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[Note
to Editors: The following NTK Holdings release is similar to the Nortek, Inc.
release on third-quarter financial results except primarily for the impact
of
certain NTK Holdings debt and deferred compensation and amounts reported as
shareholders investment.]
NTK
HOLDINGS REPORTS
3rd
QUARTER RESULTS
PROVIDENCE,
RI, November 3, 2006—NTK
Holdings, Inc. (“NTK
Holdings”),
the
parent company of Nortek
Holdings, Inc.
(“Nortek
Holdings”)
and
Nortek,
Inc.
(“Nortek”),
a
leading diversified manufacturer of innovative, branded residential and
commercial ventilation, HVAC and home technology convenience and security
products, today announced third-quarter financial results. In light of the
filing by NTK
Holdings
of a
registration statement with the Securities and Exchange Commission for a
proposed initial public offering of its common stock, NTK
Holdings
will
not be holding a conference call to discuss third-quarter results.
Key
financial highlights from continuing operations for the third quarter of 2006
included:
Key
financial highlights from continuing operations for the first nine months of
2006 included:
As
of
September 30, 2006, NTK
Holdings
had
approximately $56 million in unrestricted cash and cash equivalents and had
$35
million of borrowings outstanding under its $200-million revolving credit
facility.
On
July
18, 2006, NTK
Holdings
acquired Magenta Research Ltd. (“Magenta”) of New Milford, Connecticut to expand
its offerings of Technology Products. Magenta designs and sells products that
distribute audio and video signals over Category 5 and fiber optic cable to
multiple display screens.
NTK
Holdings*,
the
parent company of Nortek
Holdings*
and
Nortek*,
is
a
leading diversified
manufacturer of innovative, branded residential and commercial ventilation,
HVAC
and home technology convenience and security products. NTK
Holdings
and
Nortek
offer
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
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 NTK 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.
(A)
NTK
Holdings, Inc. (the “Company” or “NTK Holdings”) is a Delaware corporation that
was formed to hold the capital stock of Nortek Holdings, Inc. (“Nortek
Holdings”). NTK Holdings became the parent company of Nortek Holdings on
February 10, 2005. The unaudited condensed consolidated summary of operations
presented herein for periods prior to February 10, 2005, reflect the results
of
operations and cash flows of Nortek Holdings and all of its wholly-owned
subsidiaries and subsequent to February 10, 2005, reflect the results of
operations and cash flows of NTK Holdings.
The
unaudited condensed consolidated summary of operations include
the accounts of Nortek Holdings and NTK Holdings, as appropriate and all of
their 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. 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
Securities and Exchange Commissions (“SEC”).
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 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 third
quarters ended September 30, 2006 and October 1, 2005:
(1)
Net
earnings include an approximate pre-tax $0.3 million charge related to the
planned closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility in the
Residential Ventilation Products segment for the third quarter ended September
30, 2006. Net earnings includes an approximate $1.2 million gain related to
the
favorable settlement of litigation in the Air Conditioning and Heating Products
Segment for the third quarter ended September 30, 2006. Net earnings include
approximately $0.1 million of stock-based compensation charges recorded in
each
of the third quarters of 2006 and 2005, respectively.
(2)
Interest
expense for the third quarter of 2006 includes cash interest of approximately
$28.4 million and non-cash interest of approximately $13.4 million. Interest
expense for the third quarter of 2005 includes cash interest of approximately
$25.9 million and non-cash interest of approximately $8.4 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
nine months ended September 30, 2006 and October 1, 2005:
(1)
Net
earnings include an approximate pre-tax $35.9 million curtailment gain related
to post-retirement medical and life insurance benefits and an approximate
pre-tax $4.1 million charge related to the planned closure of the Company’s
NuTone, Inc. Cincinnati, Ohio facility in the Residential Ventilation Products
segment for the first nine months ended September 30, 2006. Net earnings include
an increase in warranty expense of approximately $4.0 million related to a
product safety upgrade in the Home Technology Products segment for the first
nine months ended September 30, 2006. Net earnings includes an approximate
$1.6
million gain related to the favorable settlement of litigation in the Air
Conditioning and Heating Products Segment for the first nine months ended
September 30, 2006. Net earnings include approximately $0.3 million of
stock-based compensation charges recorded in each of the first nine months
of
2006 and 2005, respectively.
(2)
Interest
expense for the first nine months of 2006 includes cash interest of
approximately $86.9 million (including approximately $3.9 million relating
to
the accelerated amortization of the Nortek Holdings deferred compensation plan)
and non-cash interest of approximately $33.3 million. Interest expense for
the
first nine months of 2005 includes cash interest of approximately $82.8 million
(including approximately $8.2 million relating to the accelerated amortization
of the Nortek Holdings deferred compensation plan) and non-cash interest of
approximately $21.5 million.
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 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 nine months ended September 30, 2006 and October 1,
2005:
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