- Announces $500 million share repurchase
authorization
Call scheduled for Wednesday, February 8, 2023 at 8:30 a.m.
Eastern Time
Zurn Elkay Water Solutions Corporation (NYSE:ZWS)
Fourth Quarter
Highlights
- Net sales in the quarter increased 46% to $340 million compared
with $232 million in last year’s December quarter (+50%
acquisitions, -1% foreign currency translation, -3% core
sales(1)).
- Net income from continuing operations was $10 million (diluted
EPS from continuing operations of $0.06), compared with net income
from continuing operations of $3 million (diluted EPS from
continuing operations of $0.02) in the year-ago quarter.
- Completed $25 million of common stock repurchases during the
quarter.
- Adjusted EPS(1) was $0.16 compared with $0.22 in the year-ago
quarter.
- Adjusted EBITDA(1) was $65 million (19.0% of net sales)
compared with $45 million (19.4% of net sales) in last year's
fourth quarter.
- Net debt leverage of 1.4x as of December 31, 2022.
Calendar Year 2022
Highlights
- Completed the combination with Elkay Manufacturing Company, a
market leader of commercial drinking water solutions.
- Board of Directors authorized a plan for the Company to
repurchase up to $500 million of our common stock.
- Net sales were $1,282 million and increased by 41% from the
comparable $911 million in calendar year 2021 (+11% core sales(1),
+31% acquisitions, -1% foreign currency translation).
- Net income from continuing operations was $57 million (diluted
EPS from continuing operations of $0.37), compared with $50 million
(diluted EPS from continuing operations of $0.40) in calendar year
2021.
- Adjusted EPS(1) was $0.94, compared with $0.77 in the prior
calendar year.
- Adjusted EBITDA(1) was $265 million (20.6% of net sales)
compared with $196 million (21.5% of net sales) in calendar year
2021.
Todd A. Adams, Chairman and Chief Executive Officer of Zurn
Elkay, commented, “As a result of executing against our strategy
over the past two years, we have put ourselves in a position to
create a significant amount of value as we start 2023 as a premier,
pure-play water business. The core Zurn business delivered another
record year, with core sales growth of 11% on top of the 13% core
growth we generated in 2021. We have accelerated the integration of
the mid-year transaction with Elkay and start the year as a single
business, with a clear path to the $50 million in synergies we
expected and building momentum in our leading safe drinking water
platform. With that backdrop, our Board of Directors has authorized
a plan for the Company to repurchase up to $500 million of our
common stock and we anticipate utilizing at least $100 million to
repurchase shares during 2023. Our 2023 will be about executing
against our strategic breakthrough’s and leveraging our expected
$200 million of free cash flow to invest in our core business to
create value for our shareholders.”
Adams continued, "In the fourth quarter, we delivered $340
million of sales inclusive of a weaker than anticipated residential
market and wholesale channel inventory reductions as our lead-times
returned to historical levels. Demand in our non-residential end
markets continued to show strength led by demand within our
drinking water product categories. We continue to see commodity and
transportation costs decline from peak levels in 2022, however, our
margins in the quarter reflect the impact of selling through higher
cost inventory. We expect to begin seeing the margin benefits of
the improved commodity and transportation cost environment in the
second quarter of 2023.
"In the coming weeks you will see us release our second
sustainability report as a stand-alone water business. We continue
to make enhancements to our sustainability program and our pursuit
of helping our customers protect the vital resource of water has
never been stronger. In the upcoming report you will see us
disclose consolidated Zurn Elkay metrics, progress towards the
goals we initiated in last year’s report as well as initiate
several new goals primarily focused on the environment. We are
excited to continue to build on the momentum we have around ESG in
our company."
March Quarter and 2023
Outlook
Adams continued, “We’re going to take a view on our external
outlook that encompasses a broader range of volatility than we have
the past couple of years. For the year, we believe total sales will
be in the range of $1,500 million to $1,550 million, and Adjusted
EBITDA to be in the range of $325 million to $345 million and
anticipate delivering approximately $200 million in free cash flow.
As it relates to the first quarter, we expect total sales to be in
the range of $340 million to $355 million and Adjusted EBITDA
margins between 19.0% to 19.5%, inclusive of approximately 250
basis points impact from the sell-through of higher-cost inventory
that is out of the run-rate during the second quarter.”
Fourth Quarter 2022
Overview
Net sales were $340.3 million during the three months ended
December 31, 2022, an increase of 46% year-over-year. Excluding a
50% increase in net sales resulting from our merger with Elkay and
a 1% decrease in sales associated with foreign currency
translation, core sales decreased 3% year over year driven by lower
residential market demand and our channel partners reducing
inventory levels following the overall improvement of our lead
times.
Income from operations, was $19.8 million or 5.8% of net sales.
Income from operations as a percentage of net sales increased by 10
basis points year over year as the benefits of productivity actions
and lower non-cash stock-based compensation expense was partially
offset by incremental depreciation, intangible asset amortization
and the inventory fair value amortization resulting from the merger
with Elkay as well as the sell-through of higher cost inventory in
the quarter.
Adjusted EBITDA(1) was $64.6 million, or 19.0% of net sales
during the three months ended December 31, 2022 compared to $45.1
million, or 19.4% of net sales during the three months ended
December 31, 2021.
(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 Elkay
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.
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 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 Elkay Water Solutions
Headquartered in Milwaukee, Wisconsin, Zurn Elkay is a
growth-oriented, pure-play water management business that designs,
procures, manufactures, and markets what we believe to be the
broadest sustainable product portfolio of specification-driven
water management solutions to improve health, human safety and the
environment. Our product portfolio includes professional grade
water safety and control products, flow system, hygienic and
environmental products, and drinking water products for public and
private spaces that deliver superior value to building owners,
positively impact the environment and human hygiene and reduce
product installation time. Additional information about Zurn Elkay
Water Solutions can be found at www.zurn-elkay.com.
Conference Call Details
Zurn Elkay Water Solutions will hold a conference call on
Wednesday, February 8, 2023, at 8:30 a.m. Eastern Time to discuss
its fourth 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. 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 10:00 a.m.
Central Time February 8, 2023 until 10:59 p.m. Central Time,
February 15, 2023. 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 this 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 report on Form 10-K for the period 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.
Zurn Elkay 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,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Net sales
$
340.3
$
232.3
$
1,281.8
$
910.9
Cost of sales
230.9
147.1
816.3
537.7
Gross profit
109.4
85.2
465.5
373.2
Selling, general and administrative
expenses
72.4
64.1
309.0
239.0
Restructuring and other similar
charges
2.3
2.1
15.4
3.7
Amortization of intangible assets
14.9
5.8
34.0
23.5
Income from operations
19.8
13.2
107.1
107.0
Non-operating expense:
Interest expense, net
(8.9
)
(5.1
)
(26.9
)
(34.7
)
Loss on the extinguishment of debt
—
(20.4
)
—
(20.4
)
Actuarial gain on pension and
postretirement benefit obligations
1.9
1.2
1.9
1.2
Other income (expense), net
1.4
0.2
1.7
(0.7
)
Income (loss) before income taxes
14.2
(10.9
)
83.8
52.4
(Provision) benefit for income taxes
(3.9
)
13.9
(26.8
)
(2.7
)
Net income from continuing operations
10.3
3.0
57.0
49.7
Income (loss) from discontinued
operations, net of tax
3.9
(69.4
)
4.7
71.2
Net income (loss)
$
14.2
$
(66.4
)
$
61.7
$
120.9
Basic net income (loss) per share:
Continuing operations
$
0.06
$
0.02
$
0.38
$
0.41
Discontinued operations
$
0.02
$
(0.56
)
$
0.03
$
0.59
Net income (loss)
$
0.08
$
(0.53
)
$
0.41
$
1.00
Diluted net income (loss) per share:
Continuing operations
$
0.06
$
0.02
$
0.37
$
0.40
Discontinued operations
$
0.02
$
(0.54
)
$
0.03
$
0.57
Net income (loss)
$
0.08
$
(0.52
)
$
0.40
$
0.97
Weighted-average number of shares
outstanding (in thousands):
Basic
177,938
124,283
151,581
121,493
Effect of dilutive equity securities
2,068
4,443
2,256
3,621
Diluted
180,006
128,726
153,837
125,114
Zurn Elkay Water Solutions
Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP
Financial Measures Three Months Ended December 31, 2022 (in
Millions) (Unaudited)
Three Months Ended December
31, 2022
Reported
Results
Adjustments
Non-GAAP
Results
Net sales
$
340.3
$
—
$
340.3
EBITDA
43.4
21.2
(a)
64.6
Depreciation and amortization
(23.6
)
—
(23.6
)
Income from operations
19.8
21.2
(b)
41.0
Income before income taxes
14.2
23.3
(c)
37.5
Provision for income taxes and indicated
rate
(3.9
)
27.5
%
(5.6
)
24.0
%
(9.5
)
25.3
%
Net income from continuing operations
10.3
17.7
28.0
Income from discontinued operations, net
of tax
3.9
(3.9
)
—
Net income
$
14.2
$
13.8
$
28.0
EBITDA
Adjustments (a)
Income from
Operations
Adjustments (b)
Income before
Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
2.3
$
2.3
$
2.3
Acquisition-related fair value
adjustment
3.7
3.7
3.7
Stock-based compensation expense
9.5
9.5
—
Last-in-first-out inventory
adjustments
5.7
5.7
5.7
Amortization of intangible assets
—
—
14.9
Other income, net (1)
—
—
(1.4
)
Actuarial gain on pension and
postretirement benefit obligations
—
—
(1.9
)
Total Adjustments
$
21.2
$
21.2
$
23.3
____________________
(1)
Other income, 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 Year Ended December 31, 2022 (in Millions)
(Unaudited)
Year Ended December 31,
2022
Reported
Results
Adjustments
Non-GAAP
Results
Net sales
$
1,281.8
$
—
$
1,281.8
EBITDA
161.6
103.0
(a)
264.6
Depreciation and amortization
(54.5
)
—
(54.5
)
Income from operations
107.1
103.0
(b)
210.1
Income before income taxes
83.8
108.4
(c)
192.2
Provision for income taxes and indicated
rate
(26.8
)
32.0
%
(21.1
)
19.5
%
(47.9
)
24.9
%
Net income from continuing operations
57.0
87.3
144.3
Income from discontinued operations, net
of tax
4.7
(4.7
)
—
Net income
$
61.7
$
82.6
$
144.3
EBITDA
Adjustments (a)
Income from
Operations
Adjustments (b)
Income before
Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
15.4
$
15.4
$
15.4
Acquisition-related fair value
adjustment
18.9
18.9
18.9
Stock-based compensation expense
25.0
25.0
—
Last-in-first-out inventory
adjustments
9.7
9.7
9.7
Merger costs
33.7
33.7
33.7
Other, net (1)
0.3
0.3
0.3
Other income, net (2)
—
—
(1.7
)
Amortization of intangible assets
—
—
34.0
Actuarial gain on pension and
postretirement benefit obligations
—
—
(1.9
)
Total Adjustments
$
103.0
$
103.0
$
108.4
____________________
(1)
Other, net includes the gains and losses
from sale of long-lived assets.
(2)
Other income, 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 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
(10.9
)
34.3
(c)
23.4
Benefit (provision) for income taxes and
indicated rate
13.9
127.5
%
(8.4
)
24.5
%
5.5
(23.5
)%
Net income from continuing operations
3.0
25.9
28.9
Loss from discontinued operations, net of
tax
(69.4
)
69.4
—
Net (loss) income
$
(66.4
)
$
95.3
$
28.9
EBITDA
Adjustments (a)
Income from
Operations
Adjustments (b)
Income before
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
Last-in-first-out inventory
adjustments
7.2
7.2
7.2
Stock-based compensation expense
14.3
14.3
—
Amortization of intangible assets
—
—
5.8
Other income, net (1)
—
—
(0.2
)
Actuarial gain on pension and
postretirement benefit obligations
—
—
(1.2
)
Loss on the extinguishment of debt
—
—
20.4
Total Adjustments
$
23.8
$
23.8
$
34.3
____________________
(1)
Other income, 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 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
$
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
Last-in-first-out inventory
adjustments
14.1
14.1
14.1
Stock-based compensation expense
37.5
37.5
—
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 Elkay Water Solutions
Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP
Financial Measures Three and Twelve Months Ended December 31, 2022
and December 31, 2021 (in Millions, except share and per share
amounts) (Unaudited)
Three Months Ended
Year Ended
Adjusted EBITDA
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Net income (loss)
$
14.2
$
(66.4
)
$
61.7
$
120.9
(Income) loss from discontinued
operations, net of tax
(3.9
)
69.4
(4.7
)
(71.2
)
Provision (benefit) for income taxes
3.9
(13.9
)
26.8
2.7
Actuarial gain on pension and
postretirement benefit obligations
(1.9
)
(1.2
)
(1.9
)
(1.2
)
Other (income) expense, net (1)
(1.4
)
(0.2
)
(1.7
)
0.7
Loss on the extinguishment of debt
—
20.4
—
20.4
Interest expense, net
8.9
5.1
26.9
34.7
Income from operations
$
19.8
$
13.2
$
107.1
$
107.0
Adjustments
Depreciation and amortization
$
23.6
$
8.1
$
54.5
$
32.7
Restructuring and other similar
charges
2.3
2.1
15.4
3.7
Acquisition-related fair value
adjustment
3.7
0.2
18.9
0.8
Stock-based compensation expense
9.5
14.3
25.0
37.5
Merger costs
—
—
33.7
—
Last-in first-out inventory
adjustments
5.7
7.2
9.7
14.1
Other, net (2)
—
—
0.3
—
Subtotal of adjustments
44.8
31.9
157.5
88.8
Adjusted EBITDA
$
64.6
$
45.1
$
264.6
$
195.8
____________________
(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,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Net income (loss)
$
14.2
$
(66.4
)
$
61.7
$
120.9
(Income) loss from discontinued
operations, net of tax
(3.9
)
69.4
(4.7
)
(71.2
)
Loss on the extinguishment of debt
—
20.4
—
20.4
Amortization of intangible assets
14.9
5.8
34.0
23.5
Restructuring and other similar
charges
2.3
2.1
15.4
3.7
Acquisition-related fair value
adjustment
3.7
0.2
18.9
0.8
Merger costs
—
—
33.7
—
Last-in first-out inventory adjustment
5.7
7.2
9.7
14.1
Actuarial gain on pension and
postretirement benefit obligations
(1.9
)
(1.2
)
(1.9
)
(1.2
)
Other (income) expense, net (1)
(1.4
)
(0.2
)
(1.7
)
0.7
Other, net (2)
—
—
0.3
—
Tax effect on above items
(5.6
)
(8.4
)
(21.1
)
(14.8
)
Adjusted net income
$
28.0
$
28.9
$
144.3
$
96.9
GAAP diluted net income per share from
continuing operations
$
0.06
$
0.02
$
0.37
$
0.40
Adjusted earnings per share - diluted
$
0.16
$
0.22
$
0.94
$
0.77
Weighted-average number of shares
outstanding (in thousands)
GAAP basic weighted-average shares
177,938
124,283
151,581
121,493
Effect of dilutive equity securities
2,068
4,443
2,256
3,621
Adjusted diluted weighted-average
shares
180,006
128,726
153,837
125,114
____________________
(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.
Year Ended
December 31,
2022
December 31,
2021
Cash provided by operating activities
$
97.0
$
223.6
Expenditures for property, plant and
equipment
(7.6
)
(23.3
)
Free cash flow
$
89.4
$
200.3
Zurn Elkay Water Solutions
Corporation and Subsidiaries Condensed Consolidated Statements of
Comprehensive Income (in Millions) (Unaudited)
Three Months Ended
Year Ended
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Net income (loss)
$
14.2
$
(66.4
)
$
61.7
$
120.9
Other comprehensive income (loss):
Foreign currency translation
adjustments
(0.1
)
2.4
(4.2
)
(4.2
)
Change in pension and postretirement
defined benefit plans, net of tax
4.1
18.6
4.1
18.4
Total other comprehensive income (loss),
net of tax
4.0
21.0
(0.1
)
14.2
Total comprehensive income (loss)
$
18.2
$
(45.4
)
$
61.6
$
135.1
Zurn Elkay Water Solutions
Corporation and Subsidiaries Condensed Consolidated Balance Sheets
(in Millions, except share amounts) (Unaudited)
December 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
$
124.8
$
96.6
Receivables, net
219.7
144.1
Inventories
366.7
184.5
Income taxes receivable
18.3
33.1
Other current assets
28.0
16.5
Total current assets
757.5
474.8
Property, plant and equipment, net
183.8
64.4
Intangible assets, net
1,009.7
179.1
Goodwill
777.0
254.1
Insurance for asbestos claims
72.1
66.0
Other assets
63.9
39.3
Total assets
$
2,864.0
$
1,077.7
Liabilities and stockholders'
equity
Current liabilities:
Current maturities of debt
$
5.7
$
5.6
Trade payables
116.9
105.1
Compensation and benefits
19.2
22.0
Current portion of pension and
postretirement benefit obligations
1.6
1.3
Other current liabilities
145.9
106.4
Total current liabilities
289.3
240.4
Long-term debt
530.2
533.9
Pension and postretirement benefit
obligations
50.5
57.3
Deferred income taxes
221.4
3.1
Operating lease liability
34.2
8.9
Reserve for asbestos claims
79.0
66.0
Other liabilities
44.4
41.7
Total liabilities
1,249.0
951.3
Stockholders' equity:
Common stock, $0.01 par value; 200,000,000
shares authorized; shares issued and outstanding: 176,876,406 at
December 31, 2022 and 125,720,068 at December 31, 2021
1.8
1.3
Additional paid-in capital
2,853.1
1,436.9
Retained deficit
(1,164.9
)
(1,236.9
)
Accumulated other comprehensive loss
(75.0
)
(74.9
)
Total stockholders' equity
1,615.0
126.4
Total liabilities and stockholders'
equity
$
2,864.0
$
1,077.7
Zurn Elkay Water Solutions
Corporation and Subsidiaries Condensed Consolidated Statements of
Cash Flows (in Millions) (Unaudited)
Year Ended
December 31,
2022
December 31,
2021
Operating activities
Net income
$
61.7
$
120.9
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation
20.5
44.1
Amortization of intangible assets
34.0
33.4
(Loss) gain on dispositions of long-lived
assets
0.3
(10.1
)
Deferred income taxes
0.5
(12.1
)
Other non-cash expense (income)
4.8
(3.6
)
Actuarial (gain) loss on pension and
postretirement benefit obligations
(1.9
)
3.6
Loss on extinguishment of debt
—
20.4
Stock-based compensation expense
25.0
51.4
Changes in operating assets and
liabilities:
Receivables
15.5
(66.6
)
Inventories
(17.6
)
(79.5
)
Other assets
36.5
(7.7
)
Accounts payable
(18.3
)
99.1
Accruals and other
(64.0
)
30.3
Cash provided by operating activities
97.0
223.6
Investing activities
Expenditures for property, plant and
equipment
(7.6
)
(23.3
)
Acquisitions, net of cash acquired
(44.8
)
(17.1
)
Proceeds from dispositions of long-lived
assets
1.3
14.3
Proceeds from insurance claims
9.5
—
Payment associated with divestiture of
discontinued operations
35.0
4.2
Cash used for investing activities
(6.6
)
(21.9
)
Financing activities
Proceeds from borrowings of debt
102.0
550.0
Repayments of debt
(107.7
)
(1,126.7
)
Dividend received from Spin-Off of PMC
—
486.8
Cash transferred to PMC related to
Spin-Off
—
(192.8
)
Payment of debt issuance costs
—
(28.8
)
Proceeds from exercise of stock
options
2.5
24.9
Taxes withheld and paid on employees'
share-based payment awards
(0.7
)
(32.3
)
Repurchase of common stock
(24.7
)
(0.9
)
Payment of common stock dividends
(32.5
)
(36.4
)
Cash used for financing activities
(61.1
)
(356.2
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(1.1
)
(4.5
)
Increase (decrease) in cash, cash
equivalents and restricted cash
28.2
(159.0
)
Cash, cash equivalents and restricted cash
at beginning of period
96.6
255.6
Cash, cash equivalents and restricted cash
at end of period
$
124.8
$
96.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230207006070/en/
Dave Pauli Vice President - Investor Relations 414.223.7770
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