PROVIDENCE – Home and commercial technology manufacturer Nortek Inc. posted a third-quarter loss of $579.6 million, compared with a year-ago profit of $37.6 million, on net sales that fell 3.16 percent to $583 million amid “continuing difficult business conditions.”
Excluding a non-cash goodwill impairment charge of $600 million – “resulting from the deterioration of the overall economic cycle impacting Nortek’s end markets, which negatively impacted long-term cash-flow forecasts” – earnings would have fallen 54.26 percent year-over-year to $20.4 million, but increased 451 percent compared with the company’s second-quarter profit of $3.7 million. (READ MORE) “The impairment charge has no impact” on its current liquidity or debt, the company said.
Results for the three-month period ended Sept. 27 also included $17.1 million in depreciation and amortization expenses, compared with the year-ago expense of $15.8 million. Acquisitions contributed about $1.1 million to net sales for the period, and reduced operating earnings by $400,000, the company said.
“Nortek’s third-quarter performance reflects the continuing difficult business conditions in the company’s core markets,” Chairman and CEO Richard L. Bready said in an after-market statement. “The liquidity crisis and the mortgage problems have driven housing starts down to a level of less than 1 million starts [per year],” he noted, citing statistics from the U.S. Bureau of the Census. (READ MORE) “Additionally, challenged consumer confidence has adversely impacted consumer spending for home remodeling and improvement projects.”
Therefore, Bready said, “Nortek continues to focus on cost-reduction initiatives, manufacturing-efficiency improvements and strategic-sourcing actions – which, together with conservation of cash, will partially offset the effects of lower volume and higher commodity costs.”
Meanwhile, NTK Holdings Inc. – the parent of Nortek Holdings Inc., which is the parent of Nortek Inc. – posted a net loss of $579.7 million compared with its revised third-quarter profit of $37.6 million. (NTK’s balance sheet is similar to Nortek’s, except for certain senior debt and deferred compensation costs not shared by its subsidiaries.) Excluding the $600 million goodwill-impairment charge, NTK would have had third-quarter earnings of $20.3 million.
Interest expenses rose 15.09 percent to $53.4 million, while investment income fell 66.67 percent to $200,000 and the company’s provision against income taxes increased 640 percent to $3.7 million from the year-ago $500,000.
The company’s planned initial public offering (IPO) – tabled in the third quarter of last year (READ MORE) – remains on hold.
“While we expect the difficult housing market will continue into 2009, NTK Holdings is proactively reducing its cost structure and focusing on cash generation and rationalizing its businesses,” Bready said.
“NTK Holdings plans to maintain its leadership position in these difficult markets, while remaining poised for participation, long-term, in improving home improvement and residential building markets.”
NTK Holdings Inc. is a maker of branded residential and commercial merchandise including HVAC, ventilation and home security and technology products through its Nortek Holdings Inc. and Nortek Inc. subsidiaries. Additional information can be found at www.nortek-inc.com.
