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[Note
to Editors: The following NTK Holdings release is similar to the Nortek,
Inc.
release on first-quarter financial results except primarily for the impact
of
certain NTK Holdings senior discount notes and deferred compensation and
amounts
reported as shareholders investment.]
NTK
HOLDINGS REPORTS
1ST
QUARTER RESULTS
PROVIDENCE,
RI, May 14, 2007—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 first-quarter financial results. NTK
Holdings
reported sales of $553 million and operating earnings of $44.8 million for
the
quarter ended March 31, 2007. 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 first-quarter results.
Key
financial highlights from continuing operations for the first quarter of
2007
included:
Operating
earnings were impacted in the first quarter of 2007 by weak industry demand
in
the residential HVAC market, a lower level of housing activity and higher
material costs, which were partially offset by continued strategic sourcing
initiatives as well as sales-price increases.
As
of
March 31, 2007, NTK
Holdings
had
approximately $43 million in unrestricted cash, cash equivalents and marketable
securities and had $34 million of borrowings outstanding under its revolving
credit facility.
On
March 2, 2007, NTK
Holdings
acquired LiteTouch, Inc. (“LiteTouch”) of Salt Lake City, Utah. LiteTouch is a
designer, manufacturer and distributor of automated lighting controls for
a
variety of uses including residential, commercial, new construction and retrofit
applications.
On
April 10, 2007, NTK
Holdings
acquired Allstar Corporation (“Allstar”) located in Downingtown, Pennsylvania.
Allstar is a manufacturer and distributor of residential, gate operators,
garage
door openers, radio controls and accessory products for the garage door and
fence industry.
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,
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)
The
unaudited condensed consolidated summary of operations includes the accounts
of
NTK Holdings, Inc. and all of its 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. 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 Commission (“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 therefore, 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 therefore, 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 earnings, which is the most
directly comparable GAAP operating performance measure, to EBITDA for the first
quarter ended March 31, 2007 and April 1, 2006:
(1)
In
the
RVP segment, net earnings include an approximate $0.6 million charge related
to
the closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility and a
non-cash foreign exchange gain of approximately $0.1 million related to
intercompany debt not indefinitely invested in the Company’s subsidiaries
recorded in the first quarter ended March 31, 2007 and warranty expense of
approximately $1.5 million related to a product safety upgrade recorded in
the
first quarter ended April 1, 2006. In the HVAC segment, net earnings include
a
charge of approximately $1.8 million related to a reserve for amounts due from
a
customer recorded in the first quarter ended March 31, 2007. In Unallocated,
net
earnings include approximately $0.1 million of stock based compensation charges
recorded in each of the first quarters of 2007 and 2006,
respectively.
(2)
Interest
expense for the first quarter of 2007 includes cash interest of approximately
$27.8 million and non-cash interest of approximately $14.5 million. Interest
expense for the first quarter of 2006 includes cash interest of approximately
$27.4 million and non-cash interest of approximately $8.7 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, debt service, 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 used in operating
activities, which is the most directly comparable GAAP liquidity measure, to
EBITDA for the first quarter ended March 31, 2007 and April 1,
2006:
(1)
Interest
expense for the first quarter of 2007 includes cash interest of approximately
$27.8 million and non-cash interest of approximately $14.5 million. Interest
expense for the first quarter of 2006 includes cash interest of approximately
$27.4 million and non-cash interest of approximately $8.7 million.
(2)
In
the
RVP segment, net earnings include an approximate $0.6 million charge related
to
the closure of the Company’s NuTone, Inc. Cincinnati, Ohio facility and a
non-cash foreign exchange gain of approximately $0.1 million related to
intercompany debt not indefinitely invested in the Company’s subsidiaries
recorded in the first quarter ended March 31, 2007 and warranty expense of
approximately $1.5 million related to a product safety upgrade recorded in
the
first quarter ended April 1, 2006. In the HVAC segment, net earnings include
a
charge of approximately $1.8 million related to a reserve for amounts due from
a
customer recorded in the first quarter ended March 31, 2007.
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