Nortek ends 2012 quarter with $145 million cash, reduces and refinances debt in fourth quarter

By Lisa Kerner

Charlotte, N.C., March 15 - Nortek Inc.'s fourth quarter "was a solid conclusion to 2012," said chief executive officer Michael Clarke during the company's earnings call on Friday.

"Our growth and profitability for 2012 was substantial," said Clarke, noting that operating earnings and net operating cash flow more than doubled. "In addition to improving our cash conversion cycle and increasing cash from operations, we reduced our debt and restructured the balance sheet by refinancing our term loan."

"This was the sixth straight quarter in which Nortek generated positive cash provided by operating activities," said chief financial officer Al Hall on the call.

"Cash flow provided from lower levels of inventory was $46 million for the year as compared to $2 million provided in 2011.

"On Oct. 18, 2012, we sold $235 million principal amount of our existing 8½ notes due in 2021 for $252 million in cash and recorded a $6.4 million pre-tax loss on debt refinancing in the fourth quarter," said Hall.

Gross proceeds were used to repay an equal principal amount of its existing first term loan facility.

As of Dec. 31, Nortek had $144.7 million of unrestricted cash and cash equivalents on its balance sheet, compared with $58.2 million on Dec. 31, 2011.

In addition to cash, Nortek ended the year with no borrowings under its ABL. However, Hall said Nortek expects to fund its previously announced acquisition of 2GIG Technologies, Inc., valued at $135 million, with cash and borrowings under the ABL.

Hall said Nortek's strong liquidity enabled the company to capitalize on growth opportunities.

Financial highlights

Consolidated cash from operating activities in the quarter was $26 million versus $47 million in 2011, said Hall, and for the full year, consolidated cash from operations rose by $83 million.

Fourth-quarter net sales were down about $30 million at $505.4 million. Net sales for the year were up 2.8% at $2.2 billion.

Operating earnings for the quarter were $15.2 million, compared with $26.4 million in the fourth quarter of 2011. Full-year operating earnings were $127.6 million, compared with $63.1 million in 2011.

Net loss for the fourth quarter of 2012 was $12.5 million, or $0.82 loss per share, versus a net loss for the fourth quarter of 2011 of $0.8 million, or $0.05 loss per share.

For 2012, net earnings were $9.5 million, or $0.61 per diluted share, including the $6.4 million pre-tax loss from debt retirement, compared with a net loss for 2011 of $55.9 million, or $3.70 loss per share, including a $33.8 million pre-tax loss on debt refinancing.

Interest expense for 2012 was $96.5 million, compared with $105.6 million in 2011. Nortek attributed the decrease to the impact of refinancing over the last two years and the paydown of the company's asset-based lending facility.

Nortek is a Providence, R.I., manufacturer of residential and commercial building products.

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