Investor call scheduled for Tuesday, July 25, 2023 at 8:30 a.m.
Eastern Time
Zurn Elkay Water Solutions Corporation (NYSE:ZWS)
Second Quarter
Highlights
- Net sales in the quarter increased 42% to $403 million compared
with $284 million in last year’s June quarter (-5% core sales(1),
+47% acquisitions).
- Net income from continuing operations was $33 million (diluted
EPS from continuing operations of $0.19) compared with $36 million
(diluted EPS from continuing operations of $0.28) in the year-ago
quarter.
- Adjusted EPS(1) was $0.24 compared with $0.32 in the year-ago
quarter.
- Adjusted EBITDA(1) was $87 million (21.6% of net sales)
compared with $64 million (22.6% of net sales) in last year's
second quarter.
- Net debt leverage(1) of 1.5x as of June 30, 2023.
- Deployed $50 million to repurchase 2.3 million shares of common
stock in the quarter.
Todd A. Adams, Chairman and Chief Executive Officer, commented,
“We are pleased with our second quarter results that came in ahead
of our outlook, and the progress we have made on our strategic
initiatives in the first half of the year. Demand trends in the
quarter remained constructive as pro forma orders increased high
single digits year over year and we continued to see momentum
growing in our drinking water business. During the quarter, we
repurchased $50 million of our common stock putting us at $87
million of repurchases for the calendar year which translates to a
repurchase of 4 million shares. Operationally, we executed well as
we delivered an adjusted EBITDA margin(1) of 21.6% which was just
above the high-end of our outlook heading into the quarter. Our
second quarter margin improved 210 bps sequentially from the first
quarter and we will continue to see margin expand in the second
half of the year."
“As we look to the back half of the year, we continue to have
confidence in generating core sales growth in our business and we
are well positioned to deliver improving EBITDA margins and cash
flow while driving our net debt leverage to just above one times by
the end of the calendar year. With the combination of growth,
synergies and lower input and transportation costs we have a clear
path to our margins improving approximately 300 bps in the second
half compared to the first half."
Third Quarter Outlook
Adams continued, “After a solid first half, we have increased
the low end of our previously provided sales and Adjusted EBITDA(1)
outlook and are raising our free cash flow forecast for the year.
Our outlook for the year is sales to be in the range of $1,525
million and $1,550 million, Adjusted EBITDA(1) to be in the range
of $335 million to $345 million and free cash flow(1) to total
approximately $215 million. For the third quarter, we expect sales
to be in a range of $390 million to $400 million and consolidated
Adjusted EBITDA margin(1) to range between 23.5% and 24.0%."
Second Quarter 2023
Overview
Net sales were $403.2 million and $284.2 million during the
three months ended June 30, 2023 and June 30, 2022, respectively,
an increase of 42% year over year. Excluding a 47% increase in
sales associated with our combination with Elkay, core sales
decreased 5% year-over-year as a result of lower year over year
demand associated with products sold into our residential end
markets as well as timing of shipments in the prior year as we
began working down an elevated backlog during the three months
ended June 30, 2022.
During the three months ended June 30, 2023, income from
operations was $54.8 million compared to $53.5 million during the
three months ended June 30, 2022. Income from operations as a
percentage of net sales decreased by 520 basis points year over
year as the benefits of productivity actions were offset by higher
restructuring costs, non-cash stock-based compensation expense,
incremental depreciation and intangible asset amortization
resulting from the merger with Elkay, as well as the sell-through
of higher cost inventory in the quarter.
Adjusted EBITDA(1) was $87.0 million, or 21.6% of net sales,
during the three months ended June 30, 2023 compared to $64.3
million, or 22.6% of net sales, during the three months ended June
30, 2022.
(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 Elkay),
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. 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. “Adjusted EBITDA Margin” is the term we use to describe
Adjusted EBITDA divided by net sales.
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 Water
Solutions Corporation 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 products, 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.zurnelkay.com.
Conference Call Details
Zurn Elkay Water Solutions will hold a conference call and
webcast presentation on Tuesday, July 25, 2023, at 8:30 a.m.
Eastern Time to discuss its second quarter 2023 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.zurnelkay.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 25, 2023 until 10:59 p.m. Central Time, August 1,
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, 2022, 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
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net sales
$
403.2
$
284.2
$
775.3
$
523.8
Cost of sales
229.7
170.4
453.0
308.1
Gross profit
173.5
113.8
322.3
215.7
Selling, general and administrative
expenses
96.3
58.4
184.8
112.3
Restructuring and other similar
charges
7.8
0.3
9.7
1.4
Amortization of intangible assets
14.6
1.6
29.3
4.6
Income from operations
54.8
53.5
98.5
97.4
Non-operating expense:
Interest expense, net
(10.3
)
(5.2
)
(19.9
)
(10.0
)
Other income (expense), net
1.6
(0.6
)
(0.8
)
(0.3
)
Income before income taxes
46.1
47.7
77.8
87.1
Provision for income taxes
(13.2
)
(11.3
)
(22.3
)
(21.3
)
Net income from continuing operations
32.9
36.4
55.5
65.8
Income from discontinued operations, net
of tax
1.7
—
1.9
0.8
Net income
$
34.6
$
36.4
$
57.4
$
66.6
Basic net income per share:
Continuing operations
$
0.19
$
0.29
$
0.32
$
0.52
Discontinued operations
$
0.01
$
—
$
0.01
$
0.01
Net income
$
0.20
$
0.29
$
0.33
$
0.53
Diluted net income per share:
Continuing operations
$
0.19
$
0.28
$
0.31
$
0.51
Discontinued operations
$
0.01
$
—
$
0.01
$
0.01
Net income
$
0.20
$
0.28
$
0.32
$
0.52
Weighted-average number of shares
outstanding (in thousands):
Basic
174,260
126,419
175,333
126,350
Effect of dilutive equity awards
2,221
1,972
2,365
2,063
Diluted
176,481
128,391
177,698
128,413
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three Months Ended June 30,
2023
(in Millions)
(Unaudited)
Three Months Ended June 30,
2023
Reported
Results
Adjustments
Non-GAAP
Results
Net Sales
$
403.2
$
—
$
403.2
EBITDA
76.6
10.4
(a)
87.0
Depreciation and amortization
(21.8
)
—
(21.8
)
Income from operations
54.8
10.4
(b)
65.2
Income before income taxes
46.1
13.2
(c)
59.3
Provision for income taxes and indicated
rate
(13.2
)
28.6
%
(3.1
)
23.5
%
(16.3
)
27.5
%
Net income from continuing operations
32.9
10.1
43.0
Income from discontinued operations, net
of tax
1.7
(1.7
)
—
Net income
$
34.6
$
8.4
$
43.0
EBITDA
Adjustments
(a)
Income from
Operations
Adjustments
(b)
Income before
Income Taxes
Adjustments
(c)
Restructuring and other similar
charges
$
7.8
$
7.8
$
7.8
Last-in-first-out inventory
adjustments
(7.6
)
(7.6
)
(7.6
)
Stock-based compensation expense
10.2
10.2
—
Amortization of intangible assets
—
—
14.6
Other income, net (1)
—
—
(1.6
)
Total Adjustments
$
10.4
$
10.4
$
13.2
____________________
(1)
Other income, net for the periods
indicated, consists primarily of gains and losses from foreign
currency transactions, the non-service cost components of net
periodic benefit costs associated with our defined benefit plans
and other non-operational gains and losses.
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Six Months Ended June 30,
2023
(in Millions)
(Unaudited)
Six Months Ended June 30,
2023
Reported
Results
Adjustments
Non-GAAP
Results
Net Sales
$
775.3
$
—
$
775.3
EBITDA
143.1
16.3
(a)
159.4
Depreciation and amortization
(44.6
)
—
(44.6
)
Income from operations
98.5
16.3
(b)
114.8
Income before income taxes
77.8
25.9
(c)
103.7
Provision for income taxes and indicated
rate
(22.3
)
28.7
%
(6.2
)
23.9
%
(28.5
)
27.5
%
Net income from continuing operations
55.5
19.7
75.2
Income from discontinued operations, net
of tax
1.9
(1.9
)
—
Net income
$
57.4
$
17.8
$
75.2
EBITDA
Adjustments
(a)
Income from
Operations
Adjustments
(b)
Income before
Income Taxes
Adjustments
(c)
Restructuring and other similar
charges
$
9.7
$
9.7
$
9.7
Last-in-first-out inventory
adjustments
(13.9
)
(13.9
)
(13.9
)
Stock-based compensation expense
20.5
20.5
—
Amortization of intangible assets
—
—
29.3
Other expense, net (1)
—
—
0.8
Total Adjustments
$
16.3
$
16.3
$
25.9
____________________
(1)
Other expense, net for the periods
indicated, consists primarily of gains and losses from foreign
currency transactions, the non-service cost components of net
periodic benefit costs associated with our defined benefit plans
and other non-operational gains and losses.
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
$
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, the non-service cost components of net
periodic benefit costs associated with our defined benefit plans
and other non-operational gains and losses.
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
$
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 the sale of long-lived assets.
(2)
Other expense, net for the periods
indicated, consists primarily of gains and losses from foreign
currency transactions, the non-service cost components of net
periodic benefit costs associated with our defined benefit plans
and other non-operational gains and losses.
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measures
Three and Six Months Ended
June 30, 2023 and June 30, 2022
(in Millions, except share and
per share amounts) (Unaudited)
Three Months Ended
Six Months Ended
Adjusted EBITDA
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
34.6
$
36.4
$
57.4
$
66.6
Income from discontinued operations, net
of tax
(1.7
)
—
(1.9
)
(0.8
)
Provision for income taxes
13.2
11.3
22.3
21.3
Other (income) expense, net (1)
(1.6
)
0.6
0.8
0.3
Interest expense, net
10.3
5.2
19.9
10.0
Income from operations
$
54.8
$
53.5
$
98.5
$
97.4
Adjustments
Depreciation and amortization
$
21.8
$
4.0
$
44.6
$
9.3
Restructuring and other similar
charges
7.8
0.3
9.7
1.4
Stock-based compensation expense
10.2
3.8
20.5
7.7
Last-in first-out inventory
adjustments
(7.6
)
2.4
(13.9
)
(0.4
)
Acquisition-related fair value
adjustment
—
0.3
—
0.6
Other, net (2)
—
—
—
0.3
Subtotal of adjustments
32.2
10.8
60.9
18.9
Adjusted EBITDA
$
87.0
$
64.3
$
159.4
$
116.3
____________________
(1)
Other (income) expense, net for the
periods indicated, consists primarily of gains and losses from
foreign currency transactions, the non-service cost components of
net periodic benefit costs associated with our defined benefit
plans and other non-operational gains and losses.
(2)
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, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
34.6
$
36.4
$
57.4
$
66.6
Income from discontinued operations, net
of tax
(1.7
)
—
(1.9
)
(0.8
)
Amortization of intangible assets
14.6
1.6
29.3
4.6
Restructuring and other similar
charges
7.8
0.3
9.7
1.4
Acquisition-related fair value
adjustment
—
0.3
—
0.6
Last-in first-out inventory adjustment
(7.6
)
2.4
(13.9
)
(0.4
)
Other (income) expense, net (1)
(1.6
)
0.6
0.8
0.3
Other, net (2)
—
—
—
0.3
Tax effect on above items
(3.1
)
(1.1
)
(6.2
)
(1.5
)
Adjusted net income
$
43.0
$
40.5
$
75.2
$
71.1
GAAP diluted net income per share from
continuing operations
$
0.19
$
0.28
$
0.31
$
0.51
Adjusted earnings per share - diluted
$
0.24
$
0.32
$
0.42
$
0.55
Weighted-average number of shares
outstanding (in thousands)
GAAP basic weighted-average shares
174,260
126,419
175,333
126,350
Effect of dilutive equity securities
2,221
1,972
2,365
2,063
Adjusted diluted weighted-average
shares
176,481
128,391
177,698
128,413
____________________
(1)
Other (income) expense, net for the
periods indicated, consists primarily of gains and losses from
foreign currency transactions, the non-service cost components of
net periodic benefit costs associated with our defined benefit
plans and other non-operational gains and losses.
(2)
Other, net includes the gains and losses
from the sale of long-lived assets.
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Cash provided by (used for) operating
activities
$
87.2
$
41.9
$
92.2
$
(12.0
)
Expenditures for property, plant and
equipment
(5.9
)
(1.2
)
(11.1
)
(2.0
)
Free cash flow
$
81.3
$
40.7
$
81.1
$
(14.0
)
Earnings Guidance
Earnings Outlook Reconciliation
(1)
Three Months Ending
September 30,
2023
Year Ending
December 31,
2023
Net income
$34 million to $38 million
$104 million to $114 million
Provision for income taxes
13
46
Interest expense, net
10
41
Depreciation and amortization
22
88
Restructuring and other similar
charges
2
14
Stock-based compensation expense
11
42
Adjusted EBITDA
$92 million to $96 million
(23.5% to 24.0% of net sales)
$335 million to $345 million
____________________
(1)
Our outlook is based upon the extent of
information available as of the date of this filing regarding
events and conditions that will impact our future operating results
for our fiscal year 2023. Our actual results may be materially
impacted by events for which information is not available, such as
asset impairments, purchase accounting effects related to future
acquisitions, future restructuring actions, last-in first-out
inventory adjustments, gains (losses) recognized on the disposal of
tangible and intangible assets, gains (losses) on extinguishment of
debt, actuarial gains (losses) on our defined benefit plans, and
other gains (losses) related to events or conditions not yet known.
Consequently, we have not included incremental gains or (losses)
for these items in our forward-looking guidance since that
information is not reasonably available.
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Comprehensive Income
(in Millions)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
34.6
$
36.4
$
57.4
$
66.6
Other comprehensive income (loss):
Foreign currency translation
adjustments
3.6
(2.0
)
3.5
—
Other comprehensive income (loss), net of
tax
3.6
(2.0
)
3.5
—
Total comprehensive income
$
38.2
$
34.4
$
60.9
$
66.6
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated Balance
Sheets
(in Millions, except share
amounts)
(Unaudited)
June 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
103.0
$
124.8
Receivables, net
242.6
219.7
Inventories
313.8
366.7
Income taxes receivable
4.2
18.3
Other current assets
25.3
28.0
Total current assets
688.9
757.5
Property, plant and equipment, net
192.6
183.8
Intangible assets, net
981.3
1,009.7
Goodwill
795.9
777.0
Insurance for asbestos claims
72.1
72.1
Other assets
71.2
63.9
Total assets
$
2,802.0
$
2,864.0
Liabilities and stockholders'
equity
Current liabilities:
Current maturities of debt
$
6.3
$
5.7
Trade payables
66.7
116.9
Compensation and benefits
20.5
19.2
Current portion of pension and
postretirement benefit obligations
1.6
1.6
Other current liabilities
136.4
145.9
Total current liabilities
231.5
289.3
Long-term debt
549.1
530.2
Pension and postretirement benefit
obligations
52.3
50.5
Deferred income taxes
211.0
221.4
Operating lease liability
40.3
34.2
Reserve for asbestos claims
79.0
79.0
Other liabilities
50.2
44.4
Total liabilities
1,213.4
1,249.0
Stockholders' equity:
Common stock, $0.01 par value; 200,000,000
shares authorized; shares issued and outstanding: 172,932,582 at
June 30, 2023 and 176,876,406 at December 31, 2022
1.7
1.8
Additional paid-in capital
2,853.7
2,853.1
Retained deficit
(1,195.3
)
(1,164.9
)
Accumulated other comprehensive loss
(71.5
)
(75.0
)
Total stockholders' equity
1,588.6
1,615.0
Total liabilities and stockholders'
equity
$
2,802.0
$
2,864.0
Zurn Elkay Water Solutions
Corporation and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in Millions)
(Unaudited)
Six Months Ended
June 30, 2023
June 30, 2022
Operating activities
Net income
$
57.4
$
66.6
Adjustments to reconcile net income to
cash provided by (used for) operating activities:
Depreciation
15.3
4.7
Amortization of intangible assets
29.3
4.6
Non-cash asset impairment
2.5
—
Loss on dispositions of long-lived
assets
—
0.3
Deferred income taxes
(1.6
)
6.8
Other non-cash expenses
0.3
1.7
Stock-based compensation expense
20.5
7.7
Changes in operating assets and
liabilities:
Receivables
(22.2
)
(45.0
)
Inventories
28.8
(58.9
)
Other assets
13.6
7.8
Accounts payable
(50.6
)
21.1
Accruals and other
(1.1
)
(29.4
)
Cash provided by (used for) operating
activities
92.2
(12.0
)
Investing activities
Expenditures for property, plant and
equipment
(11.1
)
(2.0
)
Acquisitions, net of cash acquired
—
1.1
Proceeds from dispositions of long-lived
assets
0.3
1.3
Proceeds from insurance claims
9.0
—
Proceeds associated with divestiture of
discontinued operations
—
35.0
Cash (used for) provided by investing
activities
(1.8
)
35.4
Financing activities
Proceeds from borrowings of debt
13.0
10.0
Repayments of debt
(16.1
)
(13.0
)
Proceeds from exercise of stock
options
1.2
1.8
Taxes withheld and paid on employees'
share-based payment awards
—
(0.5
)
Repurchase of common stock
(87.1
)
—
Payment of common stock dividends
(24.5
)
(7.6
)
Cash used for financing activities
(113.5
)
(9.3
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
1.3
(0.3
)
(Decrease) increase in cash, cash
equivalents and restricted cash
(21.8
)
13.8
Cash, cash equivalents and restricted cash
at beginning of period
124.8
96.6
Cash, cash equivalents and restricted cash
at end of period
$
103.0
$
110.4
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230724039027/en/
Dave Pauli Vice President - Investor Relations 414.223.7770
Zurn Elkay Water Solutions (NYSE:ZWS)
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