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Zurn Elkay Water Solutions Reports First Quarter 2023 Financial Results

2023-04-25 16:10 ET - News Release

Investor call scheduled for Wednesday, April 26, 2023 at 8:30 a.m. Eastern Time


Company Website: https://zurn-elkay.com
MILWAUKEE -- (Business Wire)

Zurn Elkay Water Solutions Corporation (NYSE:ZWS)

First Quarter Highlights

  • Net sales in the quarter increased 55% to $372 million compared with $240 million in last year’s March quarter (+3% core sales(1), +53% acquisitions, -1% foreign currency translation).
  • Net income from continuing operations was $23 million (diluted EPS from continuing operations of $0.13) compared with $29 million (diluted EPS from continuing operations of $0.23) in the year-ago quarter.
  • Adjusted EPS(1) was $0.18 compared with $0.24 in the year-ago quarter.
  • Adjusted EBITDA(1) was $72 million (19.5% of net sales) compared with $52 million (21.7% of net sales) in last year's first quarter.
  • Net debt leverage(1) of 1.6x as of March 31, 2023.
  • Deployed $37 million to share repurchases in the quarter.
  • Published our 2022 Sustainability Report.

Todd A. Adams, Chairman and Chief Executive Officer, commented, “We are pleased with our start to the year as demand trends in our business were a bit better than we anticipated and we delivered pro forma core growth of 5% on top of a prior year first quarter where core sales grew 15%. During the quarter we launched a nationwide awareness campaign focused on the need for safe drinking water within K-12 schools here in the US, and we continue to see momentum growing in our drinking water business. Operationally, we executed well as we delivered an adjusted EBITDA margin(1) of 19.5% which was at the high-end of our expectations heading into the quarter. Our Elkay synergy commitment of $25 million in the year remains on track and we expect to see our margin improve sequentially in the second quarter and further improve into the second half of the year as the lower commodity and transportation costs begin to read through. During the quarter, we repurchased $37 million of our common stock which puts us ahead of schedule on our commitment of at least $100 million in share repurchases during the year."

"In March we published our 2022 Sustainability Report. This is our fourth published report, but our first sustainability report as a combined Zurn Elkay organization. The report highlights our ongoing efforts to continually improve the environmental, social and governance aspects of our business and provides updates on the specific ESG related targets that we communicated last year and also adds several new targets. We are committed and excited to build on the momentum we have around ESG as a company.”

Second Quarter Outlook

Adams continued, “We continue to take a view on our external outlook that encompasses a broader range of volatility than we have the past couple years. Our outlook for the year remains unchanged from 90 days ago with sales to be in the range of $1,500 million and $1,550 million, Adjusted EBITDA(1) to be in the range of $325 million to $345 million and free cash flow(1) to total approximately $200 million. For the second quarter, we expect sales to be in a range of $385 million to $395 million and consolidated Adjusted EBITDA margins(1) to range between 21.0% and 21.5%."

First Quarter 2023 Overview

Net sales were $372.1 million and $239.6 million during the three months ended March 31, 2023 and March 31, 2022, respectively, an increase of 55% year over year. Excluding a 53% increase in sales associated with our combination with Elkay and a 1% decrease in sales associated with foreign currency translation, core sales increased 3% year-over-year as nearly all of our product categories, with the exception of products sold into the residential end market, contributed to the sales growth.

During the three months ended March 31, 2023, income from operations was $43.7 million compared to $43.9 million during the three months ended March 31, 2022. Income from operations as a percentage of net sales decreased by 660 basis points year over year as the benefits of productivity actions were offset by higher 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 $72.4 million, or 19.5% of net sales, during the three months ended March 31, 2023 compared to $52.0 million, or 21.7% of net sales, during the three months ended March 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 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.zurn-elkay.com.

Conference Call Details

Zurn Elkay Water Solutions will hold a conference call on Wednesday, April 26, 2023, at 8:30 a.m. Eastern Time to discuss its first 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. The conference call can be accessed via telephone as follows:

Domestic toll-free: 888-510-2359
International toll: 646-960-0215
Access Code: 7660247

A live webcast of the call will also be available on the Company's investor relations website. Please go to the website (investors.zurn-elkay.com) at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

If you are unable to participate during the live teleconference, a replay of the conference call will be available from 9:30 a.m. Central Time April 26, 2023 until 10:59 p.m. Central Time, May 3, 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

 

March 31, 2023

 

March 31, 2022

Net sales

$

372.1

 

 

$

239.6

 

Cost of sales

 

223.3

 

 

 

137.7

 

Gross profit

 

148.8

 

 

 

101.9

 

Selling, general and administrative expenses

 

88.5

 

 

 

53.9

 

Restructuring and other similar charges

 

1.9

 

 

 

1.1

 

Amortization of intangible assets

 

14.7

 

 

 

3.0

 

Income from operations

 

43.7

 

 

 

43.9

 

Non-operating expense:

 

 

 

Interest expense, net

 

(9.6

)

 

 

(4.8

)

Other (expense) income, net

 

(2.4

)

 

 

0.3

 

Income before income taxes

 

31.7

 

 

 

39.4

 

Provision for income taxes

 

(9.1

)

 

 

(10.0

)

Net income from continuing operations

 

22.6

 

 

 

29.4

 

Income from discontinued operations, net of tax

 

0.2

 

 

 

0.8

 

Net income

$

22.8

 

 

$

30.2

 

 

 

 

 

Basic net income per share:

 

 

 

Continuing operations

$

0.13

 

 

$

0.23

 

Discontinued operations

$

0.00

 

 

$

0.01

 

Net income

$

0.13

 

 

$

0.24

 

Diluted net income per share:

 

 

 

Continuing operations

$

0.13

 

 

$

0.23

 

Discontinued operations

$

0.00

 

 

$

0.01

 

Net income

$

0.13

 

 

$

0.24

 

Weighted-average number of shares outstanding (in thousands):

 

 

 

Basic

 

176,416

 

 

 

126,281

 

Effect of dilutive equity awards

 

1,969

 

 

 

2,160

 

Diluted

 

178,385

 

 

 

128,441

 

Zurn Elkay Water Solutions Corporation and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures

Three Months Ended March 31, 2023

(in Millions) (Unaudited)

 

 

 

Three Months Ended March 31, 2023

 

 

Reported

Results

 

 

 

Adjustments

 

 

 

Non-GAAP

Results

 

 

Net sales

 

$

372.1

 

 

 

 

$

 

 

 

 

$

372.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

66.5

 

 

 

 

 

5.9

 

(a)

 

 

 

72.4

 

 

 

Depreciation and amortization

 

 

(22.8

)

 

 

 

 

 

 

 

 

 

(22.8

)

 

 

Income from operations

 

 

43.7

 

 

 

 

 

5.9

 

(b)

 

 

 

49.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

31.7

 

 

 

 

 

12.7

 

(c)

 

 

 

44.4

 

 

 

Provision for income taxes and indicated rate

 

 

(9.1

)

 

28.7

%

 

 

(3.1

)

 

24.4

%

 

 

(12.2

)

 

27.5

%

Net income from continuing operations

 

 

22.6

 

 

 

 

 

9.6

 

 

 

 

 

32.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

 

 

0.2

 

 

 

 

 

(0.2

)

 

 

 

 

 

 

 

Net income

 

$

22.8

 

 

 

 

$

9.4

 

 

 

 

$

32.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

Adjustments (a)

 

 

 

Income

from

Operations

Adjustments (b)

 

 

 

Income

before

Income Taxes

Adjustments (c)

 

 

Restructuring and other similar charges

 

$

1.9

 

 

 

 

$

1.9

 

 

 

 

$

1.9

 

 

 

Last-in-first-out inventory adjustments

 

 

(6.3

)

 

 

 

 

(6.3

)

 

 

 

 

(6.3

)

 

 

Stock-based compensation expense

 

 

10.3

 

 

 

 

 

10.3

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

14.7

 

 

 

Other expense, net (1)

 

 

 

 

 

 

 

 

 

 

 

 

2.4

 

 

 

Total Adjustments

 

$

5.9

 

 

 

 

$

5.9

 

 

 

 

$

12.7

 

 

 

____________________

(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 Months Ended March 31, 2022

(in Millions) (Unaudited)

 

 

 

Three Months Ended March 31, 2022

 

 

Reported

Results

 

 

 

Adjustments

 

 

 

Non-GAAP

Results

 

 

Net sales

 

$

239.6

 

 

 

 

$

 

 

 

 

$

239.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

49.2

 

 

 

 

 

2.8

 

(a)

 

 

 

52.0

 

 

 

Depreciation and amortization

 

 

(5.3

)

 

 

 

 

 

 

 

 

 

(5.3

)

 

 

Income from operations

 

 

43.9

 

 

 

 

 

2.8

 

(b)

 

 

 

46.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

39.4

 

 

 

 

 

1.6

 

(c)

 

 

 

41.0

 

 

 

Provision for income taxes and indicated rate

 

 

(10.0

)

 

25.4

%

 

 

(0.4

)

 

25.0

%

 

 

(10.4

)

 

25.4

%

Net income from continuing operations

 

 

29.4

 

 

 

 

 

1.2

 

 

 

 

 

30.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

 

 

0.8

 

 

 

 

 

(0.8

)

 

 

 

 

 

 

 

Net income

 

$

30.2

 

 

 

 

$

0.4

 

 

 

 

$

30.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

Adjustments (a)

 

 

 

Income

from

Operations

Adjustments (b)

 

 

 

Income

before

Income Taxes

Adjustments (c)

 

 

Restructuring and other similar charges

 

$

1.1

 

 

 

 

$

1.1

 

 

 

 

$

1.1

 

 

 

Acquisition-related fair value adjustment

 

 

0.3

 

 

 

 

 

0.3

 

 

 

 

 

0.3

 

 

 

Other, net (1)

 

 

0.3

 

 

 

 

 

0.3

 

 

 

 

 

0.3

 

 

 

Last-in-first-out inventory adjustments

 

 

(2.8

)

 

 

 

 

(2.8

)

 

 

 

 

(2.8

)

 

 

Stock-based compensation expense

 

 

3.9

 

 

 

 

 

3.9

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

3.0

 

 

 

Other income, net (2)

 

 

 

 

 

 

 

 

 

 

 

 

(0.3

)

 

 

Total Adjustments

 

$

2.8

 

 

 

 

$

2.8

 

 

 

 

$

1.6

 

 

 

____________________

(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 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 March 31, 2023 and March 31, 2022

(in Millions, except share and per share amounts) (Unaudited)

 

 

Three Months Ended

Adjusted EBITDA

March 31, 2023

 

March 31, 2022

Net income

$

22.8

 

 

$

30.2

 

Income from discontinued operations, net of tax

 

(0.2

)

 

 

(0.8

)

Provision for income taxes

 

9.1

 

 

 

10.0

 

Other expense (income), net (1)

 

2.4

 

 

 

(0.3

)

Interest expense, net

 

9.6

 

 

 

4.8

 

Income from operations

$

43.7

 

 

$

43.9

 

 

 

 

 

Adjustments

 

 

 

Depreciation and amortization

$

22.8

 

 

$

5.3

 

Restructuring and other similar charges

 

1.9

 

 

 

1.1

 

Acquisition-related fair value adjustment

 

 

 

 

0.3

 

Stock-based compensation expense

 

10.3

 

 

 

3.9

 

Last-in first-out inventory adjustments

 

(6.3

)

 

 

(2.8

)

Other, net (2)

 

 

 

 

0.3

 

Subtotal of adjustments

 

28.7

 

 

 

8.1

 

Adjusted EBITDA

$

72.4

 

 

$

52.0

 

____________________

(1)

Other expense (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.

(2)

Other, net includes the gains and losses from sale of long-lived assets.

 

Three Months Ended

Adjusted Net Income and Earnings Per Share

March 31, 2023

 

March 31, 2022

Net income

$

22.8

 

 

$

30.2

 

Income from discontinued operations, net of tax

 

(0.2

)

 

 

(0.8

)

Amortization of intangible assets

 

14.7

 

 

 

3.0

 

Restructuring and other similar charges

 

1.9

 

 

 

1.1

 

Acquisition-related fair value adjustment

 

 

 

 

0.3

 

Last-in first-out inventory adjustment

 

(6.3

)

 

 

(2.8

)

Other expense (income), net (1)

 

2.4

 

 

 

(0.3

)

Other, net (2)

 

 

 

 

0.3

 

Tax effect on above items

 

(3.1

)

 

 

(0.4

)

Adjusted net income

$

32.2

 

 

$

30.6

 

 

 

 

 

GAAP diluted net income per share from continuing operations

$

0.13

 

 

$

0.23

 

Adjusted earnings per share - diluted

$

0.18

 

 

$

0.24

 

 

 

 

 

Weighted-average number of shares outstanding (in thousands)

 

 

 

GAAP basic weighted-average shares

 

176,416

 

 

 

126,281

 

Effect of dilutive equity securities

 

1,969

 

 

 

2,160

 

Adjusted diluted weighted-average shares

 

178,385

 

 

 

128,441

 

____________________

(1)

Other expense (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.

(2)

Other, net includes the gains and losses from the sale of long-lived assets.

 

 

Three Months Ended

 

 

March 31, 2023

 

March 31, 2022

Cash provided by (used for) operating activities

 

$

5.0

 

 

$

(53.9

)

Expenditures for property, plant and equipment

 

 

(5.2

)

 

 

(0.8

)

Free cash flow

 

$

(0.2

)

 

$

(54.7

)

 

 

Earnings Guidance

Earnings Outlook Reconciliation (1)

 

Three Months Ending June 30, 2023

 

Year Ending December 31, 2023

Net income

 

$23 million to $27 million

 

$94 million to $114 million

Provision for income taxes

 

10

 

42

Interest expense, net

 

10

 

44

Depreciation and amortization

 

23

 

90

Restructuring and other similar charges

 

2

 

8

Stock-based compensation expense

 

11

 

47

Adjusted EBITDA

 

$81 million to $85 million
(21.0% to 21.5% of net sales)

 

$325 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

 

March 31, 2023

 

March 31, 2022

Net income

$

22.8

 

 

$

30.2

Other comprehensive income (loss):

 

 

 

Foreign currency translation adjustments

 

(0.1

)

 

 

2.0

Other comprehensive (loss) income, net of tax

 

(0.1

)

 

 

2.0

Total comprehensive income

$

22.7

 

 

$

32.2

Zurn Elkay Water Solutions Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in Millions, except share amounts)

 

 

 

(Unaudited)

 

 

 

 

March 31,

2023

 

December 31,

2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

74.8

 

 

$

124.8

 

Receivables, net

 

 

223.0

 

 

 

219.7

 

Inventories

 

 

349.1

 

 

 

366.7

 

Income taxes receivable

 

 

10.2

 

 

 

18.3

 

Other current assets

 

 

24.7

 

 

 

28.0

 

Total current assets

 

 

681.8

 

 

 

757.5

 

Property, plant and equipment, net

 

 

201.5

 

 

 

183.8

 

Intangible assets, net

 

 

995.0

 

 

 

1,009.7

 

Goodwill

 

 

790.7

 

 

 

777.0

 

Insurance for asbestos claims

 

 

72.1

 

 

 

72.1

 

Other assets

 

 

68.9

 

 

 

63.9

 

Total assets

 

$

2,810.0

 

 

$

2,864.0

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of debt

 

$

6.3

 

 

$

5.7

 

Trade payables

 

 

84.0

 

 

 

116.9

 

Compensation and benefits

 

 

9.4

 

 

 

19.2

 

Current portion of pension and postretirement benefit obligations

 

 

1.6

 

 

 

1.6

 

Other current liabilities

 

 

128.3

 

 

 

145.9

 

Total current liabilities

 

 

229.6

 

 

 

289.3

 

 

 

 

 

 

Long-term debt

 

 

550.3

 

 

 

530.2

 

Pension and postretirement benefit obligations

 

 

51.4

 

 

 

50.5

 

Deferred income taxes

 

 

216.9

 

 

 

221.4

 

Operating lease liability

 

 

38.4

 

 

 

34.2

 

Reserve for asbestos claims

 

 

79.0

 

 

 

79.0

 

Other liabilities

 

 

44.9

 

 

 

44.4

 

Total liabilities

 

 

1,210.5

 

 

 

1,249.0

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding:

175,132,260 at March 31, 2023 and 176,876,406 at December 31, 2022

 

 

1.8

 

 

 

1.8

 

Additional paid-in capital

 

 

2,851.9

 

 

 

2,853.1

 

Retained deficit

 

 

(1,179.1

)

 

 

(1,164.9

)

Accumulated other comprehensive loss

 

 

(75.1

)

 

 

(75.0

)

Total stockholders' equity

 

 

1,599.5

 

 

 

1,615.0

 

Total liabilities and stockholders' equity

 

$

2,810.0

 

 

$

2,864.0

 

Zurn Elkay Water Solutions Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in Millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

March 31,

2023

 

March 31,

2022

Operating activities

 

 

 

 

Net income

 

$

22.8

 

 

$

30.2

 

Adjustments to reconcile net income to cash provided by (used for) operating activities:

 

 

 

 

Depreciation

 

 

8.1

 

 

 

2.3

 

Amortization of intangible assets

 

 

14.7

 

 

 

3.0

 

Deferred income taxes

 

 

0.9

 

 

 

4.6

 

Other non-cash expenses

 

 

0.3

 

 

 

0.5

 

Stock-based compensation expense

 

 

10.3

 

 

 

3.9

 

Changes in operating assets and liabilities:

 

 

 

 

Receivables

 

 

(3.2

)

 

 

(27.7

)

Inventories

 

 

(4.2

)

 

 

(39.6

)

Other assets

 

 

12.4

 

 

 

(1.1

)

Accounts payable

 

 

(33.0

)

 

 

8.4

 

Accruals and other

 

 

(24.1

)

 

 

(38.4

)

Cash provided by (used for) operating activities

 

 

5.0

 

 

 

(53.9

)

 

 

 

 

 

Investing activities

 

 

 

 

Expenditures for property, plant and equipment

 

 

(5.2

)

 

 

(0.8

)

Proceeds from dispositions of long-lived assets

 

 

 

 

 

1.3

 

Proceeds associated with divestiture of discontinued operations

 

 

 

 

 

35.0

 

Cash (used for) provided by investing activities

 

 

(5.2

)

 

 

35.5

 

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from borrowings of debt

 

 

13.0

 

 

 

10.0

 

Repayments of debt

 

 

(14.6

)

 

 

(11.4

)

Proceeds from exercise of stock options

 

 

0.6

 

 

 

0.5

 

Taxes withheld and paid on employees' share-based payment awards

 

 

 

 

 

(0.5

)

Repurchase of common stock

 

 

(37.0

)

 

 

 

Payment of common stock dividends

 

 

(12.3

)

 

 

(3.8

)

Cash used for financing activities

 

 

(50.3

)

 

 

(5.2

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

0.5

 

 

 

0.2

 

Decrease in cash, cash equivalents and restricted cash

 

 

(50.0

)

 

 

(23.4

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

124.8

 

 

 

96.6

 

Cash, cash equivalents and restricted cash at end of period

 

$

74.8

 

 

$

73.2

 

 

Contacts:

Dave Pauli
Vice President - Investor Relations
414.223.7770

Source: Zurn Elkay Water Solutions Corporation

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