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Nortek Posts Second-Quarter 2014 Results [Manufacturing Close - Up]
[August 22, 2014]

Nortek Posts Second-Quarter 2014 Results [Manufacturing Close - Up]


(Manufacturing Close - Up Via Acquire Media NewsEdge) Nortek released financial results for the three months ended June 28.

In its release on August 19, the Company noted second-quarter 2014 consolidated highlights: -Net sales increased to $718.6 million, from $630.7 million in the second quarter of 2013. The Company's acquisition of Thomas & Betts' HVAC business (Reznor) contributed $23.8 million to net sales during the second quarter of 2014.



-GAAP operating loss was $32.1 million, compared with GAAP operating earnings of $40.4 million in the second quarter of 2013. Second-quarter 2014 GAAP operating loss includes the impact of a $80.4 million non-cash impairment charge related to the Company's audio-video businesses, which were previously included in the Technology Solutions segment; the combined results of the audio- video businesses are now reported as the AV segments.

-Adjusted operating earnings* were $59.2 million, compared with $50.5 million in the second quarter of 2013. Adjusted operating margin increased to 8.2 percent, from 8.0 percent a year earlier.


-Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)* rose to $88.6 million, from $81.5 million in the second quarter of 2013. Adjusted EBITDA margin decreased to 12.3 percent from 12.9 percent a year earlier.

-The acquisition of Reznor, which closed on April 30, contributed a $1.4 million GAAP operating loss and a $1.0 million adjusted operating loss including the impact of accounting for the fair value of assets acquired and liabilities assumed. Reznor contributed $2.8 million to the increase in adjusted EBITDA for the second quarter.

-GAAP net loss was $46.2 million, or $2.97 loss per diluted share, compared with GAAP net income of $11.5 million, or $0.73 earnings per diluted share, in the second quarter last year.

-Net cash used in operating activities was $7.9 million, compared with $28.3 million of net cash provided by operating activities in the second quarter of 2013. Capital expenditures were $10.4 million, compared with $11.2 million in last year's second quarter. Resulting free cash flow was negative $18.3 million, compared with positive $17.1 million in the second quarter of 2013.

-As of June 28, Nortek had $91.3 million of unrestricted cash and cash equivalents on its balance sheet, compared with $80.9 million on December 31, 2013.

-As of June 28, Nortek had $95.0 million of borrowings outstanding under its ABL facility, compared with no borrowings on December 31, 2013.

-The increase in ABL facility borrowings, compared with December 31, 2013, primarily related to the funding of seasonal working capital needs.

Management Comments on the Second Quarter "Nortek's sales growth accelerated in the second quarter, driven by strong demand for our home security and automation products, as well as our air management solutions for non-residential applications," said President and Chief Executive Officer Michael J. Clarke. "The Reznor business we acquired during the second quarter also contributed to our growth." "Net sales were up from the second quarter last year in all five of our major business segments reflecting organic and acquisition related growth," Clarke said. "Adjusted EBITDA margins increased year-over-year in our Technology Solutions (TECH), Custom and Engineered Solutions (CES), Residential Heating and Cooling (RHC) and Display Mount Solutions (DMS) segments." "In the Residential Ventilation (RESV) segment, net sales were up slightly from the same period last year, led by higher sales in the U.S. into the appliance and retail channels," Clarke said. "In the RHC segment, sales of residential HVAC products were down slightly year-over-year following a strong first quarter. Net sales for RHC as a whole increased to $159.9 million, from $137.3 million in the second quarter of 2013, driven by sales contributed from the Reznor acquisition." "Our TECH segment, which now excludes our audio-video businesses, had a strong quarter, driven by increased shipments of security, home automation and access control products, in part due to a shift in order timing from the first to the second quarter by one of our major customers," said Clarke. "Net sales in the TECH segment increased 46.7 percent to $161.5 million, from $110.1 million in the second quarter last year. This represented strong growth even after considering the shift in order timing." "Our DMS segment posted its third consecutive quarter of year- over-year growth, as sales increased slightly to $69.3 million from $69.0 million in the second quarter of 2013," Clarke said. "Net sales in our CES segment increased 16.2 percent to $139.4 million, from $120.0 million in the year-earlier period reflecting solid growth in demand for our products in the semiconductor cleanroom, data center and commercial office markets." "The majority of our segments improved their adjusted EBITDA margins in the second quarter," said Clarke. "This improvement reflected the benefit we realized from the leverage of our fixed expenses on higher sales levels, the lower costs achieved as a result of our strategic sourcing initiatives and a planned favorable mix shift in our DMS segment." "Management has made the strategic decision to separately manage the audio-video businesses that were previously part of our TECH segment," Clarke said. "We are focusing on the structure of the businesses and improving operational efficiencies to best position the businesses for the future." Management Comments on the Outlook "Nortek is on track to achieve solid growth and improved profitability in 2014," Clarke said. "We expect to see improvement in our residential markets in the second half, with a sense of caution in light of some of the recent housing-related forecasts. We are also cautious in our overall outlook for non-residential construction activity in the second half. Recognizing the challenging market environment, we are focused on driving growth across the business. At the same time, we expect to realize a portion of the benefits of our operational initiatives this year with the balance being achieved over the next couple of years. As a result, Nortek is well-positioned to continue delivering improved results, especially as our end markets pick up." More information: www.nortekinc.com ((Comments on this story may be sent to [email protected])) (c) 2014 ProQuest Information and Learning Company; All Rights Reserved.

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