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Nortek Reports First Quarter 2016 Results

PROVIDENCE, RI, May 12, 2016 (Marketwired via COMTEX) -- Delivers Strong Year-Over-Year Net Sales and Earnings Growth

PROVIDENCE, RI--(Marketwired - May 12, 2016) - Nortek, Inc. NTK, -0.45% a global diversified industrial company with leading brands and innovative air management and technology-driven solutions for residential and commercial applications, today announced financial results for the three-months ended April 2, 2016.

Management Commentary

"We started the year with positive momentum, posting solid first quarter financial performance led by market demand, innovation across our businesses and the benefits of our transformation efforts," said President and Chief Executive Officer Michael J. Clarke. "We were especially pleased to deliver strong organic net sales growth of 8% and organic adjusted EBITDA growth of 31% over the prior year period. Strength was broad-based, with Air Quality, Security, Ergonomics and HVAC all posting double-digit organic net sales growth compared to last year. In our HVAC business, we continue to be encouraged by the order trends and our delivery performance is tracking well. Benefitting from our restructuring efforts and the discontinuation of unprofitable product lines, our Custom Air and AV businesses delivered meaningful year-over-year improvements in segment adjusted operating earnings in the first quarter."

Mr. Clarke added, "As anticipated, the positive underlying fundamentals we highlighted last quarter are really shining through in 2016, as evidenced by our strong first quarter performance. Across the business, we are driving product innovation and operational excellence in order to further position Nortek for long-term growth."

First Quarter 2016 Consolidated Highlights

Net sales increased 7.2% to $613.9 million, from $572.7 million in the first quarter of 2015. Excluding acquisitions, divestitures and the impact of foreign exchange translation, net sales increased 8.2%. The first quarter of 2016 included five additional shipping days as compared to the prior year period.

GAAP operating earnings were $28.9 million, compared with $7.7 million in the first quarter of 2015. Excluding the impact of acquisitions and divestitures, operating earnings were $30.3 million, compared with $8.3 million in the first quarter of 2015.

Adjusted operating earnings* were $29.3 million, compared with $15.4 million in the first quarter of 2015. Excluding acquisitions and divestitures, adjusted operating earnings were $30.7 million, compared with $16.0 million in the first quarter of 2015.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)* was $60.2 million, compared with $46.0 million in the first quarter of 2015. Excluding acquisitions and divestitures, adjusted EBITDA was $60.7 million, compared with $46.4 million in the first quarter of 2015.

GAAP net earnings were $2.6 million, or $0.16 per diluted share, compared with a GAAP net loss of $13.9 million, or $0.87 loss per diluted share, in the first quarter of 2015.

Free cash flow, which is defined as net cash used in operating activities minus capital expenditures, was negative $16.4 million, compared with negative $65.4 million in the first quarter of 2015.

As of April 2, 2016, Nortek had $28.5 million of unrestricted cash and cash equivalents on its balance sheet, compared with $24.6 million on December 31, 2015.

As of April 2, 2016, Nortek had $64.0 million of borrowings outstanding under its ABL facility. Nortek had $44.0 million of borrowings outstanding under its ABL facility on December 31, 2015.

* See appendix for reconciliation to most comparable GAAP equivalent.

First Quarter 2016 Segment Highlights

Net sales in the Air Quality & Home Solutions (AQH) segment increased 9.4% (11.6% on a constant currency basis) compared with the first quarter of 2015. The increase reflected growth in all regions and channels, driven mainly by strong demand for new products and market growth.

In the Residential & Commercial HVAC (RCH) segment, net sales increased 10.3% (11.3% on a constant currency basis) from the first quarter of 2015. The increase was primarily driven by higher volume in the residential business, partially offset by lower commercial sales, including the impact of the mild weather experienced in this year's first quarter.

Net sales in the Custom & Commercial Air Solutions (CAS) segment decreased 5.1% (4.6% on a constant currency basis) compared with the first quarter of 2015. The constant currency decrease was mainly attributable to the impact of exiting unprofitable product lines in 2015, partially offset by increased demand for air handler solutions in the healthcare and commercial markets.

In the Security & Control Solutions (SCS) segment, net sales increased 14.4% (13.0% excluding the Numera acquisition) from the first quarter of 2015. The increase was mainly attributable to higher volume with our largest OEM customer, as well as strong demand from distributor and dealer accounts.

Net sales in the Audio, Video & Control Solutions (AVC) segments decreased 17.8% (6.5% excluding the divested TV One business) compared with the first quarter of 2015. The organic decrease was primarily driven by lower sales of commercial A/V products, which is a product category the Company is rationalizing.

In the Ergonomic & Productivity Solutions (ERG) segment, net sales increased 16.4% (13.6% excluding the Anthro acquisition) from the first quarter of 2015. The organic increase primarily reflects continued strong demand for Ergotron branded sit/stand workstations and medical carts.

Outlook

Mr. Clarke added, "Over the past few years, we have made significant investments to improve our operations and reposition the business for long-term, sustainable growth. The benefits from these investments are showing up and we're feeling really good about our start to the year and momentum across the business. With an improved cost structure, a favorable outlook for our major end markets, and a number of innovative products hitting the market, we are well positioned to deliver solid growth in both reported and adjusted operating earnings, as well as cash flow, in 2016. While we face some top-line headwinds, mainly related to exiting unprofitable product lines, we also expect to deliver overall growth in net sales, at constant currency, in 2016."

Conference Call Details

Nortek has scheduled a conference call to review its first quarter 2016 results tomorrow, May 13, 2016, at 9:00 a.m. ET. Those who wish to listen to the conference call webcast should visit the Investor Relations section of the Company's website at www.nortek.com. The live call also can be accessed by dialing (866) 405-1203 or (201) 689-8432 prior to the start of the call. For those who are unable to listen to the live call, the webcast will be archived on the Company's website. An accompanying slide presentation also will be available on the website.

About Nortek

Nortek is a global, diversified industrial company whose many market-leading brands deliver broad capabilities and a wide array of innovative, technology-driven products and solutions for lifestyle improvement at home and at work. The Company's broad array of offerings includes ventilation products such as range hoods and bathroom fans, security and audio/video solutions, heating and cooling products, air management systems, and ergonomic and productivity solutions.

As used herein, the term "Nortek" refers to Nortek, Inc., together with its subsidiaries, unless the context indicates otherwise. This term is used for convenience only and is not intended as a precise description of any of the separate corporations, each of which manages its own affairs.

Safe Harbor Statement

This press release includes statements that constitute "forward-looking" statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. When used in this press release, words such as "anticipate," "believe," "could," "estimate," "expect," "feel," "intend," "may," "plan," "potential," "project," "seek," "should," "will," or "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements are based on Nortek's current plans and expectations and involve risks and uncertainties, over which we have no control, that could cause actual future activities and results of operations to be materially different...


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