Call scheduled for Wednesday, February 2, 2022 at 8:00 a.m.
Eastern Time
Zurn Water Solutions Corporation (NYSE:ZWS):
Fourth Quarter
Highlights
- On October 4, 2021 Zurn Water Solutions Corporation ("Zurn" or
the "Company"), formerly known as Rexnord Corporation, completed
the spin-off of its Process & Motion Control ("PMC") business
in a Reverse Morris Trust transaction (the "Transaction").
- Results presented represent the standalone Zurn business (PMC
reported as discontinued operations in all periods).
- Net sales in the quarter increased 23% to $232 million compared
with $188 million in last year’s December quarter (+16% core
sales(1), +7% acquisitions).
- Net income from continuing operations was $3 million (diluted
EPS from continuing operations of $0.02), inclusive of the $20
million loss on debt extinguishment in conjunction with the
Transaction, compared with net income from continuing operations of
$6 million (diluted EPS from continuing operations of $0.05) in the
year-ago quarter.
- Adjusted EPS(1) was $0.22 compared with $0.09 in the year-ago
quarter.
- Adjusted EBITDA(1) was $45 million (19.4% of net sales)
compared with $36 million (18.9% of net sales) in last year's
fourth quarter. Both periods were inclusive of $11 million of
corporate costs.
- Net debt leverage of 2.3x as of December 31, 2021. Proforma for
the anticipated $20 million of annual corporate costs, net debt
leverage was 2.0x.
- Completed acquisition of Wade Drains.
Calendar Year 2021
Highlights
- Net sales were $911 million and increased by 22% from the
comparable $746 million in calendar year 2020 (+13% core sales, +8%
acquisitions, +1% foreign currency translation).
- Net income from continuing operations was $50 million (diluted
EPS from continuing operations of $0.40), compared with $29 million
(diluted EPS from continuing operations of $0.23) in calendar year
2020.
- Adjusted EPS was $0.77, compared with $0.50 in the prior
calendar year.
- Adjusted EBITDA was $196 million (21.5% of net sales) compared
with $165 million (22.1% of net sales) in calendar year 2020.
Inclusive of $40 million and $35 million of corporate costs in 2021
and 2020, respectively.
Todd A. Adams, Chairman and Chief Executive Officer, commented,
“The fourth quarter completes a transformational year for our
Company as we transitioned from Rexnord Corporation to Zurn Water
Solutions. The transition to Zurn could not have come at a better
time as a solid demand backdrop coupled with the number of organic
growth initiatives we are executing on gives us confidence in our
ability to continue to profitably grow the business. During the
year we saw Zurn core sales grow 13% on top of the core growth we
delivered in 2020 despite the pandemic. This growth further
demonstrates the compounding effect of the growth initiatives we
have implemented over the years focused on expanding into adjacent
markets, leading product innovation, and executing on acquisitions
focused on broadening our product portfolio and increasing
addressable market share, all while having best in class margins.
With our broadest sustainable product portfolio of water management
solutions to improve health, human safety and the environment, we
are confident in our ability to continue to create shareholder
value in 2022 and beyond."
"In the fourth quarter, demand trends in our Zurn business
remained strong and year over year sales grew 23% with our core
sales growing 16%, which was slightly better than our expectations.
The core growth we delivered in the quarter was on top of
double-digit core sales growth in the prior year fourth quarter.
Operationally, we continue to execute well as we delivered adjusted
EBITDA margins, excluding corporate costs, of 24% which were
in-line with our expectations provided 90 days ago."
"In the coming weeks you will see us release our first
sustainability report as a stand-alone water business. Operating as
a pure-play water company our ESG profile and impact will be more
visible and heightened. In the report you will see us publish
specific ESG related targets, including commitments to reduce
greenhouse gas emissions and energy use and goals for diversity
among leadership and suppliers. We are excited to continue to build
on the momentum we have around ESG in our company."
March Quarter and 2022
Outlook
Adams continued, “For the first quarter of 2022 we expect Zurn
total sales to increase year over year by a high teens percentage,
Adjusted EBITDA margin, excluding corporate costs, to range between
24% and 24.5% and for our corporate expenses to approximate $7
million. We continue to expect double digit core growth for 2022
with robust Adjusted EBITDA margins and strong free cash flow."
Fourth Quarter 2021
Overview
Zurn net sales were $232.3 million during the three months ended
December 31, 2021, an increase of 23% year over year. Excluding a
7% increase in net sales resulting from our prior-year acquisition
of Hadrian and the current quarter acquisition of Wade Drains, core
sales increased 16% year over year driven by increased demand
across nearly all of our product categories.
Zurn income from operations excluding corporate costs of $24.2
million was $37.4 million or 16.1% of net sales. Income from
operations as a percentage of net sales decreased by 370 basis
points year over year as the favorable impact of year over year
sales growth was offset primarily by the year-over-year change in
the adjustment to state inventories at last-in-first-out cost, the
mix impact of the Hadrian acquisition in the prior year fourth
quarter and the Wade Drains acquisition in the current year fourth
quarter, and higher year-over-year non-cash stock based
compensation expense.
Adjusted EBITDA(1) excluding corporate costs of $10.7 million in
both periods was $55.8 million, or 24.0% of net sales during the
three months ended December 31, 2021 compared to $46.2 million, or
24.5% of net sales during the three months ended December 31,
2020.
(1) Refer to "Non-GAAP Measures" for a definition of this
non-GAAP metric, as well as the accompanying reconciliations to
GAAP.
Non-GAAP Financial Measures
The following non-GAAP financial measures are utilized by
management in comparing our operating performance on a consistent
basis. We believe that these financial measures are appropriate to
enhance an overall understanding of our underlying operating
performance trends compared to historical and prospective periods
and our peers. Management also believes that these measures are
useful to investors in their analysis of our results of operations
and provide improved comparability between fiscal periods as well
as insight into the compliance with our debt covenants. Non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, financial information calculated in accordance
with GAAP. Investors are encouraged to review the reconciliation of
these non-GAAP measures to their most directly comparable GAAP
financial measures. A reconciliation of non-GAAP financial measures
presented above to our GAAP results has been provided in the
financial tables included in this press release.
Core Sales
Core sales excludes the impact of acquisitions (such as Hadrian
and Wade Drains), divestitures and foreign currency translation.
Management believes that core sales facilitates easier and more
meaningful comparison of our net sales performance with prior and
future periods and to our peers. We exclude the effect of
acquisitions and divestitures because the nature, size and number
of acquisitions and divestitures can vary dramatically from period
to period and between us and our peers, and can also obscure
underlying business trends and make comparisons of long-term
performance difficult. We exclude the effect of foreign currency
translation from this measure because the volatility of currency
translation is not under management's control.
Adjusted Net Income and Adjusted Earnings Per Share
Adjusted net income and adjusted earnings per share (calculated
on a diluted basis) exclude actuarial gains and losses on pension
and postretirement benefit obligations, restructuring and other
similar charges, gains or losses on divestitures, discontinued
operations, gains or losses on extinguishment of debt, the impact
of acquisition-related fair value adjustments in connection with
purchase accounting, amortization of intangible assets, the
adjustment to state inventories at last-in first-out costs, and
other non-operational, non-cash or non-recurring losses, net of
their income tax impact. The tax rates used to calculate adjusted
net income and adjusted earnings per share are based on a
transaction specific basis. We believe that adjusted net income and
adjusted earnings per share are useful in assessing our financial
performance by excluding items that are not indicative of our core
operating performance or that may obscure trends useful in
evaluating our continuing results of operations. All references to
Net Income and EPS within this earnings release refer to net income
attributable to Zurn Water Solutions common stockholders and net
income per diluted share attributable to Zurn Water Solutions
common stockholders, respectively.
EBITDA
EBITDA represents earnings from continuing operations before
interest and other debt related activities, taxes, depreciation and
amortization. EBITDA is presented because it is an important
supplemental measure of performance and it is frequently used by
analysts, investors and other interested parties in the evaluation
of companies in our industry. EBITDA is also presented and compared
by analysts and investors in evaluating our ability to meet debt
service obligations. Other companies in our industry may calculate
EBITDA differently. EBITDA is not a measurement of financial
performance under GAAP and should not be considered as an
alternative to cash flow from operating activities or as a measure
of liquidity or an alternative to net income as indicators of
operating performance or any other measures of performance derived
in accordance with GAAP. Because EBITDA is calculated before
recurring cash charges, including interest expense and taxes, and
is not adjusted for capital expenditures or other recurring cash
requirements of the business, it should not be considered as a
measure of discretionary cash available to invest in the growth of
the business.
Adjusted EBITDA
“Adjusted EBITDA” is the term we use to describe EBITDA as
defined and adjusted in our credit agreement, which is net income,
adjusted for the items summarized in the Reconciliation of GAAP to
Non-GAAP Financial Measures table below. Adjusted EBITDA is
intended to show our unleveraged, pre-tax operating results and
therefore reflects our financial performance based on operational
factors, excluding non-operational, non-cash or non-recurring
losses or gains. In view of our debt level, it is also provided to
aid investors in understanding our compliance with our debt
covenants. Adjusted EBITDA is not a presentation made in accordance
with GAAP, and our use of the term Adjusted EBITDA varies from
others in our industry. In addition to Adjusted EBITDA we also use
the term "Adjusted EBITDA excluding corporate costs" which is used
to described our total Adjusted EBITDA at the operating level
without being burdened by the EBITDA costs associated with our
corporate functions. Adjusted EBITDA should not be considered as an
alternative to net income, income from operations or any other
performance measures derived in accordance with GAAP. Adjusted
EBITDA has important limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for,
analysis of our results as reported under GAAP. For example,
Adjusted EBITDA does not reflect: (a) our capital expenditures,
future requirements for capital expenditures or contractual
commitments; (b) changes in, or cash requirements for, our working
capital needs; (c) the significant interest expenses, or the cash
requirements necessary to service interest or principal payments,
on our debt; (d) tax payments that represent a reduction in cash
available to us; (e) any cash requirements for the assets being
depreciated and amortized that may have to be replaced in the
future; or (f) the impact of earnings or charges resulting from
matters that we and the lenders under our credit agreement may not
consider indicative of our ongoing operations. In particular, our
definition of Adjusted EBITDA allows us to add back certain
non-cash, non-operating or non-recurring charges that are deducted
in calculating net income, even though these are expenses that may
recur, vary greatly and are difficult to predict and can represent
the effect of long-term strategies as opposed to short-term
results.
In addition, certain of these expenses can represent the
reduction of cash that could be used for other corporate purposes.
Further, although not included in the calculation of Adjusted
EBITDA below, the measure may at times allow us to add estimated
cost savings and operating synergies related to operational changes
ranging from acquisitions to dispositions to restructurings and/or
exclude one-time transition expenditures that we anticipate we will
need to incur to realize cost savings before such savings have
occurred. Further, management and various investors use the ratio
of total debt less cash to Adjusted EBITDA (which includes a full
pro-forma last-twelve-month impact of acquisitions), or "net debt
leverage", as a measure of our financial strength and ability to
incur incremental indebtedness when making key investment decisions
and evaluating us against peers. Lastly, management and various
investors use the ratio of the change in Adjusted EBITDA divided by
the change in net sales (referred to as “incremental margin” in the
case of an increase in net sales or “decremental margin” in the
case of a decrease in net sales) as an additional measure of our
financial performance and is utilized when making key investment
decisions and evaluating us against peers.
Free Cash Flow
We define Free Cash Flow as cash flow from operations less
capital expenditures, and we use this metric in analyzing our
ability to service and repay our debt and to forecast future
periods. However, this measure does not represent funds available
for investment or other discretionary uses since it does not deduct
cash used to service our debt. We define Free Cash Flow Conversion
as Free Cash Flow divided by net income.
Return on Invested Capital (“ROIC”)
ROIC is used because we believe it is an important supplemental
measure of financial performance and it is also currently a
performance measure under our long-term incentive plan. ROIC is
frequently used by analysts, investors and other interested parties
in the evaluation of companies in our industry. ROIC is also used
by investors and analysts to evaluate management’s deployment of
capital to create shareholder value. We define ROIC as tax-effected
net operating income for the last 12 months divided by average
total invested capital over a rolling four-quarter period. Total
invested capital is defined as shareholders equity plus debt, less
cash and cash equivalents. Other companies may not define or
calculate ROIC in the same way.
About Zurn Water Solutions
Headquartered in Milwaukee, Wisconsin, Zurn Water Solutions is a
growth oriented, pure-play water business that designs, procures,
manufactures and markets what we believe is the broadest
sustainable product portfolio of water management solutions to
improve health, human safety and the environment. The Zurn product
portfolio includes professional grade water control and safety,
water distribution and drainage, finish plumbing, hygienic and
environmental and site works products for public and provide
spaces. Additional information about the Company can be found at
www.zurnwatersolutions.com.
Conference Call Details
Zurn Water Solutions will hold a conference call on Wednesday,
February 2, 2022, at 8:00 a.m. Eastern Time to discuss its fourth
quarter 2021 results, provide a general business update and respond
to investor questions. Zurn Chairman and CEO, Todd Adams, and
Senior Vice President and CFO, Mark Peterson, will co-host the
call. The conference call can be accessed via telephone as
follows:
Domestic toll-free #: 888-510-2359 International toll #:
646-960-0215 Access Code: 7660247
A live webcast of the call will also be available on the
Company's investor relations website. Please go to the website
(investors.zurnwatersolutions.com) at least 15 minutes prior to the
start of the call to register, download and install any necessary
audio software.
If you are unable to participate during the live teleconference,
a replay of the conference call will be available from 10:00 a.m.
Central Time February 2, 2022 until 10:59 p.m. Central Time,
February 9, 2022. To access the replay, please dial 800-770-2030
(domestic) or 647-362-9199 (international). The Conference ID for
the replay is: 7660247. The replay will also be available as a
webcast on the Company’s investor relations website.
Cautionary Statement on Forward-Looking Statements
Information in this release may involve outlook, expectations,
beliefs, plans, intentions, strategies or other statements
regarding the future, which are forward-looking statements. These
forward-looking statements involve risks and uncertainties. All
forward-looking statements included in this release are based on
information available to Zurn Water Solutions Corporation as of the
date of the release, Zurn assumes no obligation to update any such
forward-looking statements. The statements in this release are not
guarantees of future performance, and actual results could differ
materially from current expectations. Numerous factors could cause
or contribute to such differences. Please refer to “Risk Factors”
and “Cautionary Notice Regarding Forward-Looking Statements” in our
transition report on Form 10-K for the period ended December 31,
2020, as well as the Company’s subsequent annual, quarterly and
current reports filed on Forms 10-K, 10-Q and 8-K from time to time
with the Securities and Exchange Commission for a further
discussion of the factors and risks associated with the
business.
Zurn Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Operations
(in Millions, except share and
per share amounts)
(Unaudited)
Three Months Ended
Year Ended
December 31,
2021
December 31,
2020
December 31,
2021
December 31,
2020
Net sales
$
232.3
$
188.3
$
910.9
$
746.1
Cost of sales
147.1
107.4
537.7
407.9
Gross profit
85.2
80.9
373.2
338.2
Selling, general and administrative
expenses
64.1
57.1
239.0
206.1
Restructuring and other similar
charges
2.1
0.8
3.7
2.0
Amortization of intangible assets
5.8
5.7
23.5
22.4
Income from operations
13.2
17.3
107.0
107.7
Non-operating expense:
Interest expense, net
(5.1
)
(10.1
)
(34.7
)
(45.9
)
Loss on the extinguishment of debt
(20.4
)
—
(20.4
)
—
Actuarial gain (loss) on pension and
postretirement benefit obligations
1.2
(0.3
)
1.2
(21.2
)
Other income (expense), net
0.1
(1.7
)
(0.7
)
(2.5
)
(Loss) income before income taxes
(11.0
)
5.2
52.4
38.1
Benefit (provision) for income taxes
13.9
0.4
(2.7
)
(9.5
)
Net income from continuing operations
2.9
5.6
49.7
28.6
(Loss) income from discontinued
operations, net of tax
(69.3
)
31.6
71.2
118.1
Net (loss) income attributable to Zurn
$
(66.4
)
$
37.2
$
120.9
$
146.7
Basic net (loss) income per share
attributable to Zurn common stockholders:
Continuing operations
$
0.02
$
0.05
$
0.41
$
0.24
Discontinued operations
$
(0.56
)
$
0.26
$
0.59
$
0.98
Net income attributable to Zurn
$
(0.53
)
$
0.31
$
1.00
$
1.21
Diluted net (loss) income per share
attributable to Zurn common stockholders:
Continuing operations
$
0.02
$
0.05
$
0.40
$
0.23
Discontinued operations
$
(0.54
)
$
0.25
$
0.57
$
0.96
Net income attributable to Zurn
$
(0.52
)
$
0.30
$
0.97
$
1.19
Weighted-average number of shares
outstanding (in thousands):
Basic
124,283
121,783
121,493
120,764
Effect of dilutive equity securities
4,443
2,562
3,621
2,688
Diluted
128,726
124,345
125,114
123,452
Zurn Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three Months Ended December
31, 2021
(in Millions)
(Unaudited)
Three Months Ended December
31, 2021
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
232.3
$
—
$
232.3
EBITDA
21.3
23.8
(a)
45.1
Depreciation and amortization
(8.1
)
—
(8.1
)
Income from operations
13.2
23.8
(b)
37.0
(Loss) income before income taxes
(11.0
)
34.4
(c)
23.4
Benefit (provision) for income taxes and
indicated rate
13.9
126.4
%
(8.4
)
24.4
%
5.5
(23.5
) %
Net income from continuing operations
2.9
26.0
28.9
Loss from discontinued operations, net of
tax
(69.3
)
69.3
—
Net (loss) income attributable to Zurn
(66.4
)
95.3
28.9
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Incomebefore Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
2.1
$
2.1
$
2.1
Acquisition-related fair value
adjustment
0.2
0.2
0.2
Stock-based compensation expense
14.3
14.3
—
Last-in-first-out inventory
adjustments
7.2
7.2
7.2
Amortization of intangible assets
—
—
5.8
Other expense, net (1)
—
—
(0.1
)
Actuarial gain on pension and
postretirement benefit obligations
—
—
(1.2
)
Loss on the extinguishment of debt
—
—
20.4
Total Adjustments
$
23.8
$
23.8
$
34.4
(1) Other expense, net, for the periods indicated, consists
primarily of gains and losses from foreign currency transactions,
and the non-service cost components of net periodic benefit credits
associated with our defined benefit plans.
Zurn Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Year Ended December 31,
2021
(in Millions)
(Unaudited)
Year Ended December 31,
2021
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
910.9
$
—
$
910.9
EBITDA
139.7
56.1
(a)
195.8
Depreciation and amortization
(32.7
)
—
(32.7
)
Income from operations
107.0
56.1
(b)
163.1
Income before income taxes
52.4
62.0
(c)
114.4
Provision for income taxes and indicated
rate
(2.7
)
5.2
%
(14.8
)
23.9
%
(17.5
)
15.3
%
Net income from continuing operations
49.7
47.2
96.9
Income from discontinued operations, net
of tax
71.2
(71.2
)
—
Net income attributable to Zurn
$
120.9
$
(24.0
)
$
96.9
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
3.7
$
3.7
$
3.7
Acquisition-related fair value
adjustment
0.8
0.8
0.8
Stock-based compensation expense
37.5
37.5
—
Last-in-first-out inventory
adjustments
14.1
14.1
14.1
Amortization of intangible assets
—
—
23.5
Other expense, net (1)
—
—
0.7
Actuarial gain on pension and
postretirement benefit obligations
—
—
(1.2
)
Loss on the extinguishment of debt
—
—
20.4
Total Adjustments
$
56.1
$
56.1
$
62.0
(1) Other expense, net, for the periods indicated, consists
primarily of gains and losses from foreign currency transactions,
and the non-service cost components of net periodic benefit credits
associated with our defined benefit plans.
Zurn Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three Months Ended December
31, 2020
(in Millions)
(Unaudited)
Three Months Ended December
31, 2020
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
188.3
$
—
$
188.3
EBITDA
25.0
10.5
(a)
35.5
Depreciation and amortization
(7.7
)
0.1
(d)
(7.6
)
Income from operations
17.3
10.6
(b)
27.9
Income before income taxes
5.2
7.7
(c)
12.9
Benefit (provision) for income taxes and
indicated rate
0.4
(7.7
) %
(1.9
)
24.7
%
(1.5
)
11.6
%
Net income from continuing operations
5.6
5.8
11.4
Income from discontinued operations, net
of tax
31.6
(31.6
)
—
Net income attributable to Zurn
$
37.2
$
(25.8
)
$
11.4
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
0.8
$
0.8
$
0.8
Acquisition-related fair value
adjustment
0.3
0.3
0.3
Last-in-first-out inventory
adjustments
(1.2
)
(1.2
)
(1.2
)
Stock-based compensation expense
10.6
10.6
—
Supply chain optimization and footprint
repositioning initiatives (d)(1)
—
0.1
0.1
Amortization of intangible assets
—
—
5.7
Other expense, net (2)
—
—
1.7
Actuarial loss on pension and
postretirement benefit obligations
—
—
0.3
Total Adjustments
$
10.5
$
10.6
$
7.7
(1) Represents accelerated depreciation associated with our
strategic supply chain optimization and footprint repositioning
initiatives. (2) Other expense, net, for the periods indicated,
consists primarily of gains and losses from foreign currency
transactions and the non-service cost components of net periodic
benefit credits associated with our defined benefit plans.
Zurn Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Year Ended December 31,
2020
(in Millions)
(Unaudited)
Year Ended December 31,
2020
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
746.1
$
—
$
746.1
EBITDA
138.1
26.8
(a)
164.9
Depreciation and amortization
(30.4
)
0.1
(d)
(30.3
)
Income from operations
107.7
26.9
(b)
134.6
Income before income taxes
38.1
44.1
(c)
82.2
Provision for income taxes and indicated
rate
(9.5
)
24.9
%
(10.4
)
23.6
%
(19.9
)
24.2
%
Net income from continuing operations
28.6
33.7
62.3
Income from discontinued operations, net
of tax
118.1
(118.1
)
—
Net income attributable to Zurn
$
146.7
$
(84.4
)
$
62.3
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
2.0
$
2.0
$
2.0
Acquisition-related fair value
adjustment
2.2
2.2
2.2
Other, net (1)
(0.3
)
(0.3
)
(0.3
)
Last-in-first-out inventory
adjustments
(6.0
)
(6.0
)
(6.0
)
Stock-based compensation expense
28.9
28.9
—
Supply chain optimization and footprint
repositioning initiatives (d)(2)
—
0.1
0.1
Amortization of intangible assets
—
—
22.4
Other expense, net (3)
—
—
2.5
Actuarial loss on pension and
postretirement benefit obligations
—
—
21.2
Total Adjustments
$
26.8
$
26.9
$
44.1
(1) Other, net includes the gains and losses from sale of
long-lived assets. (2) Represents accelerated depreciation
associated with our strategic supply chain optimization and
footprint repositioning initiatives. (3) Other expense, net, for
the periods indicated, consists primarily of gains and losses from
foreign currency transactions and the non-service cost components
of net periodic benefit credits associated with our defined benefit
plans.
Zurn Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three and Twelve Months Ended
December 31, 2021 and December 31, 2020
(in Millions, except share and
per share amounts) (Unaudited)
Three Months Ended
Year Ended
Adjusted EBITDA
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Net (loss) income attributable to Zurn
$
(66.4
)
$
37.2
$
120.9
$
146.7
Loss (income) from discontinued
operations, net of tax
69.3
(31.6
)
(71.2
)
(118.1
)
(Benefit) provision for income taxes
(13.9
)
(0.4
)
2.7
9.5
Actuarial gain (loss) on pension and
postretirement benefit obligations
(1.2
)
0.3
(1.2
)
21.2
Other (income) expense, net (1)
(0.1
)
1.7
0.7
2.5
Loss on the extinguishment of debt
20.4
—
20.4
—
Interest expense, net
5.1
10.1
34.7
45.9
Income from operations
$
13.2
$
17.3
$
107.0
$
107.7
Adjustments
Depreciation and amortization
$
8.1
$
7.7
$
32.7
$
30.4
Restructuring and other similar
charges
2.1
0.8
3.7
2.0
Acquisition-related fair value
adjustment
0.2
0.3
0.8
2.2
Stock-based compensation expense
14.3
10.6
37.5
28.9
Last-in first-out inventory
adjustments
7.2
(1.2
)
14.1
(6.0
)
Other, net (2)
—
—
—
(0.3
)
Subtotal of adjustments
31.9
18.2
88.8
57.2
Adjusted EBITDA
$
45.1
$
35.5
$
195.8
$
164.9
Corporate costs
$
(10.7
)
$
(10.7
)
$
(39.5
)
$
(35.3
)
Adjusted EBITDA before corporate
costs
$
55.8
$
46.2
$
235.3
$
200.2
(1) Other (income) expense, net, for the periods indicated,
consists primarily of gains and losses from foreign currency
transactions and the non-service cost components of net periodic
benefit credits associated with our defined benefit plans. (2)
Other, net includes the gains and losses from the sale of
long-lived assets.
Three Months Ended
Year Ended
Adjusted Net Income and Earnings Per
Share
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Net (loss) income attributable to Zurn
$
(66.4
)
$
37.2
$
120.9
$
146.7
Loss (income) from discontinued
operations, net of tax
69.3
(31.6
)
(71.2
)
(118.1
)
Loss on the extinguishment of debt
20.4
—
20.4
—
Amortization of intangible assets
5.8
5.7
23.5
22.4
Restructuring and other similar
charges
2.1
0.8
3.7
2.0
Supply chain optimization and footprint
repositioning initiatives (1)
—
0.1
—
0.1
Acquisition-related fair value
adjustment
0.2
0.3
0.8
2.2
Last-in first-out inventory adjustment
7.2
(1.2
)
14.1
(6.0
)
Actuarial (gain) loss on pension and
postretirement benefit obligations
(1.2
)
0.3
(1.2
)
21.2
Other (income) expense, net (2)
(0.1
)
1.7
0.7
2.5
Other, net (3)
—
—
—
(0.3
)
Tax effect on above items
(8.4
)
(1.9
)
(14.8
)
(10.4
)
Adjusted net income
$
28.9
$
11.4
$
96.9
$
62.3
GAAP diluted net income per share from
continuing operations
$
0.02
$
0.05
$
0.40
$
0.23
Adjusted earnings per share - diluted
$
0.22
$
0.09
$
0.77
$
0.50
Weighted-average number of shares
outstanding (in thousands)
GAAP basic weighted-average shares
124,283
121,783
121,493
120,764
Effect of dilutive equity securities
4,443
2,562
3,621
2,688
Adjusted diluted weighted-average
shares
128,726
124,345
125,114
123,452
(1) Represents accelerated depreciation associated with our
strategic supply chain optimization and footprint repositioning
initiatives. (2) Other (income) expense, net, for the periods
indicated, consists primarily of gains and losses from foreign
currency transactions and the non-service cost components of net
periodic benefit credits associated with our defined benefit plans.
(3) Other, net includes the gains and losses from the sale of
long-lived assets.
Year Ended
December 31, 2021
December 31, 2020
Cash provided by operating activities
$
223.6
$
320.2
Expenditures for property, plant and
equipment
(23.3
)
(44.2
)
Free cash flow
$
200.3
$
276.0
Zurn Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Comprehensive Income
(in Millions)
(Unaudited)
Three Months Ended
Year Ended
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Net (loss) income attributable to Zurn
$
(66.4
)
$
37.2
$
120.9
$
146.7
Other comprehensive income (loss):
Foreign currency translation
adjustments
2.4
18.4
(4.2
)
21.5
Change in pension and postretirement
defined benefit plans, net of tax
18.6
13.0
18.4
9.1
Total other comprehensive income, net of
tax
$
21.0
$
31.4
$
14.2
$
30.6
Zurn Water Solutions
Corporation and Subsidiaries
Condensed Consolidated Balance
Sheets
(in Millions, except share
amounts)
(Unaudited)
December 31, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
96.6
$
62.3
Receivables, net
144.1
103.6
Inventories
184.5
136.1
Income taxes receivable
33.1
8.5
Other current assets
16.5
11.3
Current assets of discontinued
operations
—
585.9
Total current assets
474.8
907.7
Property, plant and equipment, net
64.4
69.6
Intangible assets, net
179.1
200.3
Goodwill
254.1
244.8
Other assets
105.3
96.6
Non-current assets of discontinued
operations
—
1,882.1
Total assets
$
1,077.7
$
3,401.1
Liabilities and stockholders'
equity
Current liabilities:
Current maturities of debt
$
5.6
$
0.3
Trade payables
105.1
41.3
Compensation and benefits
22.0
13.1
Current portion of pension and
postretirement benefit obligations
1.3
1.4
Other current liabilities
106.4
60.5
Current liabilities of discontinued
operations
—
200.9
Total current liabilities
240.4
317.5
Long-term debt
533.9
1,118.0
Pension and postretirement benefit
obligations
57.3
80.4
Deferred income taxes
3.1
8.0
Other liabilities
116.6
67.3
Non-current liabilities of discontinued
operations
—
370.6
Total liabilities
951.3
1,961.8
Stockholders' equity:
Common stock, $0.01 par value; 200,000,000
shares authorized; shares issued and outstanding:
125,720,068 at December 31, 2021 and
119,549,735 at December 31, 2020
1.3
1.2
Additional paid-in capital
1,436.9
1,392.9
Retained (deficit) earnings
(1,236.9
)
116.0
Accumulated other comprehensive loss
(74.9
)
(73.8
)
Total Zurn stockholders' equity
126.4
1,436.3
Non-controlling interest
—
3.0
Total stockholders' equity
126.4
1,439.3
Total liabilities and stockholders'
equity
$
1,077.7
$
3,401.1
Zurn Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in Millions)
(Unaudited)
Twelve Months Ended
December 31, 2021
December 31, 2020
Operating activities
Net income
$
120.9
$
146.7
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation
44.1
53.2
Amortization of intangible assets
33.4
36.1
Gain on dispositions of long-lived
assets
(10.1
)
(1.8
)
Deferred income taxes
(12.1
)
(14.7
)
Actuarial loss on pension and
postretirement benefit obligations
3.6
37.4
Other non-cash expenses
(3.6
)
3.5
Gain on extinguishment of debt
20.4
—
Stock-based compensation expense
51.4
44.8
Changes in operating assets and
liabilities:
Receivables
(66.6
)
10.8
Inventories
(79.5
)
35.0
Other assets
(7.7
)
23.8
Accounts payable
99.1
(56.4
)
Accruals and other
30.3
1.8
Cash provided by operating activities
223.6
320.2
Investing activities
Expenditures for property, plant and
equipment
(23.3
)
(44.2
)
Acquisitions, net of cash acquired
(17.1
)
(161.4
)
Proceeds from dispositions of long-lived
assets
14.3
9.0
Payment associated with divestiture of
discontinued operations
4.2
—
Cash used for investing activities
(21.9
)
(196.6
)
Financing activities
Proceeds from borrowings of debt
550.0
331.0
Repayments of debt
(1,126.7
)
(336.7
)
Dividend received from Spin-Off of PMC
486.8
—
Cash transferred to PMC related to
Spin-Off
(192.8
)
—
Proceeds from exercise of stock
options
24.9
37.5
Repurchase of common stock
(0.9
)
(140.0
)
Payment of common stock dividends
(36.4
)
(38.6
)
Payment of debt issuance costs
(28.8
)
—
Taxes withheld and paid on employees'
share-based payment awards
(32.3
)
(9.4
)
Cash used for financing activities
(356.2
)
(156.2
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(4.5
)
11.2
Decrease in cash, cash equivalents and
restricted cash
(159.0
)
(21.4
)
Cash, cash equivalents and restricted cash
at beginning of period
255.6
277.0
Cash, cash equivalents and restricted cash
at end of period
$
96.6
$
255.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220201006114/en/
Dave Pauli Vice President - Investor Relations 414.223.7770
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