Investor call scheduled for Wednesday, July 27, 2022 at 8:30
a.m. Eastern Time
Zurn Elkay Water Solutions Corporation (NYSE:ZWS), a leader in
sustainable water solutions, reported today second-quarter 2022
financial results.
Second Quarter
Highlights
- On July 1, 2022 Zurn Elkay Water Solutions Corporation ("Zurn
Elkay" or the "Company") formerly known as Zurn Water Solutions,
completed the combination with Elkay Manufacturing Company
(“Elkay”), a market leader of commercial drinking water
solutions.
- Net sales in the quarter increased 17% to $284 million compared
with $244 million in last year’s June quarter (+15% core sales(1),
+2% acquisitions).
- Net income from continuing operations was $36 million (diluted
EPS from continuing operations of $0.28) compared with net income
from continuing operations of $21 million (diluted EPS from
continuing operations of $0.17) in the year-ago quarter.
- Adjusted EPS(1) was $0.32 compared with $0.22 in the year-ago
quarter.
- Adjusted EBITDA(1) was $64 million (22.6% of net sales)
compared with $56 million (22.8% of net sales) in last year's
second quarter. Corporate costs were $7 million compared to $10
million in last year's second quarter.
- Increased quarterly dividend from $0.03 per share to $0.07 per
share.
- Net debt leverage of 2.0x as of June 30, 2022.
Todd A. Adams, Chairman and Chief Executive Officer of Zurn
Elkay Water Solutions Corporation, commented, “We are pleased to
have successfully completed the combination with Elkay right after
the second quarter closed. Elkay is a strong, strategic fit and the
combination of Zurn and Elkay will drive significant value for both
our shareholders and customers as we have created a North American
leader with a suite of high-quality commercial water solutions that
is unmatched in the marketplace. The Elkay combination puts us well
on our way to doubling the size of the business over the next
couple of years while enhancing both our competitive advantage
within specified water solutions and our commitment to
sustainability. Our newly combined teams are energized about the
opportunity to serve our customers as one Zurn Elkay and remain
committed to delivering on the $50 million of synergies by
2025."
“In the second quarter, which does not include any impact from
Elkay, we delivered another quarter of strong growth as year over
year sales grew 17% with our core sales growing 15% on top of core
growth of 29% in the prior year second quarter. Operationally, we
continue to execute well as we delivered an adjusted EBITDA margin,
excluding corporate costs, of 25.1% which was above the high-end of
our expectations heading into the quarter."
“As we look to the back half of the year, we continue to have
confidence in generating double digit sales growth in our core
business and we are well positioned to deliver solid EBITDA margins
and cash flow in the combined business while driving our net debt
leverage close to one times by the end of the calendar year."
Third Quarter Outlook
Adams continued, “For the third quarter of 2022 we expect Zurn
sales to increase by a high-teens percentage over the prior year
third quarter and for Elkay sales to be between $145 and $155
million in the quarter. We anticipate the consolidated Zurn Elkay
Adjusted EBITDA margin, excluding corporate costs, to range between
21.0% and 22.0% and for our corporate expenses to approximate $7
million. The consolidated Adjusted EBITDA margin outlook
anticipates at least 100 bps of margin expansion from the Zurn
Elkay proforma combined Adjusted EBITDA margin in the prior year
third quarter."
Second Quarter 2022
Overview
Net sales were $284 million during the three months ended June
30, 2022, an increase of 17% year over year. Excluding a 2%
increase to net sales resulting from our prior-year acquisition,
core sales increased 15% year over year as all of our product
categories contributed to the sales growth.
Income from operations, excluding corporate costs of $9 million,
was $63 million during the three months ended June 30, 2022, or
22.1% of net sales. Income from operations excluding corporate
costs as a percentage of net sales increased by 40 basis points
primarily as a result of the favorable impact of year-over-year
sales growth (inclusive of price realization), productivity savings
and the lower intangible asset amortization and stock option
expense, all of which was partially offset by the year-over-year
increases in material and transportation costs, as well as
incremental growth and productivity investments.
Adjusted EBITDA(1), excluding corporate costs of $7 million, was
$71 million, or 25.1% of net sales during the three months ended
June 30, 2022 compared to $65 million, excluding corporate costs of
$10 million, or 26.8% of net sales during the three months ended
June 30, 2021.
(1)
Refer to "Non-GAAP Financial
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 the Wade
Drains acquisition), 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 Elkay Water Solutions common stockholders and
net income per diluted share attributable to Zurn Elkay 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 an indicator 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), which we refer
to as "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 this ratio is
utilized by management 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 stockholders' equity plus debt, less
cash and cash equivalents. Other companies may not define or
calculate ROIC in the same way.
About Zurn Elkay Water Solutions
Headquartered in Milwaukee, Wisconsin, Zurn Elkay 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 solutions to improve
health, human safety, and the environment. The Zurn Elkay product
portfolio includes professional grade water control and safety,
water distribution and drainage, drinking water, finish plumbing,
hygienic, environmental and site works products for public and
private spaces. Visit www.zurn-elkay.com for additional information
about the Company.
Conference Call Details
Zurn Elkay Water Solutions will hold a conference call on
Wednesday, July 27, 2022, at 8:30 a.m. Eastern Time to discuss its
second quarter 2022 results, provide a general business update and
respond to investor questions. Zurn Elkay Chairman and CEO, Todd
Adams, and Senior Vice President and CFO, Mark Peterson, will
co-host the call and webcast. 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.zurn-elkay.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 9:30 a.m.
Central Time July 27, 2022 until 10:59 p.m. Central Time, August 3,
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 Elkay Water Solutions Corporation as
of the date of the release, and Zurn Elkay 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 Annual Report on Form 10-K for the year ended
December 31, 2021, 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. In addition, our Merger with Elkay Manufacturing Company
involves various risks, uncertainties, and factors including those
described in Part II, Item 1A, "Risk Factors" in the Company's
Quarterly Reporting on Form 10-Q for the quarterly period ended
June 30, 2022.
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Operations
(in Millions, except share and
per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net sales
$
284.2
$
243.7
$
523.8
$
448.9
Cost of sales
170.4
139.9
308.1
256.7
Gross profit
113.8
103.8
215.7
192.2
Selling, general and administrative
expenses
58.4
60.4
112.3
118.1
Restructuring and other similar
charges
0.3
0.3
1.4
0.9
Amortization of intangible assets
1.6
5.8
4.6
11.9
Income from operations
53.5
37.3
97.4
61.3
Non-operating expense:
Interest expense, net
(5.2
)
(10.1
)
(10.0
)
(19.7
)
Other expense, net
(0.6
)
(0.4
)
(0.3
)
(0.1
)
Income before income taxes
47.7
26.8
87.1
41.5
Provision for income taxes
(11.3
)
(6.2
)
(21.3
)
(10.9
)
Net income from continuing operations
36.4
20.6
65.8
30.6
Income from discontinued operations, net
of tax
—
52.6
0.8
92.6
Net income attributable to Zurn Elkay
common stockholders
$
36.4
$
73.2
$
66.6
$
123.2
Basic net income per share:
Continuing operations
$
0.29
$
0.17
$
0.52
$
0.25
Discontinued operations
$
—
$
0.44
$
0.01
$
0.77
Net income
$
0.29
$
0.61
$
0.53
$
1.03
Diluted net income per share:
Continuing operations
$
0.28
$
0.17
$
0.51
$
0.25
Discontinued operations
$
—
$
0.42
$
0.01
$
0.75
Net income
$
0.28
$
0.59
$
0.52
$
0.99
Weighted-average number of shares
outstanding (in thousands):
Basic
126,419
120,465
126,350
120,138
Effect of dilutive equity awards
1,972
3,832
2,063
3,953
Diluted
128,391
124,297
128,413
124,091
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three Months Ended June 30,
2022
(in Millions)
(Unaudited)
Three Months Ended June 30,
2022
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
284.2
$
—
$
284.2
EBITDA
57.5
6.8
(a)
64.3
Depreciation and amortization
(4.0
)
—
(4.0
)
Income from operations
53.5
6.8
(b)
60.3
Income before income taxes
47.7
5.2
(c)
52.9
Provision for income taxes and indicated
rate
(11.3
)
23.7
%
(1.1
)
21.2
%
(12.4
)
23.4
%
Net income from continuing operations
36.4
4.1
40.5
Income from discontinued operations, net
of tax
—
—
—
Net income attributable to Zurn Elkay
common stockholders
$
36.4
$
4.1
$
40.5
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
0.3
$
0.3
$
0.3
Acquisition-related fair value
adjustment
0.3
0.3
0.3
Last-in-first-out inventory
adjustments
2.4
2.4
2.4
Stock-based compensation expense
3.8
3.8
—
Amortization of intangible assets
—
—
1.6
Other expense, net (1)
—
—
0.6
Total Adjustments
$
6.8
$
6.8
$
5.2
____________________
(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 Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Six Months Ended June 30,
2022
(in Millions)
(Unaudited)
Six Months Ended June 30,
2022
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
523.8
$
—
$
523.8
EBITDA
106.7
9.6
(a)
116.3
Depreciation and amortization
(9.3
)
—
(9.3
)
Income from operations
97.4
9.6
(b)
107.0
Income before income taxes
87.1
6.8
(c)
93.9
Provision for income taxes and indicated
rate
(21.3
)
24.5
%
(1.5
)
22.1
%
(22.8
)
24.3
%
Net income from continuing operations
65.8
5.3
71.1
Income from discontinued operations, net
of tax
0.8
(0.8
)
—
Net income attributable to Zurn Elkay
common stockholders
$
66.6
$
4.5
$
71.1
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
1.4
$
1.4
$
1.4
Acquisition-related fair value
adjustment
0.6
0.6
0.6
Other, net (1)
0.3
0.3
0.3
Last-in-first-out inventory
adjustments
(0.4
)
(0.4
)
(0.4
)
Stock-based compensation expense
7.7
7.7
—
Amortization of intangible assets
—
—
4.6
Other expense, net (2)
—
—
0.3
Total Adjustments
$
9.6
$
9.6
$
6.8
____________________
(1)
Other, net includes the gains and
losses from sale of long-lived assets.
(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 Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three Months Ended June 30,
2021
(in Millions)
(Unaudited)
Three Months Ended June 30,
2021
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
243.7
$
—
$
243.7
EBITDA
45.5
10.0
(a)
55.5
Depreciation and amortization
(8.2
)
—
(8.2
)
Income from operations
37.3
10.0
(b)
47.3
Income before income taxes
26.8
9.1
(c)
35.9
Provision for income taxes and indicated
rate
(6.2
)
23.1
%
(2.3
)
25.3
%
(8.5
)
23.7
%
Net income from continuing operations
20.6
6.8
27.4
Income from discontinued operations, net
of tax
52.6
(52.6
)
—
Net income attributable to Zurn Elkay
common stockholders
$
73.2
$
(45.8
)
$
27.4
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
0.3
$
0.3
$
0.3
Last-in-first-out inventory
adjustments
2.6
2.6
2.6
Stock-based compensation expense
7.1
7.1
—
Amortization of intangible assets
—
—
5.8
Other expense, net (1)
—
—
0.4
Total Adjustments
$
10.0
$
10.0
$
9.1
____________________
(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 Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Six Months Ended June 30,
2021
(in Millions)
(Unaudited)
Six Months Ended June 30,
2021
Reported Results
Adjustments
Non-GAAP Results
Net Sales
$
448.9
$
—
$
448.9
EBITDA
77.8
22.0
(a)
99.8
Depreciation and amortization
(16.5
)
—
(16.5
)
Income from operations
61.3
22.0
(b)
83.3
Income before income taxes
41.5
17.8
(c)
59.3
Provision for income taxes and indicated
rate
(10.9
)
26.3
%
(4.4
)
24.7
%
(15.3
)
25.8
%
Net income from continuing operations
30.6
13.4
44.0
Income from discontinued operations, net
of tax
92.6
(92.6
)
—
Net income attributable to Zurn Elkay
common stockholders
$
123.2
$
(79.2
)
$
44.0
EBITDA Adjustments (a)
Income from Operations
Adjustments (b)
Income before Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
0.9
$
0.9
$
0.9
Acquisition-related fair value
adjustment
0.6
0.6
0.6
Last-in-first-out inventory
adjustments
4.3
4.3
4.3
Stock-based compensation expense
16.2
16.2
—
Amortization of intangible assets
—
—
11.9
Other expense, net (1)
—
—
0.1
Total Adjustments
$
22.0
$
22.0
$
17.8
____________________
(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 Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three and Six Months Ended
June 30, 2022 and June 30, 2021
(in Millions, except share and
per share amounts) (Unaudited)
Three Months Ended
Six Months Ended
Adjusted EBITDA
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net income attributable to Zurn Elkay
common stockholders
$
36.4
$
73.2
$
66.6
$
123.2
Income from discontinued operations, net
of tax (1)
—
(52.6
)
(0.8
)
(92.6
)
Provision for income taxes
11.3
6.2
21.3
10.9
Other expense, net (2)
0.6
0.4
0.3
0.1
Interest expense
5.2
10.1
10.0
19.7
Income from operations
$
53.5
$
37.3
$
97.4
$
61.3
Adjustments
Depreciation and amortization
$
4.0
$
8.2
$
9.3
$
16.5
Restructuring and other similar
charges
0.3
0.3
1.4
0.9
Stock-based compensation expense
3.8
7.1
7.7
16.2
Last-in first-out inventory adjustment
2.4
2.6
(0.4
)
4.3
Acquisition-related fair value
adjustment
0.3
—
0.6
0.6
Other, net (3)
—
—
0.3
—
Subtotal of adjustments
10.8
18.2
18.9
38.5
Adjusted EBITDA
$
64.3
$
55.5
$
116.3
$
99.8
Corporate costs
$
(7.0
)
$
(9.8
)
$
(13.8
)
$
(18.8
)
Adjusted EBITDA before corporate
costs
$
71.3
$
65.3
$
130.1
$
118.6
____________________
(1)
Income from discontinued
operations, net of tax is not included in Adjusted EBITDA in
accordance with the terms of our credit agreement.
(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.
(3)
Other, net includes the gains and
losses from sale of long-lived assets.
Three Months Ended
Six Months Ended
Adjusted Net Income and Earnings Per
Share
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net income attributable to Zurn Elkay
common stockholders
$
36.4
$
73.2
$
66.6
$
123.2
Income from discontinued operations, net
of tax
—
(52.6
)
(0.8
)
(92.6
)
Amortization of intangible assets
1.6
5.8
4.6
11.9
Restructuring and other similar
charges
0.3
0.3
1.4
0.9
Acquisition-related fair value
adjustment
0.3
—
0.6
0.6
Last-in first-out inventory adjustment
2.4
2.6
(0.4
)
4.3
Other expense, net (1)
0.6
0.4
0.3
0.1
Other, net (2)
—
—
0.3
—
Tax effect on above items
(1.1
)
(2.3
)
(1.5
)
(4.4
)
Adjusted net income
$
40.5
$
27.4
$
71.1
$
44.0
GAAP diluted net income per share from
continuing operations
$
0.28
$
0.17
$
0.51
$
0.25
Adjusted earnings per share - diluted
$
0.32
$
0.22
$
0.55
$
0.35
Weighted-average number of shares
outstanding (in thousands)
GAAP basic weighted-average shares
126,419
120,465
126,350
120,138
Effect of dilutive equity securities
1,972
3,832
2,063
3,953
Adjusted diluted weighted-average
shares
128,391
124,297
128,413
124,091
____________________
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.
2.
Other, net includes the gains and
losses from the sale of long-lived assets.
Three Months Ended(1)
Six Months Ended(1)
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Cash provided by (used for) operating
activities
$
41.9
$
145.0
$
(12.0
)
$
145.0
Expenditures for property, plant and
equipment
(1.2
)
(14.0
)
(2.0
)
(14.0
)
Free cash flow
$
40.7
$
131.0
$
(14.0
)
$
131.0
(1)
The condensed consolidated
statements of cash flows for the periods ended June 30, 2021 have
not been adjusted to separately disclose cash flows related to the
discontinued operations.
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Comprehensive Income
(in Millions)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net income
$
36.4
$
73.2
$
66.6
$
123.2
Other comprehensive income (loss):
Foreign currency translation
adjustments
(2.0
)
5.4
—
3.7
Change in pension and postretirement
defined benefit plans, net of tax
—
(0.1
)
—
(0.2
)
Other comprehensive (loss) income, net of
tax
(2.0
)
5.3
—
3.5
Total comprehensive income
$
34.4
$
78.5
$
66.6
$
126.7
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated Balance
Sheets
(in Millions, except share
amounts)
(Unaudited)
June 30, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
110.4
$
96.6
Receivables, net
188.9
144.1
Inventories
243.4
184.5
Income taxes receivable
20.1
33.1
Other current assets
25.6
16.5
Total current assets
588.4
474.8
Property, plant and equipment, net
61.6
64.4
Intangible assets, net
174.8
179.1
Goodwill
252.6
254.1
Insurance for asbestos claims
66.0
66.0
Other assets
32.9
39.3
Total assets
$
1,176.3
$
1,077.7
Liabilities and stockholders' equity
Current liabilities:
Current maturities of debt
$
5.6
$
5.6
Trade payables
126.1
105.1
Compensation and benefits
9.2
22.0
Current portion of pension and
postretirement benefit obligations
1.3
1.3
Other current liabilities
99.0
106.4
Total current liabilities
241.2
240.4
Long-term debt
531.9
533.9
Pension and postretirement benefit
obligations
55.9
57.3
Deferred income taxes
9.9
3.1
Operating lease liability
5.9
8.9
Reserve for asbestos claims
66.0
66.0
Other liabilities
36.1
41.7
Total liabilities
946.9
710.9
Stockholders' equity:
Common stock, $0.01 par value; 200,000,000
shares authorized; shares issued and outstanding: 126,182,246 at
June 30, 2022 and 125,720,068 at December 31, 2021
1.3
1.3
Additional paid-in capital
1,438.3
1,436.9
Retained deficit
(1,135.3
)
(1,236.9
)
Accumulated other comprehensive loss
(74.9
)
(74.9
)
Total stockholders' equity
229.4
126.4
Total liabilities and stockholders'
equity
$
1,176.3
$
1,077.7
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in Millions)
(Unaudited)
Six Months Ended (1)
June 30, 2022
June 30, 2021
Operating activities
Net income
$
66.6
$
123.2
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation
4.7
28.1
Amortization of intangible assets
4.6
18.5
Loss (gain) on dispositions of long-lived
assets
0.3
(9.2
)
Deferred income taxes
6.8
(4.0
)
Other non-cash expenses (income)
1.7
(1.1
)
Stock-based compensation expense
7.7
27.0
Changes in operating assets and
liabilities:
Receivables
(45.0
)
(61.7
)
Inventories
(58.9
)
(30.7
)
Other assets
7.8
(8.9
)
Accounts payable
21.1
62.1
Accruals and other
(29.4
)
1.7
Cash (used for) provided by operating
activities
(12.0
)
145.0
Investing activities
Expenditures for property, plant and
equipment
(2.0
)
(14.0
)
Acquisitions, net of cash acquired
1.1
(3.4
)
Proceeds from dispositions of long-lived
assets
1.3
13.0
Proceeds associated with divestiture of
discontinued operations
35.0
—
Cash provided by (used for) investing
activities
35.4
(4.4
)
Financing activities
Proceeds from borrowings of debt
10.0
—
Repayments of debt
(13.0
)
(1.1
)
Proceeds from exercise of stock
options
1.8
19.4
Taxes withheld and paid on employees'
share-based payment awards
(0.5
)
(1.4
)
Repurchase of common stock
—
(0.9
)
Payment of common stock dividends
(7.6
)
(21.6
)
Cash used for financing activities
(9.3
)
(5.6
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(0.3
)
0.1
Increase in cash, cash equivalents and
restricted cash
13.8
135.1
Cash, cash equivalents and restricted cash
at beginning of period
96.6
255.6
Cash, cash equivalents and restricted cash
at end of period
$
110.4
$
390.7
(1)
The condensed consolidated
statements of cash flows for the period ended June 30, 2021 have
not been adjusted to separately disclose cash flows related to the
discontinued operations.
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version on businesswire.com: https://www.businesswire.com/news/home/20220726006076/en/
Dave Pauli Vice President - Investor Relations 414.223.7770
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