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Exhibit 99.1
[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, senior unsecured loan facility and amounts
reported as shareholders investment.]
NTK
HOLDINGS REPORTS
1ST-QUARTER
RESULTS
PROVIDENCE, RI, May
19, 2009—NTK Holdings, Inc.
(“NTK Holdings”),
the parent company of Nortek
Holdings, Inc. (“Nortek
Holdings”) and Nortek,
Inc. (“Nortek”),
a leading diversified global 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
$439 million and operating earnings of $14.6 million for the quarter ended April
4, 2009.
Key financial
highlights for the first quarter of 2009 included:
Richard L. Bready,
Chairman and Chief Executive Officer, said, “NTK Holdings continues to
manage its business well considering the meltdown in the new housing market, the
financial crisis impact on refinancings and foreclosures on existing homes and
the reduced level of renovation and remodeling spending. NTK Holdings continues to
focus on cost-reduction initiatives, including reductions in headcount and
discretionary spending.”
As of April 4,
2009, NTK Holdings had
approximately $128.4 million in unrestricted cash, cash equivalents and
marketable securities and had $145 million of borrowings outstanding under its
asset-backed revolving credit facility.
Mr. Bready added,
“We expect these difficult new housing market conditions will continue
throughout 2009 until foreclosures work their way through the system and housing
prices stabilize. Furthermore, consumer spending on home remodeling
and repair expenditures will not improve substantially until consumer confidence
increases and consumers reinvest in their homes.”
NTK Holdings*, the parent
company of Nortek
Holdings* and Nortek*, is a leading
diversified global 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.
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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 and has
been prepared on the basis of a going concern. However, the conditions noted below create
uncertainty about the Company’s ability to meet its debt obligations as they
come due on March 1, 2010 and beyond. The unaudited condensed consolidated summary of
operations does not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
outcome of this uncertainty.
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”).
(B)
NTK
Holdings conducts no separate operations and acts only as a holding
company. NTK Holdings’ primary liquidity needs are to service its
outstanding indebtedness. No cash payments are due under NTK
Holdings’ indebtedness during 2009; however, NTK Holdings has substantial debt
service obligations beginning in the fiscal year ending December 31,
2010. During 2010, the total of principal and interest payments on
indebtedness owed by the Company, including payments owed by NTK Holdings is
approximately $308.9 million. In 2010, NTK Holdings alone has cash
debt service obligations of approximately $162.3 million, including a payment of
approximately $147.4 million due on March 1, 2010 under its 10 3/4% Senior
Discount Notes. Nortek has significant cash payments due on its
indebtedness and certain other specified obligations in 2009 and
thereafter. For the year ending December 31, 2009, Nortek owes
principal and interest payments on its indebtedness in the total amount of
approximately $164.5 million. In the fiscal year ending December 31,
2010, the total of principal and interest payments on Nortek’s indebtedness is
approximately $146.6 million. Nortek’s principal sources of liquidity
include approximately $88.4 million of unrestricted cash and cash equivalents at
April 4, 2009, cash flow from Nortek’s subsidiaries in 2009, Nortek’s ability to
borrow under the terms of its ABL Facility and Nortek’s subsidiaries’
unrestricted cash and cash equivalent balances of approximately $40.0 million at
April 4, 2009.
The ability of NTK Holdings to service
its outstanding indebtedness depends on the likelihood of obtaining additional
capital, restructuring the terms of such indebtedness or obtaining dividends or
other payments from Nortek. The ability of NTK Holdings to obtain
additional capital is adversely affected by the substantial amount of the
Company’s outstanding indebtedness, including indebtedness of Nortek, which is
structurally senior in right of payment to any new debt or equity financing for
NTK Holdings. The ability of NTK Holdings to obtain dividends or
other payments from Nortek is constrained by the financial condition and
operating performance of Nortek and its subsidiaries and by the limitations on
making such distributions and other payments contained in the terms of Nortek’s
outstanding indebtedness.
Nortek is under no
obligation to make any distribution or other payment to NTK Holdings even if
Nortek has available cash and the making of such a payment is permitted by the
terms of Nortek’s existing indebtedness. In light of Nortek’s own
substantial indebtedness and liquidity needs, NTK Holdings believes there is a
substantial likelihood that Nortek will choose not to make a distribution or
other payment to NTK Holdings sufficient to enable NTK Holdings to make the
payments due in 2010 on its outstanding indebtedness, including the payment due
on March 1, 2010 under its 10 3/4% Senior Discount Notes. The failure
by NTK Holdings to make such payments will constitute events of default under
the documentation governing such indebtedness and will permit the holders of
such indebtedness to accelerate the payment of such indebtedness in
full. Such defaults, including cross defaults under NTK Holdings’
senior unsecured loan facility, and any related acceleration will likely require
additional equity or a restructuring of the indebtedness, whether pursuant to
privately negotiated transactions or under supervision of an appropriate court
proceeding.
A restructuring of
the indebtedness of NTK Holdings could result in a change of control of
Nortek. A change
of control may constitute an event of default under Nortek’s ABL Facility and
would also require Nortek to offer to purchase its 10% Senior Secured Notes due 2013 and 8
1/2% Senior Subordinated Notes due 2014 at 101% of the principal amount
thereof, together with accrued and unpaid interest. The failure of
Nortek to complete the purchase of any notes tendered pursuant to such offer,
whether due to lack of funds or otherwise, would constitute an event of default
under the indentures governing such notes. Such defaults, including
cross defaults under substantially all of Nortek’s outstanding indebtedness, and
any related acceleration will likely require additional equity or a
restructuring of the indebtedness, whether pursuant to privately negotiated
transactions or under supervision of an appropriate court
proceeding.
(C)
During
the first quarter ended April 4, 2009 (“first quarter of 2009”) and March 29,
2008 (“first quarter of 2008”), the Company’s results of operations include the
following expense items recorded in selling, general and administrative expense,
net in the accompanying unaudited condensed consolidated summary of
operations:
(D) The Company uses
EBITDA as both an operating performance and liquidity
measure. Operating performance measure disclosures with respect to
EBITDA are provided below. Refer to Note E for liquidity measure
disclosures with respect to EBITDA and a reconciliation from net cash flows from
operating activities to EBITDA.
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 ABL 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 loss, which is the most directly comparable
GAAP operating performance measure, to EBITDA for the first quarter of 2009 and
2008:
(1)
Net
loss and EBITDA for the first quarter of 2009 includes a charge related to
reserves for amounts due from customers of approximately $1.0 million and net
foreign exchange losses of approximately $0.1 million related to transactions,
including intercompany debt not indefinitely invested in Nortek’s
subsidiaries.
(2)
Net
loss and EBITDA for the first quarter of 2008 includes net foreign exchange
losses of approximately $0.1 million related to transactions, including
intercompany debt not indefinitely invested in Nortek’s
subsidiaries.
(3) Interest expense
for the first quarter of 2009 includes cash interest of approximately $35.8
million and non-cash interest of approximately $19.2
million. Interest expense for the first quarter of 2008 includes cash
interest of approximately $26.0 million and non-cash interest of approximately
$17.0 million.
(E)
The
Company uses EBITDA as both a liquidity and operating performance
measure. Liquidity measure disclosures with respect to EBITDA are
provided below. Refer to Note D for operating performance measure
disclosures with respect to EBITDA and a reconciliation from net earnings (loss)
to EBITDA.
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 ABL 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) provided by operating
activities, which is the most directly comparable GAAP liquidity measure, to
EBITDA for the first quarter of 2009 and 2008:
(1)
EBITDA
for the first quarter of 2009 includes a charge related to reserves for amounts
due from customers of approximately $1.0 million and net foreign exchange losses
of approximately $0.1 million related to transactions, including intercompany
debt not indefinitely invested in Nortek’s subsidiaries.
(2)
EBITDA
for the first quarter of 2008 includes net foreign exchange losses of
approximately $0.1 million related to transactions, including intercompany debt
not indefinitely invested in Nortek’s subsidiaries.
(3) Interest expense
for the first quarter of 2009 includes cash interest of approximately $35.8
million and non-cash interest of approximately $19.2
million. Interest expense for the first quarter of 2008 includes cash
interest of approximately $26.0 million and non-cash interest of approximately
$17.0 million.
(F)
During
the fourth quarter of 2008, the Company changed the composition of its reporting
segments to report the Residential Air Conditioning and Heating Products
(“HVAC”) segment separately. In accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of
an Enterprise and Related Information”, the Company has restated prior period
segment disclosures to reflect the new composition. Information
relating to the Residential HVAC and Commercial HVAC segments for the second and
third quarters of 2008 has been restated and is presented
below:
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