Investor call scheduled for Wednesday, February 7, 2024 at 8:30
a.m. Eastern Time
Zurn Elkay Water Solutions Corporation (NYSE:ZWS)
Fourth Quarter
Highlights
- Net sales increased 5% to $357 million compared with $340
million in last year’s December quarter (+5% core sales(1)).
- Net income from continuing operations was $14 million (diluted
EPS from continuing operations of $0.08) compared with net income
from continuing operations of $10 million (diluted EPS from
continuing operations of $0.06) in the year-ago quarter.
- Adjusted diluted EPS(1) was $0.26 compared with $0.16 in the
year-ago quarter.
- Adjusted EBITDA(1) was $84 million (23.6% of net sales)
compared with $65 million (19.0% of net sales) in last year's
fourth quarter.
- Net debt leverage(1) of 1.1x as of December 31, 2023.
- Deployed $25 million to repurchase 0.8 million shares of common
stock in the quarter.
- Prepaid $60 million of our outstanding Term Loan.
Calendar Year 2023
Highlights
- Net sales were $1,531 million and increased by 19% from the
comparable $1,282 million in calendar year 2022 (-1% core sales(1)
inclusive of a 400 basis point impact from planned product line
exits, +20% from acquisitions)
- Net income from continuing operations was $104 million (diluted
EPS from continuing operations of $0.59), compared with $57 million
(diluted EPS from continuing operations of $0.37) in calendar year
2022.
- Adjusted diluted EPS(1) was $0.97, compared with $0.94 in the
prior calendar year.
- Adjusted EBITDA(1) was $340 million (22.2% of net sales)
compared with $265 million (20.6% of net sales) in calendar year
2022.
- Completed $125 million of common stock repurchases and paid $50
million in common stock dividends.
- Generated record free cash flow(1) of $233 million.
Todd A. Adams, Chairman and Chief Executive Officer of Zurn
Elkay, commented, “2023 was a year focused on completing the
integration of Elkay and capturing the related synergies while
executing against our growth initiatives, with a priority on
growing our clean drinking water platform. We are seeing the
benefits of our efforts to build awareness around the need for
clean filtered drinking water and targeted focus on K-12 schools
and higher education pay off as our drinking water sales and orders
both grew double-digits over the prior year. We also delivered on
the $25 million of synergies we committed to as well as
substantially completing the work to deliver another $25 million in
2024. We generated a record $233 million of free cash flow(1) and
executed a balanced capital allocation strategy while ending the
year with leverage at an all-time low."
Adams continued, "With respect to the fourth quarter, we had a
strong finish to the year as we delivered sales, Adjusted EBITDA
and margins above the expectations we communicated 90 days ago.
Core sales(1) increased 5% year over year inclusive of a 400 basis
point impact from product line exits. Excluding that impact, core
sales(1) increased 9% from the prior year with growth across nearly
all product categories as well as the benefit from the prior year
fourth quarter comparable. Our adjusted EBITDA margin expanded 460
bps over the prior year fourth quarter as the improved commodity
and transportation cost environment coupled with our cost synergies
read through our results as we had previously communicated.”
"As we look ahead to 2024, we believe we are well positioned to
drive superior results in a variety of end market scenarios given
the momentum we are building in our clean drinking water platform
as well as our other growth initiatives and the $25 million of
additional cost synergies we expect to deliver in 2024. Our strong
balance sheet provides us with capital allocation flexibility going
forward and the ability to execute against our funnel of
proprietary acquisition targets while remaining balanced with share
repurchase and dividends."
"In the coming weeks you will see us release our 2023
sustainability report that highlights the progress we continue to
make with respect to sustainability. We continue to make
enhancements to our sustainability program and our pursuit of
helping our customers protect the vital resource of clean water has
never been stronger. In the upcoming report you will see expanded
discussion around our role as stewards of water, progress towards
the various goals we have set as well as initiating several new
goals focused on the environment and our people. We are excited to
continue to build on the momentum we have around sustainability in
our company."
First Quarter and Full Year
Outlook
“Based on demand trends as we exited the fourth quarter and the
month of January, we believe net sales for the first quarter will
be up low single digits on a proforma basis and adjusted EBITDA(1)
margin will be between 23.5% and 24.0%. As we look ahead to the
full year we have confidence in our ability to drive growth and
deliver approximately 150 bps of year over year adjusted EBITDA
margin expansion. Additionally, we see our full year 2024 outlook
for free cash flow(1) to be approximately $250 million."
Fourth Quarter 2023
Overview
Net sales were $356.8 million and $340.3 million during the
three months ended December 31, 2023 and December 31, 2022,
respectively, an increase of 5% year over year. Core sales(1)
increased 5% year over year, inclusive of a 400 basis point impact
from planned product line exits, driven by growth across nearly all
of our product categories as well as the benefit from the prior
year comparable that was impacted by channel partners reducing
inventory levels.
During the three months ended December 31, 2023, income from
operations was $32.8 million compared to income from operations of
$19.8 million during the three months ended December 31, 2022.
Income from operations as a percentage of net sales increased by
340 basis points year over year due to the benefits resulting from
productivity synergies and restructuring actions related to the
Elkay merger as well as lower material and transportation costs,
partially offset by the loss on divestiture of asbestos liabilities
and certain assets.
Adjusted EBITDA(1) was $84.1 million, or 23.6% of net sales,
during the three months ended December 31, 2023 compared to $64.6
million, or 19.0% of net sales, during the three months ended
December 31, 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 other 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 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 filtered
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 Wednesday, February 7, 2024, at 8:30 a.m.
Eastern Time to discuss its fourth quarter 2023 results, provide a
general business update and respond to investor questions. Zurn
Elkay Water Solutions 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 two hours after
the call's completion until 10:59 p.m. Central Time, February 14,
2024. 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 as of the date
of this release, and Zurn Elkay Water Solutions 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, 2023, 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, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net sales
$
356.8
$
340.3
$
1,530.5
$
1,281.8
Cost of sales
200.9
230.9
882.4
816.3
Gross profit
155.9
109.4
648.1
465.5
Selling, general and administrative
expenses
93.6
72.4
371.3
309.0
Restructuring and other similar
charges
3.4
2.3
15.3
15.4
Loss on divestiture of asbestos
liabilities and certain assets
11.4
—
11.4
—
Amortization of intangible assets
14.7
14.9
58.7
34.0
Income from operations
32.8
19.8
191.4
107.1
Non-operating expense:
Interest expense, net
(8.7
)
(8.9
)
(38.5
)
(26.9
)
Loss on the extinguishment of debt
(0.9
)
—
(0.9
)
—
Actuarial gain on pension and other
postretirement benefit obligations
2.0
1.9
2.0
1.9
Other income (expense), net
(3.9
)
1.4
(7.2
)
1.7
Income before income taxes
21.3
14.2
146.8
83.8
Provision for income taxes
(7.8
)
(3.9
)
(42.6
)
(26.8
)
Net income from continuing operations
13.5
10.3
104.2
57.0
Income from discontinued operations, net
of tax
0.4
3.9
8.5
4.7
Net income
$
13.9
$
14.2
$
112.7
$
61.7
Basic net income per share:
Continuing operations
$
0.08
$
0.06
$
0.60
$
0.38
Discontinued operations
$
—
$
0.02
$
0.05
$
0.03
Net income
$
0.08
$
0.08
$
0.65
$
0.41
Diluted net income per share:
Continuing operations
$
0.08
$
0.06
$
0.59
$
0.37
Discontinued operations
$
—
$
0.02
$
0.05
$
0.03
Net income
$
0.08
$
0.08
$
0.64
$
0.40
Weighted-average number of shares
outstanding (in thousands):
Basic
173,119
177,938
174,251
151,581
Effect of dilutive equity awards
2,738
2,068
3,008
2,256
Diluted
175,857
180,006
177,259
153,837
Zurn Elkay Water Solutions
Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP
Financial Measures Three Months Ended December 31, 2023 (in
Millions) (Unaudited)
Three Months Ended December
31, 2023
Reported
Results
Adjustments
Non-GAAP
Results
Net Sales
$
356.8
$
—
$
356.8
EBITDA
54.4
29.7
(a)
84.1
Depreciation and amortization
(21.6
)
—
(21.6
)
Income from operations
32.8
29.7
(b)
62.5
Income before income taxes
21.3
37.7
(c)
59.0
Provision for income taxes and indicated
rate
(7.8
)
36.6
%
(5.8
)
15.4
%
(13.6
)
23.1
%
Net income from continuing operations
13.5
31.9
45.4
Income from discontinued operations, net
of tax
0.4
(0.4
)
—
Net income
$
13.9
$
31.5
$
45.4
EBITDA
Adjustments (a)
Income from
Operations
Adjustments (b)
Income before
Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
3.4
$
3.4
$
3.4
Last-in-first-out inventory
adjustments
5.4
5.4
5.4
Stock-based compensation expense
9.5
9.5
—
Amortization of intangible assets
—
—
14.7
Other expense, net (1)
—
—
3.9
Actuarial gain on pension and other
postretirement benefit obligations
—
—
(2.0
)
Loss on the extinguishment of debt
—
—
0.9
Loss on divestiture of asbestos
liabilities and certain assets
11.4
11.4
11.4
Total Adjustments
$
29.7
$
29.7
$
37.7
____________________
(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 Year Ended December 31, 2023 (in Millions)
(Unaudited)
Twelve Months Ended December
31, 2023
Reported
Results
Adjustments
Non-GAAP
Results
Net Sales
$
1,530.5
$
—
$
1,530.5
EBITDA
279.3
60.2
(a)
339.5
Depreciation and amortization
(87.9
)
—
(87.9
)
Income from operations
191.4
60.2
(b)
251.6
Income before income taxes
146.8
85.0
(c)
231.8
Provision for income taxes and indicated
rate
(42.6
)
29.0
%
(17.1
)
20.1
%
(59.7
)
25.8
%
Net income from continuing operations
104.2
67.9
172.1
Income from discontinued operations, net
of tax
8.5
(8.5
)
—
Net income
$
112.7
$
59.4
$
172.1
EBITDA
Adjustments (a)
Income from
Operations
Adjustments (b)
Income before
Income Taxes
Adjustments (c)
Restructuring and other similar
charges
$
15.3
$
15.3
$
15.3
Last-in-first-out inventory
adjustments
(6.5
)
(6.5
)
(6.5
)
Stock-based compensation expense
40.0
40.0
—
Amortization of intangible assets
—
—
58.7
Other expense, net (1)
—
—
7.2
Actuarial gain on pension and other
postretirement benefit obligations
—
—
(2.0
)
Loss on the extinguishment of debt
—
—
0.9
Loss on divestiture of asbestos
liabilities and certain assets
11.4
11.4
11.4
Total Adjustments
$
60.2
$
60.2
$
85.0
____________________
(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 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 other
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, the non-service cost components of net
periodic benefit costs 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)
Twelve Months 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 other
postretirement benefit obligations
—
—
(1.9
)
Total Adjustments
$
103.0
$
103.0
$
108.4
____________________
(1)
Other, net includes the gains and losses
from the sale of long-lived assets.
(2)
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 Three and Twelve Months Ended December 31, 2023
and December 31, 2022 (in Millions, except share and per share
amounts) (Unaudited)
Three Months Ended
Twelve Months Ended
Adjusted EBITDA
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income
$
13.9
$
14.2
$
112.7
$
61.7
Income from discontinued operations, net
of tax
(0.4
)
(3.9
)
(8.5
)
(4.7
)
Provision for income taxes
7.8
3.9
42.6
26.8
Actuarial gain on pension and other
postretirement benefit obligations
(2.0
)
(1.9
)
(2.0
)
(1.9
)
Other (income) expense, net (1)
3.9
(1.4
)
7.2
(1.7
)
Loss on the extinguishment of debt
0.9
—
0.9
—
Interest expense, net
8.7
8.9
38.5
26.9
Income from operations
$
32.8
$
19.8
$
191.4
$
107.1
Adjustments
Depreciation and amortization
$
21.6
$
23.6
$
87.9
$
54.5
Restructuring and other similar
charges
3.4
2.3
15.3
15.4
Acquisition-related fair value
adjustment
—
3.7
—
18.9
Stock-based compensation expense
9.5
9.5
40.0
25.0
Merger costs
—
—
—
33.7
Last-in first-out inventory
adjustments
5.4
5.7
(6.5
)
9.7
Loss on divestiture of asbestos
liabilities and certain assets
11.4
—
11.4
—
Other, net (2)
—
—
—
0.3
Subtotal of adjustments
51.3
44.8
148.1
157.5
Adjusted EBITDA
$
84.1
$
64.6
$
339.5
$
264.6
____________________
(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
Twelve Months Ended
Adjusted Net Income and Earnings Per
Share
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income
$
13.9
$
14.2
$
112.7
$
61.7
Income from discontinued operations, net
of tax
(0.4
)
(3.9
)
(8.5
)
(4.7
)
Loss on the extinguishment of debt
0.9
—
0.9
—
Amortization of intangible assets
14.7
14.9
58.7
34.0
Restructuring and other similar
charges
3.4
2.3
15.3
15.4
Acquisition-related fair value
adjustment
—
3.7
—
18.9
Merger costs
—
—
—
33.7
Last-in first-out inventory adjustment
5.4
5.7
(6.5
)
9.7
Actuarial gain on pension and other
postretirement benefit obligations
(2.0
)
(1.9
)
(2.0
)
(1.9
)
Other (income) expense, net (1)
3.9
(1.4
)
7.2
(1.7
)
Other, net (2)
—
—
—
0.3
Loss on divestiture of asbestos
liabilities and certain assets
11.4
—
11.4
—
Tax effect on above items
(5.8
)
(5.6
)
(17.1
)
(21.1
)
Adjusted net income
$
45.4
$
28.0
$
172.1
$
144.3
GAAP diluted net income per share from
continuing operations
$
0.08
$
0.06
$
0.59
$
0.37
Adjusted earnings per share - diluted
$
0.26
$
0.16
$
0.97
$
0.94
Weighted-average number of shares
outstanding (in thousands)
GAAP basic weighted-average shares
173,119
177,938
174,251
151,581
Effect of dilutive equity securities
2,738
2,068
3,008
2,256
Adjusted diluted weighted-average
shares
175,857
180,006
177,259
153,837
____________________
(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.
Twelve Months Ended
December 31, 2023
December 31, 2022
Cash provided by operating activities
$
253.9
$
97.0
Expenditures for property, plant and
equipment
(21.3
)
(7.6
)
Free cash flow
$
232.6
$
89.4
Zurn Elkay Water Solutions
Corporation and Subsidiaries Condensed Consolidated Statements of
Comprehensive Income (in Millions) (Unaudited)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income
$
13.9
$
14.2
$
112.7
$
61.7
Other comprehensive income (loss):
Foreign currency translation
adjustments
2.2
(0.1
)
3.6
(4.2
)
Change in pension and other postretirement
defined benefit plans, net of tax
3.7
4.1
3.7
4.1
Other comprehensive income (loss), net of
tax
5.9
4.0
7.3
(0.1
)
Total comprehensive income
$
19.8
$
18.2
$
120.0
$
61.6
Zurn Elkay Water Solutions
Corporation and Subsidiaries Condensed Consolidated Balance Sheets
(in Millions, except share amounts)
(Unaudited)
December 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
136.7
$
124.8
Receivables, net
210.2
219.7
Inventories
277.6
366.7
Income taxes receivable
17.0
18.3
Other current assets
26.3
28.0
Total current assets
667.8
757.5
Property, plant and equipment, net
180.3
183.8
Intangible assets, net
952.4
1,009.7
Goodwill
796.0
777.0
Insurance for asbestos claims
—
72.1
Other assets
70.5
63.9
Total assets
$
2,667.0
$
2,864.0
Liabilities and stockholders'
equity
Current liabilities:
Current maturities of debt
$
0.9
$
5.7
Trade payables
56.4
116.9
Compensation and benefits
30.5
19.2
Current portion of pension and other
postretirement benefit obligations
1.3
1.6
Other current liabilities
131.8
145.9
Total current liabilities
220.9
289.3
Long-term debt
494.4
530.2
Pension and other postretirement benefit
obligations
36.6
50.5
Deferred income taxes
210.0
221.4
Operating lease liability
37.3
34.2
Reserve for asbestos claims
—
79.0
Other liabilities
65.0
44.4
Total liabilities
1,064.2
1,249.0
Stockholders' equity:
Common stock, $0.01 par value; 200,000,000
shares authorized; shares issued and outstanding: 172,262,163 at
December 31, 2023 and 176,876,406 at December 31, 2022
1.7
1.8
Additional paid-in capital
2,847.0
2,853.1
Retained deficit
(1,178.2
)
(1,164.9
)
Accumulated other comprehensive loss
(67.7
)
(75.0
)
Total stockholders' equity
1,602.8
1,615.0
Total liabilities and stockholders'
equity
$
2,667.0
$
2,864.0
Zurn Elkay Water Solutions
Corporation and Subsidiaries Condensed Consolidated Statements of
Cash Flows (in Millions) (Unaudited)
Twelve Months Ended
December 31, 2023
December 31, 2022
Operating activities
Net income
$
112.7
$
61.7
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation
29.2
20.5
Amortization of intangible assets
58.7
34.0
Non-cash asset impairment
2.5
—
Loss on divestiture of asbestos
liabilities and certain assets
9.3
—
Divestiture of asbestos liabilities and
certain assets
(13.0
)
—
Loss (gain) on dispositions of long-lived
assets
(2.7
)
0.3
Deferred income taxes
(4.2
)
0.5
Other non-cash expenses
1.9
4.8
Actuarial gain on pension and other
postretirement benefit obligations
(2.0
)
(1.9
)
Loss on the extinguishment of debt
0.9
—
Stock-based compensation expense
40.0
25.0
Changes in operating assets and
liabilities:
Receivables, net
10.1
15.5
Inventories
65.0
(17.6
)
Other assets
2.5
36.5
Accounts payable
(60.8
)
(18.3
)
Accruals and other
3.8
(64.0
)
Cash provided by operating activities
253.9
97.0
Investing activities
Expenditures for property, plant and
equipment
(21.3
)
(7.6
)
Acquisitions, net of cash acquired
—
(44.8
)
Proceeds from dispositions of long-lived
assets
7.7
1.3
Proceeds from insurance claims
9.0
9.5
Proceeds associated with divestiture of
discontinued operations
—
35.0
Cash used for investing activities
(4.6
)
(6.6
)
Financing activities
Proceeds from borrowings of debt
13.0
102.0
Repayments of debt
(77.9
)
(107.7
)
Proceeds from exercise of stock
options
4.3
2.5
Taxes withheld and paid on employees'
share-based payment awards
(3.1
)
(0.7
)
Repurchase of common stock
(125.1
)
(24.7
)
Payment of common stock dividends
(50.4
)
(32.5
)
Cash used for financing activities
(239.2
)
(61.1
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
1.8
(1.1
)
Increase in cash, cash equivalents and
restricted cash
11.9
28.2
Cash, cash equivalents and restricted cash
at beginning of period
124.8
96.6
Cash, cash equivalents and restricted cash
at end of period
$
136.7
$
124.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206228428/en/
Dave Pauli Vice President - Investor Relations 414.223.7770
Zurn Elkay Water Solutions (NYSE:ZWS)
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