenses in the first nine months and third quarter of 2002, respectively, related to fees and expenses associated with the Recapitalization of the Company. In the third quarter of 2002, the Company incurred approximately $2,100,000 in connection with its re-audit of the Company’s Consolidated Financial Statements for the three years ended December 31, 2001 (see Notes C and I). In the third quarter of 2002, the Company incurred approximately $1,600,000 of direct expenses and third party fees associated with the Company’s Strategic Sourcing initiative which are recorded in the Other segment. In the first nine months and third quarter of 2001, the Company expensed approximately $6,100,000 and $4,000,000, respectively, of third party fees and expenses associated with this Strategic Sourcing initiative. Approximately $2,700,000 and $1,300,000 of these fees and expenses were charged to the Residential Building Products Segment, $2,800,000 and $2,200,000 to the Air Conditioning and Heating Products Segment and $600,000 and $500,000 to the Windows, Doors and Siding Products Segment in the first nine months and third quarter of 2001, respectively. The Company estimates that it has realized benefits associated with this Strategic Sourcing initiative of between $11,000,000 and $15,000,000 in the first nine months of 2002 as compared to the first nine months of 2001 and between $4,000,000 and $5,000,000 in the third quarter of 2002 as compared to the third quarter of 2001. In the first nine months and third quarter of 2001, the Company expensed approximately $2,800,000 and $600,000, respectively, of manufacturing costs incurred in connection with the start up of a residential air conditioning facility and a vinyl fence and decking facility. In the first half of 2001, the Company recorded in operating earnings a non-taxable gain of approximately $3,200,000 ($.29 per share) from net death benefit insurance proceeds related to life insurance maintained on former managers. In the third quarter of 2001, the Company also incurred certain duplicative net interest expense as discussed in Note F. Also, in the third quarter of 2001, the Company recorded approximately $1,700,000 of interest income resulting from the favorable abatement of state income taxes. The abatement of state income taxes did not have a significant effect on the overall annual effective income tax rate.
E. In the first quarter of 2001, the Company adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”, as amended (“SFAS No. 133”) by recording an approximate $800,000 liability in its balance sheet at March 31, 2001, representing the fair value of the Company’s interest rate collar agreement. As a result, interest expense includes a non-cash reduction in interest expense of approximately $1,200,000 ($.06 per share, net of tax) and approximately $400,000 ($.02 per share, net of tax) for the first nine months and third quarter of 2002, respectively, and a non-cash charge to interest expense of approximately $1,400,000 ($.08 per share, net of tax) and $525,000 ($.03 per share, net of tax) for the first nine months and third quarter of 2001, respectively. The interest rate collar agreement matured on August 27, 2002.
F. In June 2001, the Company sold $250,000,000 principal amount of its 9 7/8% Senior Subordinated Notes due 2011 (“9 7/8% Notes”) at a slight discount. Net proceeds from the sale of the 9 7/8% Notes, after deducting underwriting commissions and expenses amounted to approximately $241,800,000 and a portion of such proceeds was used to redeem, on July 12, 2001, $204,822,000 principal amount of the Company’s 9 7/8% Senior Subordinated Notes due 2004 (which notes were called for redemption on June 13, 2001), and pay approximately $2,900,000 of redemption premium and approximately $7,400,000 of accrued interest. As a result of this redemption, the Company recorded a pre-tax extraordinary loss of approximately $5,500,000 ($.32 per share, net of tax) in the third quarter of 2001 under then existing accounting principles generally accepted in the United States. As discussed in Note G, SFAS No. 145 “Rescission of FASB Statements No. 4, 44 and 64 Amendment of FASB Statement No. 13 and Technical Corrections” (“SFAS No. 145”) provides new guidance with respect to the classification of gains or losses on debt extinguishments once adopted. In the first nine months and third quarter of 2001, the Company incurred approximately $1,250,000 ($.07 per share, net of tax) and $450,000 ($.03 per share, net of tax), respectively, of duplicative interest expense, net of interest income, since the redemption of the 9 7/8% Senior Subordinated Notes due 2004 did not occur on the same day as the financing.
G. SFAS No. 141, “Business Combinations” requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method.
On January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). This statement applies to goodwill and intangible assets acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired. Under this statement, goodwill and intangible assets determined to have an indefinite useful life are no longer amortized, instead these assets are evaluated for impairment on an annual basis and whenever events or business conditions warrant. All other intangible assets will continue to be amortized over their remaining estimated useful lives and are evaluated for impairment in accordance with the provisions of SFAS No. 144. In addition, SFAS No. 142 requires additional disclosures with respect to each major intangible asset class relative to gross and net carrying amounts, accumulated amortization, amortization expense, weighted-average amortization periods and residual value assumptions, if any. SFAS No. 142 also requires that the estimated aggregate amortization expense for each of the five succeeding years be disclosed. The adoption of SFAS No. 142 did not result in any material changes to the Company’s accounting for intangible assets. Additional disclosures will be required in the Company’s 2002 annual report on Form 10-K to be filed with the SEC. SFAS No. 142 also requires additional disclosures with respect to goodwill by reportable segment for changes in goodwill balances, impairment losses, if any, including the methodology for determination, and the amount of goodwill included in the gain or loss on disposal of a reporting unit.
The Company has evaluated the carrying value of goodwill and determined that no impairment exists and therefore no impairment loss will be required to be recorded in the Company’s Consolidated Financial Statements as a result of adopting SFAS No. 142 on January 1, 2002.
Goodwill amortization included in operating earnings in the first nine months and third quarter of 2001 was approximately $12,299,000 and $4,030,000 as determined under accounting principles generally accepted in the United States in effect in the year 2001. As adjusted, diluted earnings per share from continuing operations for the first nine months and third quarter ended September 29, 2001 would have been approximately $3.26 per share and $.97 per share, respectively, excluding the after tax effect of goodwill amortization.
SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. The Company is currently evaluating the impact of adopting SFAS No. 143 on its consolidated financial statements.
SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets. This statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions of APB Opinion No. 30 “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“APB 30”), for the disposal of a segment of a business (as previously defined in that Opinion). This statement also amends ARB No. 51, “Consolidated Financial Statements”, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 with early adoption encouraged. The Company adopted SFAS No. 144 in the third quarter of 2001 and, as required by the standard, applied this accounting standard as of January 1, 2001. Adoption of this accounting standard did not result in any material changes in net earnings from accounting standards previously applied. Adoption of this standard did result in the accounting for the gain (loss) on the sale of certain businesses and their related operating results as discontinued operations. The presentation for all periods presented has been reclassified to conform with the new standard (see Note I).
SFAS No. 145 was issued in April 2002 and addresses the reporting of gains and losses resulting from the extinguishment of debt, accounting for sale-leaseback transactions and rescinds or amends other existing authoritative pronouncements. SFAS No.145 requires that any gain or loss on extinguishment of debt that does not meet the criteria of APB 30 for classification as an extraordinary item shall not be classified as extraordinary and shall be included in earnings from continuing operations. The provisions of this statement related to the extinguishment of debt are effective for financial statements issued in fiscal years beginning after May 15, 2002 with early application encouraged. Upon adoption of SFAS No. 145, all prior periods presented will be required to be restated. The Company plans to adopt SFAS No. 145 on January 1, 2003. Upon adoption, the Company’s $3,600,000 after tax extraordinary loss from debt retirement recorded in the third quarter of 2001 will be reclassified to earnings from continuing operations.
H. Net sales from continuing operations for the Company’s segments for the three months and nine months ended September 28, 2002 and September 29, 2001 were as follows:
Three Months Ended Nine Months Ended Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2002 2001 2002 2001 (Amounts in millions) Net Sales: Residential building products $ 182 .0 $ 163 .4 $ 546 .0 $ 488 .7 Air conditioning and heating products 176 .0 166 .9 513 .9 493 .4 Windows, doors and siding products 148 .9 138 .4 398 .3 376 .8 Consolidated net sales $ 506 .9 $ 468 .7 $ 1,458 .2 $ 1,358 .9
Operating earnings and depreciation and amortization expense from continuing operations for the Company’s segments for the three months and nine months ended September 28, 2002 and September 29, 2001 were as follows:
Three Months Ended Nine Months Ended Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2002 2001 2002 2001 (Amounts in millions) Operating Earnings (Loss): Residential building products $ 33 .2 $ 23 .0 $ 92 .5 $ 64 .8 Air conditioning and heating products 15 .5 10 .0 52 .8 42 .1 Windows, doors and siding products 23 .9 15 .2 59 .6 32 .1 Recapitalization fees and expenses (1 .0) -- (6 .2) -- Re-audit (2 .1) -- (2 .1) -- 1999 equity incentive plan -- -- (4 .4) -- Strategic Sourcing expense (1 .6) -- (1 .6) -- Gain on death benefit life insurance -- -- -- 3 .2 Other, net (14 .8) (9 .4) (38 .0) (25 .5) Consolidated operating earnings 53 .1 38 .8 152 .6 116 .7 Unallocated: Interest expense (24 .0) (26 .4) (72 .4) (77 .4) Investment income 1 .9 4 .0 5 .5 8 .2 Earnings before provision for income taxes $ 31 .0 $ 16 .4 $ 85 .7 $ 47 .5 Depreciation and Amortization: Residential building products $ 3 .7 $ 5 .6 $ 11 .8 $ 17 .1 Air conditioning and heating products 3 .3 3 .3 9 .8 9 .6 Windows, doors and siding products 3 .7 5 .3 11 .1 16 .1 Other .1 .2 .4 .5 Consolidated depreciation and amortization expense $ 10