NORTEK POSTS RECORD SECOND-QUARTER RESULTS 

NET EARNINGS MORE THAN DOUBLE 

PROVIDENCE, RI, July 28, 1999—Nortek, Inc. (NYSE: NTK), a leader in the manufacture of high-quality building products, today announced continued rising earnings in all core businesses.  Diluted per-share earnings for the second quarter ending July 3, 1999 more than doubled to $1.64 from the $0.78 per share reported in the second quarter last year, on 11.0 percent more shares outstanding. 

Richard L. Bready, Nortek Chairman and Chief Executive Officer, said, “The impressive earnings are a result of the Company’s growing strength and expansion in key markets.  For this period, Nortek achieved internal earnings growth in its core businesses, continued to make strides in improving business efficiencies and made significant progress in the ongoing integration of recent acquisitions.  With internal growth and a series of strategic acquisitions, Nortek has defined, staked out and developed a solid market position in the expanding building-products industry. 

Other second-quarter financial highlights included: 

·        Net sales of $544.1 million, a 21.0-percent increase from $449.6 million reported for the second quarter of 1998.  The second quarter of 1999 includes $125.1 million of sales from recently acquired businesses; the second quarter of 1998 included $61.4 million of sales from businesses sold. 

·        Operating earnings of $58.2 million, a 75.6-percent increase from last year’s $33.2 million.  As a percent of sales, operating earnings rose to 10.7 percent compared to 7.4 percent last year. 

·        EBITDA of $72.0 million, a 67.2-percent increase from $43.1 million for the prior year.  As a percent of sales EBITDA was 13.2 percent compared to last year’s 9.6 percent. 

·        Net earnings of $19.8 million, more than double last year’s $8.5 million.

·          The doubling of diluted per-share earnings with 1,146,000 more shares outstanding compared to last year.  Diluted per-share earnings for the second quarter of 1999 and the second quarter of 1998 are after amortization of goodwill and other intangible assets of $.38 per share and $.27 per share, respectively. 

For the first six months of 1999, diluted per-share earnings doubled to $1.94 from $.95 a year earlier--an increase achieved with 1,677,000 more shares outstanding. Operating earnings increased 62.4 percent to $85.8 million and EBITDA increased 54.9 percent to $112.6 million.  Net earnings increased almost 138.0 percent to $23.3 million from $9.8 million for the first six months of 1999. 

Sales for the first six months of $950.8 million were 12.9 percent higher than the $842.1 million reported last year.  The first six months of 1999 included $193.7 million of sales from recently acquired businesses; the first six months of 1998 included $132.8 million of sales from businesses sold.

 Mr. Bready added, “We expect the coming months to show a continuing firm U.S. economy and strong consumer confidence.  That is a business environment in which our strategy of managed synergistic growth -- with emphasis on quality, low-cost production and high-margin products -- is designed to thrive and expand our franchise.”

 Nortek is a leading international manufacturer and distributor of high-quality, competitively priced building, remodeling and indoor environmental control products for the residential and commercial markets.  The Company offers a broad array of products for improving the environments where people live and work.  Its products include range hoods and other spot ventilation products, heating and air conditioning systems, wood and vinyl windows and doors, vinyl siding products, indoor air quality systems, and specialty electronic products.

 

NORTEK, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS
(In Thousands except per share amounts)
	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	1999		1998		1999		1998
	(unaudited)
Net sales.......................................................	$544,088		$449,647		$950,788		$842,115
Cost of sales..................................................	384,971		333,506		681,887		627,826
Selling, general and administrative expenses.....	95,842		79,938		173,225		155,499
Amortization of goodwill and intangible
assets..........................................................	5,055		3,049		9,839		5,943
	485,868		416,493		864,951		789,268
Operating earnings.........................................	58,220		33,154		85,837		52,847
Interest expense.............................................	(24,373)		(19,740)		(48,339)		(39,198)
Investment income.........................................	1,653		2,086		4,502		4,351
Earnings before provision for income taxes......	35,500		15,500		42,000		18,000
Provision for income taxes..............................	15,700		7,000		18,700		8,200
Net earnings..................................................	$  19,800		$    8,500		$  23,300		$    9,800
Net earnings per share of common stock:
Basic...................................................	$      1.67		$        .79		$      1.97		$        .97
Diluted.................................................	$      1.64		$        .78		$      1.94		$        .95
Weighted average number of shares:
Basic...................................................	11,850		10,718		11,798		10,129
Diluted.................................................	12,051		10,905		11,988		10,311
EBITDA.......................................................	$  71,991		$  43,052		$112,649		$  72,723

 

The accompanying notes are an integral part of this unaudited condensed consolidated summary of operations.

 

NORTEK, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS 

A.     The unaudited condensed consolidated summary of operations for Nortek, Inc. and its subsidiaries (the "Company"), in the opinion of management, reflects all adjustments necessary for a fair statement of the periods presented.  It is suggested that this unaudited condensed consolidated summary of operations be read in conjunction with the financial statements and the notes included in the Company's latest Annual Report on form 10-K, and its latest Quarterly Report on form 10-Q as filed with the Securities and Exchange Commission. 

B.   EBITDA from continuing operations is operating earnings plus depreciation and amortization expense (other than amortization of deferred debt expense and debt discount). 

C.   On July 31, 1998, the Company, through a wholly-owned subsidiary, purchased all of the issued and outstanding capital stock of NuTone Inc. ("NuTone"), a wholly owned subsidiary of Williams plc ("Williams") for an aggregate purchase price of $242,500,000 in cash plus approximately $5,500,000 in expenses and fees.  The purchase price was funded  through the use of the net proceeds from the sale of $210,000,000 principal amount of 8 7/8% Senior Notes due August 1, 2008 (the "8 7/8% Notes") at a slight discount, which occurred on July 31, 1998, together with approximately $44,800,000 of the cash proceeds received from the Common Stock Offering as defined below.   

D.     The following presents the approximate unaudited Pro Forma net sales, depreciation and amortization expense (other than amortization of deferred debt expense and debt discount), operating earnings, earnings from continuing operations and diluted earnings from continuing operations per share of the Company for the three and six months ended July 4, 1998 and the year ended December 31, 1998 which gives pro forma effect to the sale of 2,182,500 shares of the Company's common stock in the second quarter of 1998 (the "Common Stock Offering"), the sale of the 8 7/8% Notes and the acquisition of NuTone on July 31, 1998, and reflects the estimated cost reductions directly attributable to the NuTone acquisition as described below as if such transactions had occurred on January 1, 1998.  The Pro Forma results for the year ended December 31, 1998 below include the actual results of NuTone since July 31, 1998 in accordance with the purchase method of accounting for an acquisition.  Pro Forma operating results do not give pro forma effect to dispositions of businesses that occurred in 1998, the acquisition of Napco, Inc. which occurred on October 9, 1998 and acquisitions in 1999.    

 

	Three Months Ended July 4, 1998			Six Months Ended July 4, 1999	Year Ended                           December 31, 1998
		(In thousands except per share amounts)
Pro Forma
Net sales.................................................		$495,000	$937,000		$1,849,000
Depreciation and amortization
expense.................................................		12,100	24,300		47,400
Operating earnings...................................		38,000	61,000		142,500
Earnings from continuing operations..........		8,000	8,600		31,400
Diluted earnings from continuing     operations per share..............................		$ .67	$ .72		$2.63

 

NORTEK, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS

(Continued) 

At the date of the NuTone acquisition, the Company achieved cost reductions directly attributable to the acquisition from the elimination of fees and charges paid by NuTone to Williams and related entities.  The unaudited Pro Forma operating earnings have been increased by approximately $354,000 for the year ended December 31, 1998 and by approximately $384,000 for the six months ended July 4, 1998, respectively, and decreased by approximately $98,000 for the three months ended July 4, 1998 to reflect the elimination of such fees.  Subsequent to the NuTone acquisition, the Company expects to realize approximately $15,000,000 in unaudited estimated annual cost reductions (“NuTone Cost Reductions”) that can be achieved as a result of integrating NuTone into the Company’s operations.  Pro Forma earnings have not been increased for the NuTone Cost Reductions for the periods presented, except for NuTone Cost Reductions actually achieved since the date of acquisition.  The NuTone Cost Reductions are estimates and actual savings achieved could differ materially.  In computing the Pro Forma earnings, earnings have been reduced by the net interest income on the aggregate cash portion of the purchase price of the NuTone acquisition at the historical rate earned by the Company and interest expense on indebtedness incurred in connection with the acquisition of NuTone.  Earnings have also been reduced by amortization of goodwill and intangible assets and reflect net adjustments to depreciation expense as a result of an increase in the estimated fair market value of property and equipment and changes in depreciable lives.  Interest expense was included on the 8 7/8% Notes at the applicable coupon rate plus amortization of deferred debt expense and debt discount, net of tax effect. The Pro Forma information presented does not purport to be indicative of the results which would have been reported if these transactions  had occurred on January 1, 1998, or which may be reported in the future.

E.      Net sales for the Company's principal segments for the three months and the six months ended July 3, 1999 and July 4, 1998 were as follows:

 

	Three Months Ended		Six Months Ended
	July 3, 1999	July 4, 1998	July 3, 1999	July  4, 1998