Nortek Inc. News Release

NTK HOLDINGS REPORTS 7 PERCENT
INCREASE IN 1ST QUARTER SALES


PROVIDENCE, RI, May 5, 2005—NTK Holdings, Inc. (“NTK Holdings”), the parent company of Nortek Holdings, Inc. (“Nortek Holdings”) and Nortek, Inc. (“Nortek”), a leading international designer, manufacturer and marketer of high-quality branded building products, today announced increased sales for the first quarter due to continued solid demand in its core residential housing and home improvement markets.

Key financial highlights from continuing operations for the first quarter included:

·  
Net sales of $434 million, an increase of 7 percent compared to the
$405 million recorded in 2004.

·  
Operating earnings of $40.7 million, compared to last year’s $41.7 million.

·  
Depreciation and amortization expense of $11.6 million compared to $9.3 million in last year’s first quarter.

·  
Net earnings from continuing operations of $2.3 million compared to
$3 million last year.

NTK Holdings had sales increases in both of its Residential Building Products and Air Conditioning and Heating Products Segments. The Company continues to experience material cost increases related primarily to purchases of steel, copper and aluminum. These cost increases were partially offset by price increases, continued strategic sourcing initiatives and improvements in manufacturing efficiency.

The results from continuing operations exclude Nortek’s formerly owned subsidiaries, Ply Gem Industries, Inc. and LaCornue SAS, which were sold in 2004 and accordingly treated as discontinued operations in 2004.

Richard L. Bready, Chairman and Chief Executive Officer, stated, “Housing activity maintained its solid pace in the first quarter of 2005, and it is expected that overall residential housing markets will remain strong for the remainder of the year. For the first three months of 2005, building permits were up 3.4 percent and housing starts were up 5.5 percent compared to the same period in 2004. In addition, through March HVAC industry air conditioning and heat pump shipments were up 5 percent over the prior year. However, we believe the custom designed commercial HVAC and the manufactured housing markets will not see a meaningful recovery in 2005.”

Mr. Bready added, "If these conditions continue, we would expect sales and operating earnings of our Residential Building Products and Air Conditioning and Heating Products Segments for the full year 2005 to improve over 2004."

Acquisitions contributed approximately $12.2 million and $.5 million to net sales and operating earnings, respectively, for the first quarter of 2005.

As of April 2, 2005, NTK Holdings’ had approximately $75 million in unrestricted cash, cash equivalents and marketable securities and has no borrowings outstanding under its $100-million revolving credit facility.

NTK Holdings, Inc. (“NTK Holdings”), the parent company of Nortek Holdings, Inc. (“Nortek Holdings”) and Nortek, Inc.* (“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. NTK Holdings offers a broad array of products for improving the environments where people live and work. Its products currently include: range hoods and other spot ventilation products; heating and air conditioning systems; 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 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.
 
# # #
 

NTK HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS


   
For the three months ended
  
   
Post-
 
Pre-
 
 
 
Acquisition
 
Acquisition
 
 
 
April 2, 2005
 
April 3, 2004
  
   
(Amounts in thousands)
  
           
Net Sales 
  
$
434,118
  
$
405,012
  
               
Costs and Expenses:
              
Cost of products sold
   
309,459
   
286,882
 
Selling, general and administrative expense
   
79,588
   
73,148
 
Amortization of intangible assets
   
4,333
   
3,309
 
     
393,380
   
363,339
 
Operating earnings
    
40,738
   
41,673
 
Interest expense
   
(37,184
)
  
(25,559
)
Loss from debt retirement
    
---
   
(11,958
)
Investment income
   
446
   
944
 
Earnings from continuing operations
              
   before provision for income taxes
   
4,000
   
5,100
 
Provision for income taxes
   
1,700
   
2,100
 
Earnings from continuing operations 
    
2,300
   
3,000
 
Earnings from discontinued operations 
    
---
   
68,100
 
Net earnings
  
$
2,300
  
$
71,100
  
 
The accompanying notes are an integral part of this unaudited condensed consolidated summary of operations.


(A)  
The unaudited condensed consolidated summary of operations presented herein for the pre-acquisition period ended April 3, 2004 reflects the results of operations of the former Nortek Holdings, Inc. and all of its wholly-owned subsidiaries (the predecessor company) and for the post-acquisition period ended April 2, 2005 reflects the results of operations of NTK Holdings, Inc. and its wholly owned subsidiary, Nortek Holdings, Inc. Nortek, Inc. is a wholly owned subsidiary of Nortek Holdings, Inc., and is required under the terms of its indenture to file periodic reports with the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated summary of operations include the accounts of the former Nortek Holdings, Inc. and NTK Holdings, Inc., as appropriate and all of their wholly-owned subsidiaries (individually and collectively, the “Company” or “Holdings”), 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. Certain amounts in the prior year’s unaudited condensed consolidated summary of operations have been reclassified to conform to the current year 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 Nortek, Inc.’s latest quarterly report on Form 10-Q, its latest annual report on Form 10-K and its Current Reports on Form 8-K as filed with the SEC.

(B)
On December 17, 2004, the Company acquired M&S Systems, LP (“M&S”), located in Dallas, Texas, for approximately $16,400,000. M&S is a manufacturer and designer of distributed audio and communication equipment, speakers and central vacuum systems.

On March 9, 2004, the Company acquired OmniMount Systems, Inc. (“OmniMount”) for approximately $16,500,000 in cash and contingent consideration. The contingent consideration is payable 90 days after fiscal 2006 if certain fiscal 2006 financial results, as defined by the stock purchase agreement, are met. OmniMount is a manufacturer and designer of speaker and video mountings and other products to maximize the home theater experience.

Acquisitions contributed approximately $12,200,000, $500,000 and $100,000 to net sales, operating earnings and depreciation and amortization expense, respectively, for the three months ended April 2, 2005. M&S and OmniMount are included in the Residential Building Products Segment in the Company’s segment reporting. Pro forma results related to these acquisitions have not been presented, as the effect is not significant to the Company’s consolidated operating results.

Acquisitions are accounted for as purchases and, accordingly, have been included in the Company’s consolidated results of operations since the acquisition date. Purchase price allocations are subject to refinement until all pertinent information regarding the acquisition is obtained.

On April 26, 2005, the Company, through its indirect wholly-owned subsidiary, Linear LLC, acquired Panamax (“Panamax”) for an initial purchase price of approximately $11,250,000 plus an earn-out based upon the earnings of Panamax for 2005 which is capped at approximately $4,250,000. Panamax is located in Petaluma, CA and manufactures and designs innovative power conditioning and surge protection products that prevent loss or damage of home and small business equipment due to power disturbances.
 
(C)
On July 31, 2004, the Company sold the capital stock of its wholly-owned subsidiary, La Cornue SAS (“La Cornue”) for net cash proceeds of approximately $5,800,000 and recorded a net after tax gain of approximately $950,000. La Cornue, situated outside of Paris, France manufactures and sells high-end custom made cooking ranges.

On February 12, 2004, the Company sold the capital stock of its wholly-owned subsidiary Ply Gem Industries, Inc. (“Ply Gem”) for net cash proceeds of approximately $506,700,000, after excluding approximately $21,400,000 of proceeds provided to fund liabilities of Ply Gem indemnified by the Company, and recorded a net after-tax gain on the sale of approximately $74,100,000. Ply Gem, through its operating subsidiaries, is a manufacturer and distributor of a range of products for use in the residential new construction, do-it-yourself and professional renovation markets, including vinyl siding, windows, patio doors, fencing, railing, decking and accessories. The results of operations of the operating subsidiaries of Ply Gem comprised the Company’s entire Windows, Doors and Siding Products (“WDS”) reporting segment and the corporate expenses of Ply Gem, which were previously included in Unallocated in the Company’s segment reporting.

The Company allocates interest to dispositions that qualify as a discontinued operation for debt instruments which are entered into specifically and solely with the entity disposed of and for debt which is settled with proceeds received from the disposition. Interest allocated to discontinued operations, included in interest expense, net in the table below, was approximately $2,800,000 (net of taxes of approximately $1,600,000) for the three months ended April 3, 2004.

The sale of La Cornue and Ply Gem and the related operating results have been excluded from earnings from continuing operations and are classified as discontinued operations for all periods presented.

The table that follows presents a summary of the results of discontinued operations for the three months ended April 3, 2004:


 
 Pre-Acquisition
 
For the three
 
months ended
 
April 3, 2004
 
(Amounts in thousands)
       
Net sales
  
$
43,000
  
         
Operating loss of discontinued operations *
  
$
(2,242
)
Interest expense, net
    
(4,558
)
Loss before income tax benefit
    
(6,800
)
Income tax benefit
    
(2,600
)
Loss from discontinued operations
    
(4,200
)
         
Gain on sale of discontinued operations
    
122,700
 
Income tax provision on sale of discontinued operations
    
50,400
 
     
72,300
 
         
Earnings from discontinued operations
  
$
68,100
  
         
Depreciation and amortization expense
  
$
1,379
  

 
*
Operating loss of discontinued operations are net of Ply Gem corporate expenses, which were previously included within Unallocated in the Company’s segment reporting.
 
 
(D)
The Company has two reportable segments: the Residential Building Products Segment and the Air Conditioning and Heating Products Segment. 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 income statement impact of all purchase accounting adjustments, including goodwill and intangible asset amortization, is reflected in the operating earnings of the applicable operating segment.
 
Unaudited net sales, operating earnings and pre-tax earnings from continuing operations for the Company’s segments for the periods presented below were as follows:


   
For the three months ended
  
   
Post-
  
Pre-
  
   
Acquisition
  
Acquisition
  
   
April 2, 2005
  
April 3, 2004
  
   
(Amounts in thousands)
  
           
Net sales:
              
Residential building products
  
$
261,024
  
$
234,090
  
Air conditioning and heating products
    
173,094
   
170,922
 
Consolidated net sales
  
$
434,118
  
$
405,012
  
               
Operating earnings:
              
Residential building products *
  
$
37,693
  
$
40,166
  
Air conditioning and heating products *
    
7,339
   
9,072
 
Subtotal
    
45,032
   
49,238
 
Unallocated:
              
Stock based compensation charges
    
(100
)
  
(200
)
Foreign exchange loss on intercompany debt
    
(100
)
  
(200
)
Gain on legal settlement
    
1,400
   
---
 
Other, net
    
(5,494
)
  
(7,165
)
Consolidated operating earnings
    
40,738
   
41,673
 
Interest expense
    
(37,184
)
  
(25,559
)
Loss from debt retirement
    
---
   
(11,958
)
Investment income
    
446
   
944
 
Earnings before provision
              
     for income taxes
  
$
4,000
  
$
5,100
  

 
*
The operating results of the Air Conditioning and Heating Products Segment for the three months ended April 3, 2004 include approximately $1,300,000 of costs associated with the closure of certain manufacturing facilities.

The operating results of the Residential Building Products Segment for the three months ended April 2, 2005 and April 3, 2004 each include a non-cash foreign exchange loss of approximately $400,000 on certain intercompany debt between the Company’s subsidiaries. The operating results of the Residential Building Products Segment for the three months ended April 3, 2004 also include approximately $50,000 of stock based compensation charges.

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


   
For the three months ended
  
   
Post-
  
Pre-
  
   
Acquisition
  
Acquisition
  
   
April 2, 2005
  
April 3, 2004
  
   
(Amounts in thousands)
  
           
Depreciation Expense:
              
Residential building products
  
$
3,428
  
$
2,806
  
Air conditioning and heating products
    
3,198
   
2,902
 
Other
    
225
   
82
 
Consolidated depreciation expense
  
$
6,851
  
$
5,790
  
               
Amortization of intangible assets and
             
    purchase price allocated to inventory *:
              
Residential building products
  
$
3,836
  
$
2,648
  
Air conditioning and heating products
    
803
   
824
 
Other
    
125
   
---
 
Consolidated amortization expense and
             
   purchase price allocated to inventory
  
$
4,764
  
$
3,472
  
               
Capital Expenditures:
              
Residential building products
  
$
2,447
  
$
2,429
  
Air conditioning and heating products
    
2,881
   
2,157
 
Other