Nortek outlines financial performance forecast through Dec. 31, 2014

By Caroline Salls

Pittsburgh, Dec. 2 - Nortek, Inc. announced estimates of its projected financial performance through Dec. 31, 2014 prepared in connection with its pre-packaged plan of reorganization, according to an 8-K filed with the Securities and Exchange Commission.

Under the financial projections:

• The company's forecast estimates that revenues will increase to $2.5 billion in 2014 from $1.9 billion in 2010, driven by stabilization of the residential marketplace and increased consumer discretionary spending;

• Nortek expects that EBITDA will begin increasing in 2010 to $158 million and will eventually reach $250 million in 2014, which would constitute a return to 2007 performance levels;

• The forecast estimates that gross margins will increase to 28% in 2014 from 26.5% in 2009 based on the leverage from fixed expenses, partially offset by increased material expense;

• The forecast estimates that capital expenditures will decrease to $16 million in 2009 from $25 million in 2008 and will rebound to $32 million in 2010 because of a renewed shift toward capital projects, such as manufacturing automation and new products.

From 2011 to 2014, the forecast expects relatively level capital expenditure outlays ranging from $32 million to $37 million per year;

• The forecast estimates that net working capital as a percentage of net sales will increase to 12.2% in 2014 from 10% in 2009 based on assumptions about segment-level receivables, inventory and payables;

• The company has implemented an SG&A reduction program that management expects will reduce annual expenditures by an amount between $60 million and $70 million in 2009 over 2008.

Following these initiatives, the forecast estimates SG&A expenditures to grow about 3% to 5% per year; and

• The forecast estimates an overall growth rate in revenues of 4.7% in 2010 over 2009, driven by a turnaround in the demand for the company's residential-related products.

The forecast estimates overall sales growth of 9% in 2011, which is expected to result from improved market conditions impacting Nortek's residential HVAC, residential ventilation products, home technology products and commercial HVAC segments.

Overall growth is projected to be stable for 2012 through 2014 at 5% to 6% per year.

Nortek said the forecast was prepared based on the assumption that it will emerge from Chapter 11 bankruptcy by Dec. 31.

Nortek, a Providence, R.I.-based manufacturer of residential and commercial ventilation, HVAC and home technology convenience and security products, filed for bankruptcy on Oct. 21 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 09-13632.

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