NORTEK REPORTS
3RD-QUARTER RESULTS

PROVIDENCE, RI, October 31, 2001—Nortek, Inc.(NYSE:NTK), a leading international designer, manufacturer and marketer of high-quality building products today announced results for the third quarter of 2001.

Financial highlights for the quarter ended September 29, 2001, included:

Net sales for the first nine months of 2001 were $1,411 million compared to $1,420 million for the first nine months of 2000. Operating earnings were $121 million, compared to $137 million in 2000, and EBITDA was $165 million, compared to $179 million in 2000. Earnings from continuing operations were $27 million compared to $37 million for the first nine months of 2000. Diluted per-share earnings from continuing operations for the period were $2.41 compared to $3.29 a year earlier. Diluted per-share earnings from continuing operations for the first nine months of 2001 and 2000 were after amortization of goodwill and other intangible assets of $1.34 per share and $1.31 per share, respectively.

The Company said several factors negatively impacted business in the quarter. A general slowdown in the manufactured housing market continued to negatively impact business. Cooler than normal weather in the North American market during the late spring and prime summer selling months reduced the demand for residential air conditioning products. The Company is also being impacted by a slowdown in worldwide expenditures for telecommunications infrastructure equipment. Additionally, the tragic events that occurred on September 11 caused a slowdown of incoming orders and order releases throughout the Company’s operations in September.

Richard L. Bready, Nortek’s Chairman and Chief Executive Officer said, “We are satisfied with Nortek’s third-quarter performance as our businesses responded well to rapidly changing economic and political conditions. Despite the current uncertainties, we believe the strong brand recognition of the products marketed by Nortek companies, the breadth of their product lines, and their market leadership positions has, and will, enable us to weather short-term market disruptions.”

He added, “Nortek has produced EBITDA in excess of $200 million for the 12 months ended September 29, 2001 and has a solid unrestricted cash position of approximately $190 million.

“Going forward there is a substantial amount of uncertainty about the economic environment. We are anticipating and planning for continued weak demand in the markets we serve but are prepared to react quickly to improving conditions. We continue to manage working capital closely, implement major cost reduction programs such as strategic sourcing, and focus Nortek’s resources on its core businesses to take full advantage of its strong market-share positions.”

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; vinyl products, including windows and doors, siding, decking, fencing and accessories; indoor air quality systems; and specialty electronic 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 within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company'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. The Company 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 Company's reports and filings with the Securities and Exchange Commission.


# # #


NORTEK, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS
(In thousands except per share amounts)

Three Months Ended
 Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001
 2000
 2001
 2000
(Unaudited)
 
Net sales     $ 487,510   $ 494,627   $ 1,411,113   $ 1,420,264  
Cost of products sold    359,218    367,480    1,043,382    1,053,332  
Selling, general and administrative expenses    82,800    72,933    229,742    212,647  
Amortization of goodwill and intangible assets    5,745    5,666    17,011    16,816  
     447,763    446,079    1,290,135    1,282,795  
 
Operating earnings    39,747    48,548    120,978    137,469  
Interest expense    (26,405 )  (24,400 )  (77,437 )  (72,994 )
Investment income       4,058     1,752     8,259     5,125  
Earnings from continuing operations before      
  provision for income taxes    17,400    25,900    51,800    69,600  
Provision for income taxes    10,500    12,900    24,800    32,300  
Earnings from continuing operations    6,900    13,000    27,000    37,300  
Earnings (loss) from discontinued operations    (20,100 )  2,700    (22,900 )  1,500  
Extraordinary loss from debt retirement       (3,600 )   --     (3,600 )   --  
Net earnings (loss)   $ (16,800 ) $ 15,700   $ 500   $ 38,800  
 
Earnings (loss) per share of common stock:  
Earnings from continuing operations:      
          Basic   $ .63   $ 1.18   $ 2.47   $ 3.30  
          Diluted   $ .61   $ 1.18   $ 2.41   $ 3.29  
Earnings (loss) from discontinued operations:      
          Basic   $ (1.84 ) $ .24   $ (2.09 ) $ .13  
          Diluted   $ (1.79 ) $ .24   $ (2.05 ) $ .13  
Extraordinary loss from debt retirement:      
          Basic     $ (.33 ) $ --   $ (.33 ) $ --  
          Diluted     $ (.32 ) $ --   $ (.32 ) $ --  
Net earnings (loss):      
          Basic   $ (1.54 ) $ 1.42   $ .05   $ 3.43  
          Diluted   $ (1.50 ) $ 1.42   $ .04   $ 3.42  
 
Weighted average number of shares:      
          Basic    10,941    11,025    10,927    11,299  
          Diluted    11,220    11,057    11,195    11,344  
 
EBITDA   $ 54,350   $ 61,714   $ 164,914   $ 178,705  
 
Capital Expenditures   $ 7,369   $ 5,142   $ 33,364   $ 18,557  

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. Effective in the third quarter of 2001, the Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”(“SFAS No. 144”) and accordingly the presentation for all periods has been reclassified to conform with the new standard. See Notes F and I. 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.

 The Financial Accounting Standards Board’s Emerging Issues Task Force reached final consensus in 2000 with respect to the accounting for shipping and handling fees and costs and the accounting for certain sales incentives. As a result, the Company has reclassified certain amounts among net sales, cost of products sold and selling, general and administrative expenses, net in accordance with these pronouncements for all periods presented in the accompanying unaudited condensed consolidated summary of operations. These reclassifications did not have any effect on operating earnings, earnings before interest, income taxes and depreciation and amortization (“EBITDA”), net earnings or diluted net earnings per share for any period presented.


C.

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


D.

 In the third quarter and first nine months of 2001, the Company expensed approximately $600,000 and approximately $2,800,000, respectively, of manufacturing costs incurred in connection with the start up of a residential air conditioning facility and a vinyl fence and decking facility. Also, in the third quarter and first nine months of 2001 the Company expensed as a charge to continuing operations approximately $4,200,000 and $6,300,000, respectively, of fees and expenses associated with the Company’s material procurement strategy and estimates that it has realized approximately $2,000,000 of benefits to date. Approximately $1,300,000 and $2,700,000 of these fees and expenses were charged to the Residential Building Products Segment, $2,200,000 and $2,800,000 to the Air Conditioning and Heating Products Segment, $500,000 and $600,000 to the Windows, Doors and Siding Products Segment and $200,000 and $200,000 to the Other Segment, in the third quarter and first nine months of 2001, respectively. In the first half of 2001, the Company recorded in operating earnings a non-taxable gain of approximately $3,200,000 ($.29 per share) from net death benefit insurance proceeds relating to life insurance maintained on former managers. In the third quarter and first nine months of 2001, the Company also incurred certain duplicative net interest expense as discussed in Note H below. In the third quarter of 2001, the Company recorded approximately $1,700,000 of interest income resulting from the favorable abatement of state income taxes. The abatement of state income taxes did not have a significant effect on the overall annual effective income tax rate. In the second quarter of 2000, the Company sold a parcel of land resulting in a pre-tax gain of approximately $1,700,000 ($.10 per share, net of tax) which is included in operating earnings.


E.

 In the first quarter of 2001, the Company adopted Statement of Financial Accounting Standards SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”, as amended (“SFAS No. 133”) by recording an approximate $800,000 liability in its balance sheet at March 31, 2001, representing the fair value of the Company’s interest rate collar agreement. The cumulative affect of adopting this accounting method as of December 31, 2000 was not material. As a result interest expense includes an approximate non-cash charge of $600,000 ($.03 per share, net of tax) and $1,400,000 ($.08 per share, net of tax), respectively, for the third quarter and first nine months of 2001.


F.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations". SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. This statement is effective for all business combinations initiated after June 30, 2001.


 

In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets”. This statement applies to goodwill and intangible assets acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired. Under this statement goodwill, as well as certain other intangible assets, determined to have an infinite life, will no longer be amortized, instead these assets will be reviewed for impairment on a periodic basis. This statement is effective for the Company beginning January 1, 2002. Management is evaluating the impact that this statement will have on the Company’s consolidated financial statements. Goodwill amortization included in operating earnings was approximately $4,000,000 and $12,300,000 in the third quarter and first nine months of 2001, respectively, and was approximately $4,200,000 and $12,300,000 in the third quarter and first nine months of 2000, respectively, as determined under Generally Accepted Accounting Principles currently in effect.


 

In July 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. Management is currently evaluating the impact of SFAS No. 143 on the Company’s consolidated financial statements.


 

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets. This Statement supersedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions of APB Opinion No. 30 “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends ARB No. 51, “Consolidated Financial Statements”, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 with early adoption encouraged. The Company adopted SFAS No. 144 in the third quarter of 2001 and applied this accounting standard as of the beginning of the year. Adoption of this accounting standard did not result in any material changes in net earnings (loss) from accounting standards previously applied. Adoption of this standard did result in the accounting for the loss on the sale of certain businesses and their related operating results as discontinued operations (see Note I).


G.

 Net sales from continuing operations for the Company’s principal segments for the three months and nine months ended September 29, 2001 and September 30, 2000 were as follows:


Three Months Ended
 Nine Months Ended
Sept. 29, 2001
 Sept. 30, 2000
 Sept. 29, 2001
 Sept. 30, 2000
Unaudited
(In millions)
Residential Building Products     $ 163 .4 $ 163 .7 $ 488 .7 $ 502 .9
Air Conditioning and Heating Products    166 .9  176 .7  493 .4  483 .8
Windows, Doors and Siding Products    138 .4  136 .5  376 .8  377 .8
Other    18 .8  17 .7  52 .2  55 .8
    Net sales from continuing operations   $ 487 .5 $ 494 .6 $ 1,411 .1 $ 1,420 .3

 

In the nine months ended September 29, 2001, acquisitions contributed approximately $24.1 million to net sales in the Air Conditioning and Heating Products Segment.


 

Operating earnings and depreciation and amortization expense from continuing operations for the Company’s principal segments for the three and nine months ended September 29, 2001 and September 30, 2000 were as follows:


Three Months Ended
 Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001
 2000
 2001
 2000
Unaudited
(In millions)
 
Operating Earnings:                    
     Residential Building Products   $ 23 .0 $ 22 .1 $ 64 .8 $ 70 .5
     Air Conditioning and Heating Products    10 .0  22 .3  42 .1  59 .2
     Windows, Doors and Siding Products    15 .2  10 .8  32 .1  23 .7
     Other, net    (8 .4)  (6 .6)  (18 .0)  (15 .9)
Consolidated Operating Earnings from      
     Continuing Operations    39 .8  48 .6  121 .0  137 .5
 
Unallocated:  
     Interest Expense    (26 .4)  (24 .4)  (77 .4)  (73 .0)
     Investment Income    4 .0  1 .7  8 .2  5 .1
     Earnings from Continuing Operations    
       before Provision for Income Taxes   $ 17 .4 $ 25 .9 $ 51 .8 $ 69 .6
 
Depreciation and Amortization Expense:  
     Residential Building Products   $ 5 .6 $ 4 .9 $ 17 .1 $ 15 .7
     Air Conditioning and Heating Products    3 .3  3 .0  9 .6  9 .0
     Windows, Doors and Siding Products    5 .4  4 .9  16 .1  15 .4
     Other     .3   .3  1 .1  1 .1
         Consolidated Depreciation and    
         Amortization Expense from    
         Continuing Operations   $ 14 .6 $ 13 .1 $ 43 .9 $ 41 .2

H.

In June 2001, the Company sold $250,000,000 principal amount of its 9 7/8% Senior Subordinated Notes due 2011 ("9 7/8% Notes") at a slight discount. Net proceeds from the sale of the 9 7/8% Notes, after deducting underwriting commissions and expenses amounted to approximately $241,800,000 and a portion of such proceeds was used to redeem, on July 11, 2001, $204,822,000 principal amount of the Company's 9 7/8% Senior Subordinated Notes due 2004 (which notes were called for redemption on June 13, 2001), plus an approximate $2,900,000 redemption premium thereon and approximately $7,400,000 of accrued interest thereon. As a result of this redemption, the Company recorded an extraordinary loss of approximately $5,500,000 ($.32 per share, net of tax) in the third quarter of 2001. In the third quarter and first nine months of 2001, the Company incurred approximately $450,000 ($.03 per share, net of tax) and $1,250,000 ($.07 per share, net of tax) respectively, of duplicative interest expense, net of interest income, since the redemption of the 9 7/8% Senior Subordinated Notes due 2004 did not occur on the same day as the financing.


I.

During 2001, the Company decided to dispose of Peachtree Doors and Windows, Inc. ("Peachtree") and SNE Enterprises, Inc. ("SNE"), subsidiaries of Ply Gem Industries, Inc. ("Ply Gem") in order to commit additional financial and management resources to vinyl products and other company operations. On September 21, 2001, Ply Gem sold the capital stock of its Peachtree and SNE subsidiaries for approximately $45,000,000, and recorded in the third quarter of 2001, a pre-tax loss on the sale of approximately $34,000,000 ($1.79 per share, net of tax), including the write off of approximately $11,700,000 of unamortized intangible assets. Peachtree and SNE were previously part of the Windows, Doors and Siding Products Segment.


 

A portion of the cash proceeds was used to pay down approximately $20,500,000 of outstanding debt under the Company's Ply Gem credit facility.


 

The following is a summary of the results of discontinued operations for the third quarter and first nine months of 2001 and 2000 and for the year ended December 31, 2000:


Three Months Ended
 Nine Months Ended
 Year Ended
Sept.29, Sept. 30, Sept.29, Sept. 30, Dec. 31,
2001
 2000
 2001
 2000
 2000
(Unaudited)
(Amounts in thousands)
 
Net Sales     $ 83,200   $ 95,400   $ 225,600   $ 262,100   $ 341,800  
 
Earnings (loss) before income taxes    (100 )  4,100    (4,400 )  2,300    (200 )
Income tax provision (benefit)    --    1,400    (1,500 )  800    (100 )
Earnings (loss) from discontinued operations    (100 )  2,700    (2,900 )  1,500    (100 )
Loss on sale of discontinued operations, net  
   of tax benefits of $14,000,000       (20,000 )   --     (20,000 )   --     --  
Earnings (loss) from discontinued operations     $ (20,100 ) $ 2,700   $ (22,900 ) $ 1,500   $ (100 )
 
Depreciation and Amortization Expense   $ 1,315   $ 1,103   $ 3,529   $ 3,986   $ 5,078  

 

The following is a summary of the results of discontinued operations for the second quarter and first six months of 2001 and 2000:


Three Months Ended
 Six Months Ended
June 30, July 1, June 30, July 1,
2001
 2000
 2001
 2000
(Unaudited)