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CST: 22/09/2019 11:21:08   

CSW Industrials Reports Fiscal Fourth Quarter and Full Year 2019 Results

123 Days ago

Fourth Quarter Fiscal 2019 Highlights

  • Fourth quarter 2019 revenue from continuing operations of $91.5 million, up 9.6% compared to $83.5 million in the prior year period.
  • Fourth quarter 2019 GAAP net income from continuing operations increased to $13.6 million, or $0.90 per diluted share, compared to $10.6 million, or $0.68 per diluted share, in the prior year period.
  • Fourth quarter 2019 adjusted net income from continuing operations increased 45.6% to $11.5 million, or $0.75 per diluted share, compared to $7.9 million, or $0.51 per diluted share, in the prior year period.

Full Year Fiscal 2019 Highlights

  • Full year fiscal 2019 revenue from continuing operations of $350.2 million, up 7.4% compared to $326.2 million in the prior year period.
  • Full year fiscal 2019 GAAP net income from continuing operations increased to $46.1 million, or $2.96 per diluted share, compared to $32.7 million, or $2.09 per diluted share, in the prior year period.
  • Full year fiscal 2019 adjusted net income from continuing operations increased 28.0% to $43.0 million, or $2.77 per diluted share, compared to $33.6 million, or $2.14 per diluted share, in the prior year period.
  • Operating cash flow from continuing operations for the twelve months ended March 31, 2019 increased 18.8% to $68.2 million, compared to the prior year period of $57.4 million.

DALLAS, May 22, 2019 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (NASDAQ:CSWI), a diversified industrial growth company with well-established, scalable platforms and domain expertise across two segments: Industrial Products and Specialty Chemicals, today reported results for the fiscal fourth quarter and full year 2019 ended March 31, 2019.

Net revenue during the fiscal fourth quarter of 2019 increased 9.6% (9.0% organic) to $91.5 million, compared to $83.5 million in the prior year period. Higher revenue was driven by increased sales in both the Industrial Products and Specialty Chemicals segments primarily in the building products, general industrial, HVAC/R and mining end markets, partially offset by lower sales in the energy end market.

GAAP operating income from continuing operations increased 53.3% to $16.1 million, compared to $10.5 million in the prior year period. The increase was driven by increased sales volumes.

Net income from continuing operations in the fiscal fourth quarter of 2019 was $13.6 million, or $0.90 per diluted share, compared to $10.6 million, or $0.68 per diluted share, in the prior year period. Adjusted to exclude one-time items and applying a normalized tax rate, adjusted net income from continuing operations in the fiscal fourth quarter of 2019 was $11.5 million, or $0.75 per diluted share, compared to $7.9 million, or $0.51 per diluted share, in the prior year period.

Joseph B. Armes, CSW Industrials’ Chief Executive Officer, commented, “I am very pleased with our fiscal 2019 results as we drove impressive growth to our topline and increased profits at a significantly greater rate than our sales growth. Our team executed effectively across our operating segments through continued integration efforts and efficiency initiatives.”

Armes continued, “In April, we announced the deployment of over $65 million in cash supporting our holistic capital allocation strategy aimed at driving long-term shareholder value. While our top priorities continue to be organic and inorganic investments, our previously-announced implementation of a dividend policy speaks to our Board of Directors’ confidence in our strategy and diversifies the ways in which we are able to return cash to shareholders.”

Fourth Quarter Results of Operations
Consolidated revenue from continuing operations increased 9.6% to $91.5 million, compared to $83.5 million in the prior year period.

Industrial Products segment revenue increased 14.7% (13.7% organic) to $53.7 million, compared to $46.8 million in the prior year period. Higher revenue was mainly the result of increased sales volume in architecturally-specified building products, general industrial, HVAC/R and plumbing end markets, partially offset by lower sales in the rail end markets. GAAP segment operating income increased 16.5% to $12.7 million, compared to $10.9 million in the prior year period.  

Specialty Chemicals segment revenue increased 3.3% to $37.8 million, compared to $36.6 million in the prior year period. Increased sales were driven in the rail, mining and building products end markets, partially offset by lower sales in the energy and plumbing end markets. GAAP segment operating income increased 109.4% to $6.7 million, compared to $3.2 million in the prior year period.

Consolidated gross profit increased 18.2% to $42.8 million, compared to $36.2 million in the prior year period.  Gross margin as a percentage of sales increased 340 basis points to 46.8%, compared to 43.4% in the prior year period driven by sales leverage within operating segments and operational efficiency.

Consolidated operating expenses in the current quarter were $26.8 million, or 29.3% of sales, and declined 150 basis points over the prior year level of $25.7 million, or 30.8% of sales. As a percentage of sales, the improvement was driven by sales leverage, partially offset by increased performance-based compensation as a result of stronger operating results.

Reported net earnings from continuing operations increased 28.3% to $13.6 million, or $0.90 per diluted share, compared to $10.6 million, or $0.68 per diluted share, in the prior year period. Adjusted to exclude one-time items and applying a normalized tax rate, adjusted net earnings from continuing operations in the fiscal fourth quarter of 2019 increased 45.6% to $11.5 million, or $0.75 per diluted share, compared to adjusted income from continuing operations of $7.9 million, or $0.51 per diluted share, in the prior year period.

Full Year Results
Consolidated revenue increased 7.4% (7.2% organic) to $350.2 million, compared with prior year revenue of $326.2 million. Higher revenue was attributed to sales from both existing and new products in the HVAC/R, architecturally specified building products and general industrial and plumbing end markets, partially offset by lower sales volumes in the mining and energy end markets.

Industrial Products segment revenue increased 10.4% (10.1% organic) to $205.9 million, compared to $186.5 million in the prior year period. The increase in revenue was mainly the result of higher sales in HVAC/R, architecturally-specified building products and general industrial end markets. Reported segment operating income increased 10.4% to $48.8 million, compared to $44.2 million in the prior year period. Segment adjusted operating income increased 8.5% to $48.6 million, compared to $44.8 million in the prior year period.

Specialty Chemicals segment revenue increased 3.2% to $144.2 million, compared to $139.7 million in the prior year period. The increase in revenue was driven by higher sales in the general industrial, architecturally-specified building products and plumbing end markets, partially offset by lower volume in the mining end market. Reported segment operating income increased 34.3% to $23.9 million, compared to $17.8 million in the prior year period. Segment adjusted operating income increased 18.0% to $22.3 million, compared to $18.9 million in the prior year period, due to leverage on the increased sales and operational efficiencies.

Consolidated gross profit increased 9.1% to $161.4 million over the prior year level of $147.9 million. Gross margin as a percentage of sales improved 80 basis points to 46.1%, compared to 45.3% in the prior year period. Higher gross margin was driven by leverage on sales, gains on sales of property, plant and equipment and savings as a result of prior year restructuring and realignment activities that did not recur.

Consolidated operating expenses were $100.9 million, or 28.8% of sales, compared to the prior year level of $98.3 million, or 30.1% of sales, an improvement of 130 basis points. The decrease in operating expense as a percentage of sales was attributable to leverage on increased sales and lower professional fees, partially offset by increased compensation and selling expenses.

The effective tax rate on continuing operations for the quarter ended March 31, 2019 was 19.9% and 25.0% for the fiscal year ended March 31, 2019. The Company’s effective tax rate for fiscal 2020 is expected to be in a range of 25% to 27%.

Reported net earnings from continuing operations was $46.1 million, or $2.96 per diluted share, compared to $32.7 million, or $2.09 per diluted share, in the prior year period. Adjusted to exclude one-time items and applying a normalized tax rate, adjusted income from continuing operations for the fiscal year 2019 increased 28% to $43.0 million, or $2.77 per diluted share, compared to adjusted income from continuing operations of $33.6 million, or $2.14 per diluted share, in the prior year period.

Operating cash flow from continuing operations for the fiscal year ended March 31, 2019, increased 18.8% to $68.2 million, compared to $57.4 million in the prior year.

Conference Call Information
The company will host a conference call today at 10:00 a.m. ET to discuss the results, followed by a question and answer session for the investment community.  A live webcast of the call can be accessed at ir.cswindustrials.com. To access the call, participants may dial toll-free at 1-877-407-0784 or 1-201-689-8560 (international) and request to join the CSW Industrials earnings call.

To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 or 1-412-317-6671 (international) and enter confirmation code 13690346. The telephonic replay will be available beginning at 1:00 p.m. ET on Wednesday, May 22, 2019, and will last through 11:59 p.m. ET on Wednesday, June 5, 2019.  The call will also be available for replay via the webcast link on CSW Industrials’ Investor Relations website.

Safe Harbor Statement
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, effective tax rate, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this press release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.

All forward-looking statements included in this press release are based on information currently available to us, and we assume no obligation to update any forward-looking statement except as may be required by law.

Non-GAAP Financial Measures
This press release includes an analysis of adjusted earnings per share, adjusted net income, and adjusted operating income, which are non-GAAP financial measures of performance.  For a reconciliation of these measures to the most directly comparable GAAP measures and for a discussion of why we consider these non-GAAP measures useful, see the “Reconciliation of Non-GAAP Measures” section of this release.
                                  
About CSW Industrials
CSWI is a diversified industrial growth company with well-established, scalable platforms and domain expertise across two segments: Industrial Products and Specialty Chemicals. CSWI's broad portfolio of leading products provides performance optimizing solutions to its customers. CSWI's products include mechanical products for heating, ventilation and air conditioning and refrigeration applications ("HVAC/R"), sealants and high performance specialty lubricants. Markets that CSWI serves include: HVAC/R, industrial, rail, plumbing, architecturally-specified building products, energy, mining and general industrial markets.

                 
Consolidated Statements of Income
                 
    (Unaudited)        
    Three Months Ended March 31,   Fiscal Year Ended March 31,
      2019       2018       2019       2018  
(in thousands, except per share amounts)                
Revenues, net   $   91,477     $   83,464     $   350,155     $   326,222  
Cost of revenues       (48,632 )       (47,269 )       (188,785 )       (178,282 )
Gross profit       42,845         36,195         161,370         147,940  
Selling, general and administrative expenses       (26,774 )       (25,700 )       (100,930 )       (98,281 )
Operating income       16,071         10,495         60,440         49,659  
Interest expense, net       (349 )       (476 )       (1,442 )       (2,317 )
Other income (expense), net       1,286         (88 )       2,443         905  
Income before income taxes       17,008         9,931          61,441         48,247  
Provision for income taxes       (3,384 )       678         (15,389 )       (15,565 )
Income from continuing operations       13,624         10,609         46,052         32,682  
Income (loss) from discontinued operations, net of tax       139         (4,271 )       (478 )       (44,564 )
Net (loss) income   $   13,763     $   6,338     $   45,574     $   (11,882 )
                 
                 
Basic earnings (loss) earnings per common share:                
Continuing operations   $   0.90     $   0.68     $   2.99     $   2.09  
Discontinued operations       0.01         (0.28 )       (0.03 )       (2.85 )
Net (loss) income   $   0.91     $   0.40     $   2.96     $   (0.76 )
                 
Diluted earnings (loss) earnings per common share:                
Continuing operations   $   0.90     $   0.68     $   2.96     $   2.09  
Discontinued operations       0.01         (0.28 )       (0.03 )       (2.85 )
Net (loss) income   $   0.91     $   0.40     $   2.93     $   (0.76 )


         
Consolidated Balance Sheets
    March 31,
(Amount in thousands, except per share amounts)     2019       2018  
ASSETS        
Current assets:        
Cash and cash equivalents   $   26,651     $   11,706  
Accounts receivable, net       66,136         63,383  
Inventories, net       51,429         42,974  
Prepaid expenses and other current assets       7,030         7,077  
Current assets, discontinued operations       21         2,427  
Total current assets       151,267         127,567  
Property, plant and equipment, net       53,639         54,473  
Goodwill       86,295         81,764  
Intangible assets, net       50,466         53,054  
Other assets       10,965         23,958  
Total assets   $   352,632     $   340,816  
         
LIABILITIES AND EQUITY        
Current liabilities:        
Accounts payable   $   19,024     $   16,826  
Accrued and other current liabilities       29,426         23,501  
Current portion of long-term debt       561         561  
Current liabilities, discontinued operations       161         3,966  
Total current liabilities       49,172         44,854  
Long-term debt       30,898         23,459  
Retirement benefits payable       1,978         2,017  
Other long-term liabilities       6,114         4,721  
Noncurrent liabilities, discontinued operations       784         -   
Total liabilities       88,946         75,051  
Equity:        
Common shares, $0.01 par value       158         158  
      Shares authorized – 50,000        
      Shares issued – 16,001 and 15,957, respectively        
Additional paid-in capital       46,633         42,684  
Treasury shares, at cost (962 and 80 shares, respectively)       (49,964 )       (3,252 )
Retained earnings       277,588         233,650  
Accumulated other comprehensive loss       (10,729 )       (7,475 )
Total equity       263,686         265,765  
Total liabilities and equity   $   352,632     $   340,816  


             
Consolidated Statements of Cash Flows
    Fiscal Year Ended March 31,
(Amounts in thousands)     2019       2018       2017  
Cash flows from operating activities:            
Net income (loss)   $   45,574     $   (11,882 )   $   11,071  
Less:  Loss from discontinued operations       (478 )       (44,564 )       (6,729 )
Income from continuing operations       46,052         32,682         17,800  
Adjustments to reconcile net income to net cash provided by operating activities:            
      Depreciation       7,411         7,651         7,470  
      Amortization of intangible and other assets       6,425         7,282         6,284  
      Provision for inventory reserves       231         235         167  
      Provision for doubtful accounts       818         (457 )       131  
      Share-based and other executive compensation       3,949         4,161         4,642  
      Acquisition-related non-cash gain           -          (376 )
      Net (gain) loss on disposals of property, plant and equipment       (4,320 )       (70 )       221  
      Net pension benefit       (416 )       (1,062 )       (1,092 )
      Impairment of assets       -          -          1,315  
      Realized (unrealized) deferred taxes       10,419         (10,146 )       -   
      Net deferred taxes       206         1,640         464  
      Changes in operating assets and liabilities:            
            Accounts receivable, net       (3,825 )       (2,698 )       (5,028 )
            Inventories       (5,537 )       992         214  
            Prepaid expenses and other current assets       725         17,797         (793 )
            Other assets       920         (106 )       (112 )
            Accounts payable and other current liabilities       5,704         6,263         5,669  
            Retirement benefits payable and other liabilities       (603 )       (6,780 )       2,385  
Net cash provided by operating activities, continuing operations       68,159         57,384         39,361  
Net cash used in operating activities, discontinued operations       (8,449 )       (14,228 )       (325 )
Net cash provided by operating activities       59,710         43,156         39,036  
Cash flows from investing activities:            
Capital expenditures       (7,515 )       (5,534 )       (6,869 )
Proceeds from sale of assets held for investment       3,905         547         -   
Proceeds from sale of assets       3,295         92         605  
Net change in bank time deposits       -          1,860         10,968  
Cash paid for acquisitions       (10,100 )       -          (28,179 )
Net cash used in investing activities, continuing operations       (10,415 )       (3,035 )       (23,475 )
Net cash provided by (used  in) investing activities, discontinued operations       7,356         (1,510 )       (2,493 )
Net cash used in investing activities       (3,059 )       (4,545 )       (25,968 )
Cash flows from financing activities:            
Borrowings on lines of credit       28,000         -          -   
Repayments of lines of credit       (20,561 )       (49,187 )       (16,476 )
Payments of deferred loan costs       -          (421 )       -   
Purchase of treasury shares       (46,712 )       (2,241 )       (1,011 )
Proceeds from stock option activity       -          328         2,169  
Net cash used in financing activities       (39,273 )       (51,521 )       (15,318 )
Effect of exchange rate changes on cash and equivalents       (2,433 )       1,470         (591 )
Net change in cash and cash equivalents       14,945         (11,440 )       (2,841 )
Cash and cash equivalents, beginning of period       11,706         23,146         25,987  
Cash and cash equivalents, end of period   $   26,651     $   11,706     $   23,146  


Reconciliation of Non-GAAP Measures

Reconciliation of Operating Income to Adjusted Operating Income---Continuing Operations
                 
    (unaudited)
  (in thousands) Quarter Ended March 31,   Fiscal Year Ended March 31,
      2019       2018       2019       2018  
                 
GAAP Operating Income- Continuing Operations $   16,071     $   10,495     $   60,440     $   49,659  
                 
Adjusting items:              
  Restructuring & realignment     -          154         -          1,397  
  Gain on sale of property & other     -          -          (1,839 )       -   
  Acquisition & integration costs     -          -          -          110  
  Pension Lump Sum & Officer Transition Costs     -          712         -          712  
                 
Adjusted Operating Income--Continuing Operations $   16,071     $   11,361     $   58,601     $   51,878  


             
Reconciliation of Net Income to Adjusted Net Income---Continuing Operations
                 
                 
                 
    (unaudited)
  (in thousands, except share data) Quarter Ended March 31,   Fiscal Year Ended March 31,
      2019       2018       2019       2018  
                 
GAAP Net Income---Continuing Operations $   13,624     $   10,609     $   46,052     $   32,682  
                 
Adjusting items, net of tax:              
  Restructuring & realignment     -          113         -          921  
  Gain on sale of property & other     (1,130 )       -          (2,491 )       -   
  Acquisition & integration costs     -          -          -          71  
  Pension Lump Sum & Officer Transition Costs     -          523         -          523  
  Discrete Tax Provisions & Other     (1,038 )       (3,309 )       (586 )       (603 )
                 
Adjusted Net Income---Continuing Operations $   11,456     $   7,936     $   42,975     $   33,594  
                 
GAAP Diluted income per common share, Continuing operations $   0.90     $   0.68     $   2.96     $   2.09  
                 
Adjusting items, per diluted common share:              
  Restructuring & realignment     -          0.01         -          0.07  
  Gain on sale of property & other     (0.08 )       -          (0.15 )       -   
  Acquisition & integration costs     -          -          -          -   
  Pension Lump Sum & Officer Transition Costs     -          0.03         -          0.03  
  Discrete Tax Provisions & Other     (0.07 )       (0.21 )       (0.04 )       (0.05 )
                 
Adjusted earnings per diluted common share     0.75     $   0.51     $   2.77     $   2.14  


 
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
                                 
                                 
                                 
    (unaudited)
  (in thousands, except percentages) For the Three Months Ended March 31, 2019   For the Three Months Ended March 31, 2018
    Industrial
Products
  Specialty
Chemicals
  Corporate
and Other
  Consolidated
Continuing
Operations
  Industrial
Products
  Specialty
Chemicals
  Corporate
and Other
  Consolidated
Continuing
Operations
                                 
Revenue $   53,691     $   37,786     $   -      $   91,477     $   46,829     $   36,635     $   -      $   83,464  
                                 
Operating Income $   12,653     $   6,726     $   (3,308 )   $   16,071     $   10,888     $   3,206     $   (3,599 )   $   10,495  
                                 
Adjusting items:                              
  Restructuring & realignment     -          -          -          -          -          154         -          154  
  Pension Lump Sum & Officer Transition Costs     -          -          -          -          119         47         546         712  
                                 
Adjusted Operating Income $   12,653     $   6,726     $   (3,308 )   $   16,071     $   11,007     $   3,407     $   (3,053 )   $   11,361  
% of revenue   23.6 %     17.8 %         17.6 %     23.5 %     9.3 %         13.6 %
                                 
                                 
    (unaudited)
  (in thousands, except percentages) Fiscal Year Ended March 31, 2019   Fiscal Year Ended March 31, 2018
    Industrial
Products
  Specialty
Chemicals
  Corporate
and Other
  Consolidated
Continuing
Operations
  Industrial
Products
  Specialty
Chemicals
  Corporate
and Other
  Consolidated
Continuing
Operations
                                 
Revenue $   205,931     $   144,223     $   1     $   350,155     $   186,483     $   139,735     $   4     $   326,222  
                                 
Operating Income $   48,817     $   23,930     $   (12,307 )   $   60,440     $   44,225     $   17,804     $   (12,370 )   $   49,659  
                                 
Adjusting items:                              
  Restructuring & realignment     -          -          -          -          367         1,030         -          1,397  
  Gain on sale of property & other     (253 )       (1,586 )       -          (1,839 )       -          -          -          -   
  Acquisition & integration costs     -          -          -          -          110         -          -          110  
  Pension Lump Sum & Officer Transition Costs     -          -          -          -          119         47          546         712  
                                 
Adjusted Operating Income $   48,564     $   22,344     $   (12,307 )   $   58,601     $   44,821     $   18,881     $   (11,824 )   $   51,878  
% of revenue   23.6 %     15.5 %         16.7 %     24.0 %     13.5 %         15.9 %

We use adjusted earnings per share, adjusted net income and adjusted operating income, together with financial measures prepared in accordance with GAAP, such as revenue, income from operations, operating expense, operating income and net income, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. We also believe these measures are useful for investors to assess the operating performance of our business without the effect of non-operating items.

Investor contact:
Michael Callahan, ICR
(203) 682-8311
Michael.Callahan@icrinc.com

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