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NORTEK
REPORTS
1ST-QUARTER
RESULTS
PROVIDENCE, RI, May
18, 2010—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. Nortek reported sales of $431
million and operating earnings of $4.2 million for the quarter ended April 3,
2010.
Key financial
highlights for the first quarter of 2010 included:
Richard L. Bready,
Chairman and Chief Executive Officer, said, “Nortek is beginning to see a
stabilization of the residential housing markets. Increased
first-quarter sales of residential ventilation and HVAC products drove
first-quarter performance. Nortek continues to focus on
cost reduction and working capital improvement to maintain and improve margins
and cash flow. Cash flow for the first quarter was up approximately
16 percent compared to last year.”
As of April 3,
2010, Nortek had
approximately $77.6 million in unrestricted cash, cash equivalents and
marketable securities and had $65 million of borrowings outstanding under its
$300-million asset-based revolving credit facility.
Mr. Bready added,
“We expect the residential housing markets will show modest improvement in 2010
as they continue to be restrained by unemployment levels, consumer confidence
and continued high levels of foreclosures. Conditions in the
commercial construction market are weak and are expected to remain so throughout
2010 as fewer new buildings are being constructed due in part to a lack of
available financing.”
Nortek filed on April 15, 2010
a Registration Statement on Form 10 with the Securities and Exchange Commission,
as the Company intends to file a formal application to list its common stock,
par value $0.01 per share (the “Common Stock”), on the New
York Stock Exchange. While the Company cannot guarantee that it will
meet the conditions of listing and ultimately receive approval for listing the
Common Stock on the New York Stock Exchange, it plans to diligently make the
application and take all commercially reasonable steps to meet the listing
requirements of the New York Stock Exchange. In the event Nortek is unable to meet such
listing requirements, it will seek to list the Common Stock on another national
stock exchange.
Nortek* is a leading
diversified global manufacturer of innovative, branded residential and
commercial ventilation, HVAC and home technology convenience and security
products. Nortek offers 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 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. 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 certain raw materials
(including, among others, steel, copper, packaging materials, plastics, resins,
glass, wood and aluminum) and purchased components, freight costs, the level of
domestic and foreign construction and remodeling activity affecting residential
and commercial markets, interest rates, employment levels, inflation, foreign
currency fluctuations, consumer spending levels, exposure to foreign economies,
the rate of sales growth, prices, and product and warranty 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.
#
# #
NORTEK,
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) Nortek, Inc.
(“Nortek”) and all of its wholly-owned subsidiaries, collectively the “Company”,
is a diversified manufacturer of innovative, branded residential and commercial
building products, operating within four reporting segments. Through these
segments, the Company manufactures and sells, primarily in the United States,
Canada and Europe, a wide variety of products for the professional remodeling
and replacement markets, the residential and commercial construction markets,
the manufactured housing market and the do-it-yourself
market.
On December 17,
2009 (the “Effective Date”), the Company emerged from bankruptcy proceedings
under Chapter 11 of the United States Bankruptcy Code (“Chapter
11”). In connection with its emergence from bankruptcy, the Company
adopted fresh-start reporting pursuant to the provisions of Accounting Standards
Codification (“ASC”) 852, “Reorganization” (“ASC 852”). The Company
selected December 19, 2009 as the fresh-start reporting date since it was the
closest fiscal week-end to the Effective Date of December 17, 2009 and the
effect of using December 19, 2009, instead of December 17, 2009, was not
material to the Company’s financial condition or results of operations for the
periods presented. ASC 852 requires the implementation of fresh-start
reporting if the reorganization value of the assets of the entity that emerges
from Chapter 11 is less than the sum of the post-petition liabilities and
allowed claims, and holders of voting shares immediately before confirmation of
the plan of reorganization receive less than 50 percent of the voting shares of
the emerging entity. Under fresh-start reporting, a new reporting
entity is deemed to be created and the assets and liabilities of the entity are
reflected at their fair values.
Accordingly, the
condensed consolidated summary of operations for the Company subsequent to
emergence from Chapter 11 is not comparable to the condensed consolidated
summary of operations for the Company prior to emergence from Chapter
11. References to the “Successor” refer to the Company subsequent to
the fresh-start reporting date and references to the “Predecessor” refer to the
Company prior to the fresh-start reporting date.
In addition, ASC
852 requires that financial statements, for periods including and subsequent to
a Chapter 11 bankruptcy filing, distinguish between transactions and events that
are directly associated with the reorganization proceedings and transactions and
events associated with the ongoing operations of the business, as well as
additional disclosures. The “Company”, when used in reference to the
period subsequent to emergence from Chapter 11 bankruptcy proceedings, refers to
the Successor, and when used in reference to periods prior to emergence from
Chapter 11 bankruptcy proceedings, refers to the Predecessor.
The accompanying
Successor and Predecessor unaudited condensed consolidated summary of operations
reflects the accounts of Nortek and all of its 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. Operating results for the first quarter ended April 3,
2010 are not necessarily indicative of the results that may be expected for
other interim periods or for the year ending December 31, 2010.
The Company
operates on a calendar year and for its interim periods operates on a 4-4-5
fiscal calendar, where each fiscal quarter is comprised of two 4-week periods
and one 5-week period, with each week ending on a Saturday. The
Company’s fiscal year always begins on January 1 and ends on December
31. As a result, the Company’s first and fourth quarters may have
more or less days included than a traditional 4-4-5 fiscal calendar, which
consists of 91 days. The first quarters ended April 3, 2010 (“first
quarter of 2010”) and April 4, 2009 (“first quarter of 2009”) include 93 days
and 94 days, respectively.
The Company has
evaluated subsequent events for potential recognition or disclosure through the
date the financial statements were issued, May 18, 2010. 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 registration
statement on Form 10, and its current reports on Form 8-K as filed with the
Securities and Exchange Commission.
(B) Consolidated Cash
Flow (“CCF”) and Adjusted Consolidated Cash Flow (“ACCF”) represent net earnings
(loss) before interest, income taxes, depreciation, amortization and the effects
of the emergence from bankruptcy, including the effects of fresh-start
accounting. The ACCF is defined as the CCF further adjusted to
exclude certain cash and non-cash, non-recurring items. CCF and ACCF
are not defined terms under GAAP. Neither CCF nor ACCF should be
considered an alternative to operating income or net earnings (loss) as a
measure of operating results or an alternative to cash flow as a measure of
liquidity. There are material limitations associated with making the
adjustments to the Company’s earnings to calculate CCF and ACCF and using these
non-GAAP financial measures as compared to the most directly comparable GAAP
financial measures. For instance, CCF and ACCF do not
include:
The Company
presents CCF because it considers it an important supplemental measure of its
performance and believes it is frequently used by its investors and other
interested parties, as well as by its management, in the evaluation of companies
in its industry, many of which present CCF when reporting their
results. In addition, CCF provides additional information used by the
Company’s management and Board of Directors to facilitate internal comparisons
to historical operating performance of prior periods. Further,
management believes that CCF facilitates operating performance comparisons from
period to period because it excludes potential differences caused by variations
in capital structure (affecting interest expense), tax positions (such as the
impact of changes in effective tax rates or net operating losses) and the age
and book depreciation of facilities and equipment (affecting depreciation
expense).
The Company
believes that the inclusion of supplementary adjustments to CCF applied in
presenting ACCF are appropriate to provide additional information to investors
about the performance of the business, and the Company is required to reconcile
net earnings (loss) to ACCF to demonstrate compliance with debt
covenants. While the determination of appropriate adjustments in the
calculation of ACCF is subject to interpretation under the terms of the 11%
Notes, management believes the adjustments described below are in accordance
with the covenants in the 11% Notes.
The following table
reconciles net earnings (loss) to CCF and ACCF for the trailing four quarters
ending April 3, 2010 and April 4, 2009:
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