PROVIDENCE – Home and commercial technology and ventilation company Nortek Inc. and its parent NTK Holdings Inc. today released their unaudited financial results for the year and quarter ended Dec. 31, but announced they have delayed the filing of their annual reports with the U.S. Securities and Exchange Commission (SEC).
The companies said they were unable to complete their analysis and documentation “without unreasonable effort and expense” because of “the complexities of the goodwill impairment calculation as required under SFAS No. 142 and the related valuations.” (Under the U.S. generally accepted accounting practices (GAAP), statement 142 – one of the Statements of Financial Accounting Standards (SAFS) issued by the Financial Accounting Standards Board (FASB) – is the standard guideline for calculating goodwill impairments.)
Both Nortek and NTK expect to file their Form 10-K annual reports with the SEC “on or before April 15, although there can be no assurance,” they said in their after-market announcements.
“Nortek performed reasonably well in 2008, considering the difficult market conditions,” said Richard L. Bready, the companies’ chairman and chief executive.
The manufacturing subsidiary posted a preliminary annual loss of $780.7 million – an $813.1 million decline from its 2007 profit of $32.4 million (READ MORE) – on revenue that fell 4.16 percent year over year to $2.27 billion.
Nortek’s full-year results include an estimated goodwill impairment charge of $710.0 million; $68.6 million in other depreciation and amortization charges, compared with the year-ago charge of $65.1 million; and a one-time loss of $9.9 million related to the early retirement of debt. The company’s interest expenses rose to $134.78 million, a 10.41 percent increase compared with 2007, while its investment income fell 60 percent to $800,000.
As of Dec. 31, Nortek had about $182 million in cash, cash equivalents and marketable securities, and had $145 million of borrowing outstanding under its asset-backed revolving line of credit.
For the final quarter of 2008, Nortek posted a preliminary loss of $135.6 million – a $138.9 million decline from its year-ago profit of $3.1 million – on revenue that fell 12.19 percent compared with the 2007 fourth quarter to $499.8 million.
The results included a goodwill impairment charge of $110 million; depreciation and amortization costs of $15.5 million, compared with the year-ago $18.2 million; interest expenses that rose 26.71 percent year over year to $38.9 million; and investment income that fell 60 percent to $200,000.
The fourth-quarter loss followed a third-quarter loss of $579.6 million on net sales of $583 million (READ MORE); a second-quarter profit of $3.7 million on sales of $647.1 million; and a first-quarter loss of $4.1 million on sales of $540 million.
“Remodeling and renovation spending was severely impacted by the low level of housing activity and the worldwide crisis in the credit and financial markets,” Bready said. “Additionally, the troubled mortgage market, rising unemployment and decreasing home values have had a further negative impact on consumer disposable income, and [that] has resulted in lower sales across all of our markets.”
Meanwhile, NTK Holdings Inc. – the parent of Nortek Holdings Inc., which is the parent of Nortek Inc. – posted a 2008 loss of $844.5 million, compared with its 2007 net earnings of $7 million, as its interest costs rose 8.98 percent to $200.2 million. (NTK’s balance sheet is similar to Nortek’s, except for certain senior debt and deferred compensation costs not shared by the subsidiary.) For the 2008 fourth quarter, NTK posted a loss of $150.5 million, or about 17 times its year-ago loss of $8.8 million.
“Nortek expects these difficult markets to continue throughout 2009,” Bready said.
“In the first quarter of 2009, Nortek anticipates net sales to be approximately 20 percent lower than the first quarter of 2008. Additionally, the instability in the global economy is expected to continue to impact consumer confidence and spending on home remodeling and repair expenditures throughout 2009.”
Accordingly, Nortek and NTK have “intensified cost-reduction initiatives … to significantly reduce discretionary spending and achieve reductions in [their] work force,” the CEO said, predicting that the companies will achieve savings this year of $50 million to $60 million compared with 2008.
Going forward, the NTK and Nortek management team “is looking at its business with a long-term view and a continued focus on its low-cost country sourcing strategy and cost-reduction initiatives,” Bready said.
“Balance-sheet management is an extremely important priority for all of our businesses, so we can maximize our cash flow from operating activities. During this challenging environment, we will only fund necessary capital investments that will improve our business operations.”
NTK Holdings Inc., a Delaware corporation that has its headquarters in Providence, is the parent of Nortek Inc. NTK is a maker of branded residential and commercial merchandise including ventilation HVAC products; range hoods, bath fans, central vacuums and other ventilation products; and audio, video, access control, security and other home technology products. For more information, go to www.nortek-inc.com.
