Bad Timing for Nortek Bankruptcy Announcement

I’d never do business with a company whose sales pitch is “those other guys are going out of business so you should switch to us.” If your product and service do not sell me, scare tactics certainly will not!

Some very scary things from the press release. Also the timing is very concerning. They announce this days before the largest industry show that the majority of thier lines work within? I see many changes from this and my experience has been that 12 months from now this group of lines, firms and management will not look the same. If all the lines are doing well, profitable and “well supported with cash on hand” then I am very confused as an investment person. If cash on hand is strong, then how did they accumulate in excess o $1B in debt. Something is very wrong and as the old saying goes, “you can put lipstick on a pig, but its still a pig.”

Im not saying they are going anywhere but all is not well. As for competition they will feast on this no matter what they say or products are introduced. A dealer hates risk and when you combine new product, associated normal risk AND financial risk they will be very slow to adopt.

They couldn’t really help the timing. With all of its public debt, Nortek is like a public company and they have to announce when they have to announce.

Nortek brands such as Elan, Speakercraft & Niles (to name but a few) have very strong products, brand recognition and are not likely going anywhere!  They are valuable assets!  Anyone can guess how the structure (or ownership!) may change but dealers should stay focused on their own businesses and remain loyal to these companies who are committed to the successes of their dealers and the channel.  They will all come through this unfortunate distraction.

Competitors will say what they will.
Good competitors don’t talk. That’s what makes them such good competitors, they treat everyone with respect.

If you feel Nortek and their companies have supported you and your clients for years, you have a personal decision to make. You can put a nail in their coffin while they are still living or you can literally “pitch in” and take some responsibility. This is much bigger than a company, a group of companies or our channel..

Yes, this past week at CEDIA our parent company, NTK Holdings, announced a debt restructuring plan. There was much speculation in the media surround this announcement, but here is the bottom line from my perspective.

Under the terms of a pre-packaged Chapter 11 filing this month, much of NTK Holding’s outstanding debt will be converted into equity. This reduces interest payments due to creditors, strengthens the balance sheet and improves cash-flow in the organization. Any time debt is converted to equity an organization’s overall financial strength is improved – providing working capital to help grow the business (including the possibility of new acquisitions down the road).

Although we did not attend the CEDIA show this year – ELAN, Sunfire, HomeLogic & ATON will continue to offer the same high level of products, programs and services that you have come to expect from us. Since the management buyout of ELAN from Square D in 1995 and subsequent sale to Nortek in 2001 we have enjoyed year over year sustained profitability, including 2009. We continue to heavily invest in R & D and new product developments and this year has been no exception.

We have been a long time supporter of CEDIA and have displayed product at each show for the last 18 years. This year we tried something different. We made a conscious decision to spend the trade show budget in the first half of the year on our “takin’ it to the streets” tour.  (In a tough year - why wait till September to get out in front of people?) We traveled to 50 cities - visiting our dealers where they live. We met face to face with over 2,500 individuals, spending 3 hours with each discussing our 2009 products, programs and sharing ideas on how to deal with the tough economic climate we all face.  We feel this was the right decision for 2009, but next year we do plan on attending the CEDIA show.
I hope this sheds some additional light on the subject.

Sincerely,

Bob Farinelli

President
ELAN Home Systems
Sunfire
Homelogic
ATON

ATON

Bob, thanks for chiming in!