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Nortek Reports Higher Q4 Sales, Narrower Loss

3/31/2011 01:15:01 PM Eastern
Providence, R.I. - Nortek, the parent of multiple residential- and commercial-system suppliers, reported higher sales and a narrower net loss in the fourth quarter.

Nortek posted a 7.9 percent sales gain to $462.8 million in quarter ended Dec. 31, 2010 compared with the prior year's final quarter.

The net loss of $13.2 million was lower than the year-ago $56.7 million loss before income taxes and before a one-time 2009 fourth-quarter pre-tax gain on reorganization items, which involved its emergence from Chapter 11 in 2009.

Operating earnings were $12.6 million, compared with a year-ago operating loss of $31.2 million.

For the full 2010 fiscal year ending December, sales were up 5 percent to $1.9 billion, and operating earnings hit $12.6 million, compared with a fiscal 2009 operating loss of $204.6 million. The company posted a narrower full-year net loss of $25 million, compared with a year-ago net loss of $343.6 million before income taxes and one-time reorganization items.

"Our continued focus on operational efficiency and working capital improvement contributed to our performance," said chairman/CEO Richard Bready of the company's 2010's performance, even though the majority of the company's markets remain challenging.

In the company's residential technology segment, 2010 sales rose 15.7 percent for the full year, and the segment reversed 2009's operating losses of $274 million to post operating earnings of $12.1 million.

Although the technology segment's 2010 net sales increased 15.7 percent to $463.6 million, the gain was "primarily" the result of two factors, the company noted. One was the addition of a new customer that contributed $52.1 million of the $62.8 million net sales increase. Another factor was the late-year acquisition of mounting-product maker Ergotron, contributing about $4.2 million of net sales in 2010.

Within the tech segment, the company recorded 2010 net expenses of $2.8 million to consolidate Niles Audio, Elan Home Systems, and Xantech into The AVC Group to increase operational efficiencies. The expenses include severance and the consolidation of select facilities. The company expects to spend another $900,000 in the first half of 2011 on these efforts.

For this year's first quarter and for the full year, Nortek forecasts a challenging business environment. "We expect the housing markets will improve marginally in 2011 after a slow first-quarter start," said Bready. "However, we have concerns that the effects of continued low consumer confidence, high unemployment levels and a continued high level of foreclosures will continue to depress the housing markets. In addition, the non-residential markets, which declined further in 2010, are expected to remain weak throughout 2011. These continued depressed market conditions, together with commodity cost pressures, will challenge 2011 performance."

Bready noted that some of the improvement in company-wide fourth-quarter sales and earnings was due to announced price increases effective Jan. 1 and to the uncertainly over product availability in the first quarter of residential HVAC products.  The sales shift "will have the effect of reducing first quarter 2011 net sales by approximately $10 million to $15 million and operating earnings by approximately $5 million to $7 million," the company said.

Other first-quarter challenges include housing starts and new home sales falling 9 percent and 22 percent, respectively, during the first two months of the year while sales of existing homes were flat.

Despite the challenges, the company said it would "fund necessary capital investments that will improve our business operations." In 2010, the company spent $19.8 million on capital expenditures and in 2011 plans to spend $25 million to $30 million.

Nortek's residential brands include Niles Audio, Xantech, Elan, Gefen, Omnimount, Panamax, SpeakerCraft and others.
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