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NTK
HOLDINGS REPORTS RECORD 2005 AND
FOURTH-QUARTER
SALES/OPERATING EARNINGS
PROVIDENCE,
RI, March 9, 2006—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 products for ventilation, HVAC and residential comfort, convenience
and
entertainment, today announced record 2005 annual and fourth-quarter sales
and
operating earnings with sales nearing $2 billion.
Richard
L. Bready, Chairman and Chief Executive Officer, said, “Strong fourth-quarter
performance by NTK
Holdings’
operating segments clearly demonstrated continuation of our momentum and
efficiencies, which delivered growth rates in operating earnings that exceeded
growth rates in sales.”
Key
financial highlights from continuing operations for 2005 include:
Mr.
Bready said that, “Among the factors powering NTK
Holdings’
successful 2005 was the Company’s strengthened Home Technology Products segment,
which demonstrated the positive benefits and synergies of its ongoing
acquisition program. Also, NTK
Holdings’
residential HVAC markets benefited from a warm summer season and other factors
that drove record industry shipments of central air conditioners and heat
pumps.”
Key
financial highlights from continuing operations for the fourth quarter
included:
As
of
December 31, 2005, NTK
Holdings
had
approximately $77.2 million in unrestricted cash and cash equivalents and has
no
borrowings outstanding under its $100-million revolving credit
facility.
Mr.
Bready said that, “Along with achieving record sales and earnings in 2005, we
are also proud of a number of NTK
Holdings’
other
important accomplishments. These include:
Mr.
Bready added, “2005 was a record year for home sales and one of the best in
history in new residential construction. As we look to 2006, U.S. residential
remodeling activity is expected to grow at a slower pace than 2005 and
residential new construction is expected to decline slightly in the U.S. In
2006, industry shipments of air conditioning and heat pump equipment are
expected to be strong but not equal to the level of shipments in 2005.
Additionally, we expect the commercial HVAC and manufactured housing markets
in
2006 to be comparable to 2005. And finally, in the Home Technology Products
segment we expect growth in 2006 as the custom installation market continues
its
expansion.”
On
August
27, 2004, affiliates of Thomas H. Lee Partners L.P., in partnership with certain
members of NTK
Holdings’
management, purchased all of the outstanding capital of the former Nortek
Holdings, Inc.,
in a
transaction valued at approximately $1.74 billion before fees and expenses
(the
“THL transaction”) from affiliates of Kelso and Company L.P. and certain other
parties.
The
2004
combined results include the pre-acquisition period from January 1 to August
27
and the post-acquisition period from August 28 to December 31.
NTK
Holdings*,
the
parent company of Nortek
Holdings*
and
Nortek*,
is
a
leading international manufacturer and distributor of high-quality,
competitively priced commercial and residential ventilation, HVAC and home
technology comfort, convenience and entertainment products. NTK
Holdings
and
Nortek
offer a
broad array of products for improving the environments where people live and
work. Their products include: 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, entry and
security and other products.
*As
used herein, the terms “NTK Holdings,” “Nortek Holdings” or “Nortek” refers to
NTK Holdings, Inc., together with its subsidiaries, unless the context indicates
otherwise. These terms 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.
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 Holdings and Nortek with the Securities and Exchange
Commission.
#
#
#
NTK
HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS
The
accompanying notes are an integral part of this unaudited condensed consolidated
summary of operations.
NTK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED
SUMMARY OF OPERATIONS
(A)
The
unaudited condensed consolidated summary of operations presented herein
for the
“Pre-Acquisition” period from January 1, 2004 to August 27, 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” periods from August 28, 2004 to December 31, 2004 and the
year ended December 31, 2005 reflect the results of operations of NTK Holdings,
Inc. and its wholly-owned subsidiary, Nortek Holdings, Inc. Nortek, Inc.
(“Nortek”) is a wholly-owned subsidiary of Nortek Holdings, Inc. (“Nortek
Holdings”), 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 includes 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 “NTK
Holdings”), 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. 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 the Company’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)
The
Company uses EBITDA as both an operating performance and liquidity measure.
Operating performance measure disclosures with respect to EBITDA are
provided
below. Liquidity measure disclosures with respect to EBITDA and a reconciliation
from net cash flows from operating activities to EBITDA are disclosed
following
the operating performance disclosures.
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 income (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 income (loss) for a more complete analysis of the Company’s
profitability, as net income (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 the Acquisition
and Recapitalization, 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
traditional GAAP performance measures 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
fourth
quarter ended December 31, 2005 and 2004:
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