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CST: 20/03/2019 07:05:08   

CSW Industrials Reports Fiscal Third Quarter 2019 Results

42 Days ago

Highlights

  • Third quarter 2019 revenue from continuing operations of $77.5 million, up 12.3% compared to $69.0 million in the prior year period.
  • Third quarter 2019 GAAP operating income from continuing operations increased 19.0% to $9.4 million or 12.1% of sales, compared to $7.9 million or 11.4% of sales in the prior year period.  
  • Third quarter 2019 GAAP net earnings from continuing operations increased to $6.0 million, or $0.39 per diluted share, compared to $2.6 million or $0.17 per diluted share in the prior year period.
  • Adjusted to apply a normalized tax rate, non-GAAP net earnings from continuing operations increased 37.3% to $7.0 million, or $0.46 per diluted share, compared to $5.1 million or $0.32 per diluted share in the prior year period.
  • Operating cash flow from continuing operations for the nine months ended December 31, 2018 increased 23.8% to $58.3 million compared to the prior year period of $47.1 million.

DALLAS, Feb. 05, 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 third quarter ended December 31, 2018.

Net revenue during the fiscal third quarter of 2019 increased 12.3% to $77.5 million, compared to $69.0 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 HVAC, architecturally-specified building products and general industrial end markets.

GAAP operating income from continuing operations increased 19.0% to $9.4 million, compared to $7.9 million in the prior year period. The increase was driven by increased sales volumes.

Net income from continuing operations in the fiscal third quarter of 2019 was $6.0 million, or $0.39 per diluted share, compared to $2.6 million, or $0.17 per diluted share, in the prior year period. Adjusted to apply a normalized tax rate, adjusted net income from continuing operations in the fiscal third quarter of 2019 was $7.0 million, or $0.46 per diluted share, compared to $5.1 million, or $0.32 per diluted share, in the prior year period.

Joseph B. Armes, CSW Industrials’ Chief Executive Officer, commented, “We are pleased to report excellent third quarter results highlighted by double-digit organic revenue growth, which helped to bolster margins and generate 37% growth in adjusted net income. We continue to outpace the growth of the end markets we serve, which we attribute to our talented global workforce, customer focus, industry leading brands and quality products.”

Armes continued, “We continue to steward well the capital entrusted to us by directing cash to the opportunities providing the greatest risk-adjusted return.  Underscoring this commitment, we returned $9.9 million to shareholders through share repurchases in the third fiscal quarter 2019 bringing the year-to-date total to $40.7 million.”

Third Quarter Results of Operations
Consolidated revenue from continuing operations increased 12.3% to $77.5 million, compared to $69.0 million in the prior year period.

Industrial Products segment revenue increased 15.3% to $43.7 million, compared to $37.9 million in the prior year period. Higher revenue was mainly the result of increased sales volume in HVAC and architecturally-specified building products end markets. GAAP segment operating income increased 11.0% to $8.1 million, compared to $7.3 million in the prior year period.  

Specialty Chemicals segment revenue increased 8.7% to $33.8 million, compared to $31.1 million in the prior year period. Increased sales were driven by higher volumes in the general industrial and architecturally-specified building products end markets. GAAP segment operating income increased 17.9% to $4.6 million, compared to $3.9 million in the prior year period.

Consolidated gross profit increased 13.2% to $34.2 million, compared to $30.2 million in the prior year period.  Gross margin as a percentage of sales increased to 44.2%, compared to 43.8% in the prior year period driven by sales leverage across operating segments.

Consolidated operating expenses in the current quarter were $24.8 million, or 32.0% of sales, and declined 30 basis points over the prior year level of $22.3 million, or 32.3% of sales. The increase in operating expenses was primarily driven by increased performance-based compensation as a result of stronger operating results and increased spending in the Industrial Products related to an ERP system upgrade of $0.4 million.

Reported net earnings from continuing operations increased to $6.0 million, or $0.39 per diluted share, compared to $2.6 million, or $0.17 per diluted share in the prior year period. Adjusted to apply a normalized tax rate, adjusted net earnings from continuing operations in the fiscal third quarter of 2019 increased 37.3% to $7.0 million, or $0.46 per diluted share, compared to adjusted income from continuing operations of $5.1 million, or $0.32 per diluted share, in the prior year period.

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 13686796. The telephonic replay will be available beginning at 1:00 p.m. ET on Tuesday, February 5, 2019, and will last through 11:59 p.m. ET on Tuesday, February 19, 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 ("HVAC") and refrigeration applications, sealants and high performance specialty lubricants. Markets that CSWI serves include: HVAC, industrial, rail, plumbing, architecturally-specified building products, energy, mining and general industrial markets.

                 
Consolidated Income Statements                
                 
    (unaudited)   (unaudited)
    Three Months Ended
December 31,
 
  Nine Months Ended
December 31,
 
(Amounts in thousands, except per share amounts)     2018       2017       2018       2017  
Revenues, net   $   77,488     $   69,036     $   258,678     $   242,757  
Cost of revenues       (43,260 )       (38,826 )       (140,153 )       (131,013 )
Gross profit       34,228         30,210         118,525         111,744  
Selling, general and administrative expenses       (24,807 )       (22,270 )       (74,156 )       (72,581 )
Operating income       9,421         7,940         44,369         39,163  
Interest expense, net       (289 )       (540 )       (1,094 )       (1,842 )
Other income, net       336         375         1,157         994  
Income before income taxes       9,468         7,775         44,432         38,315  
Provision for income taxes       (3,471 )       (5,140 )       (12,005 )       (16,243 )
Income from continuing operations       5,997         2,635         32,427         22,072  
Income (loss) from discontinued operations, net of tax       (1,016 )       (36,672 )       (616 )       (40,293 )
Net income   $   4,981     $   (34,037 )   $   31,811     $   (18,221 )
                                 
           
           
Basic earnings (loss) earnings per common share:          
Continuing operations   $   0.39     $   0.17     $   2.09     $   1.41  
Discontinued operations       (0.06 )       (2.34 )       (0.04 )       (2.57 )
Net income   $   0.33     $   (2.17 )   $   2.05     $   (1.16 )
                                 
           
Diluted earnings (loss) earnings per common share:          
Continuing operations   $   0.39     $   0.17     $   2.07     $   1.41  
Discontinued operations       (0.07 )       (2.34 )       (0.04 )       (2.57 )
Net income   $   0.32     $   (2.17 )   $   2.03     $   (1.16 )
                                 
           

 

Consolidated Balance Sheets        
         
  (unaudited)
(Amounts in thousands, except per share amounts)   December 31, 2018   March 31, 2018
ASSETS  
Current assets:  
Cash and cash equivalents   $ 14,624     $ 11,706  
Accounts receivable, net of allowance for doubtful accounts of $701 and $1,015, respectively     50,277       63,383  
Inventories, net     50,444       42,974  
Prepaid expenses and other current assets     9,323       7,077  
Current assets, discontinued operations     21       2,427  
Total current assets     124,689       127,567  
Property, plant and equipment, net of accumulated depreciation of $64,911 and $61,967, respectively     52,720       54,473  
Goodwill .     80,838       81,764  
Intangible assets, net     47,376       53,054  
Other assets     11,861       23,958  
Total assets   $ 317,484     $ 340,816  
   
LIABILITIES AND EQUITY  
Current liabilities:  
Accounts payable   $ 14,514     $ 16,826  
Accrued and other current liabilities     29,138       23,501  
Current portion of long-term debt     561       561  
Current liabilities, discontinued operations     168       3,966  
Total current liabilities     44,381       44,854  
Long-term debt     11,039       23,459  
Retirement benefits payable     1,789       2,017  
Other long-term liabilities     5,484       4,721  
Noncurrent liabilities, discontinued operations     964       -  
Total liabilities     63,657       75,051  
Equity:        
Common shares, $0.01 par value     158       158  
Shares authorized – 50,000        
Shares issued – 16,000 and 15,957, respectively        
Additional paid-in capital     45,576       42,684  
Treasury shares, at cost (866 and 80 shares, respectively)     (45,007 )     (3,252 )
Retained earnings     263,538       233,650  
Accumulated other comprehensive loss     (10,438 )     (7,475 )
Total equity     253,827       265,765  
Total liabilities and equity   $ 317,484     $ 340,816  
                 
 

 

Consolidated Statements of Cash Flow            
             
    (unaudited)    
    Nine Months Ended December 31,    
(Amounts in thousands)     2018       2017      
Cash flows from operating activities:            
Net income   $ 31,811     $ (18,221 )    
Less: loss from discontinued operations     (616 )     (40,293 )    
Income from continuing operations     32,427       22,072      
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation     5,599       5,697      
Amortization of intangible and other assets     4,799       5,450      
Provision for inventory reserves     822       220      
Provision for doubtful accounts     126       (6 )    
Share-based and other executive compensation     2,893       3,329      
Net gain on disposals of property, plant and equipment     (2,854 )     (89 )    
Net pension benefit     (296 )     (974 )    
Net deferred taxes     10,225       (430 )    
Changes in operating assets and liabilities:            
Accounts receivable, net     12,450       8,673      
Inventories     (7,676 )     (1,262 )    
Prepaid expenses and other current assets     (2,263 )     375      
Other assets     293       9      
Accounts payable and other current liabilities     1,755       10,343      
Retirement benefits payable and other liabilities     (19 )     (6,357 )    
Net cash provided by operating activities, continuing operations     58,281       47,050      
Net cash used in operating activities, discontinued operations     (8,401 )     (8,291 )    
Net cash provided by operating activities     49,880       38,759      
Cash flows from investing activities:            
Capital expenditures     (4,766 )     (4,263 )    
Proceeds from sale of assets held for investment     2,102       546      
Proceeds from sale of assets     3,291       22      
Net change in bank time deposits     -       1,840      
Net cash provided by (used in) investing activities, continuing operations     627       (1,855 )    
Net cash provided by (used  in) investing activities, discontinued operations     7,356       (825 )    
Net cash provided by (used in) investing activities     7,983       (2,680 )    
Cash flows from financing activities:            
Borrowings on lines of credit     8,000       -      
Repayments of lines of credit     (20,421 )     (33,046 )    
Payments of deferred loan costs     -       (422 )    
Purchase of treasury shares     (41,755 )     (997 )    
Proceeds from stock option activity     -       328      
Net cash used in financing activities     (54,176 )     (34,137 )    
Effect of exchange rate changes on cash and equivalents     (769 )     1,454      
Net change in cash and cash equivalents     2,918       3,396      
Cash and cash equivalents, beginning of period     11,706       23,146      
Cash and cash equivalents, end of period   $ 14,624     $ 26,542      
             


Reconciliation of Non-GAAP Measures

Reconciliation of Operating Income to Adjusted Operating Income---Continuing Operations          
                     
    (unaudited)    
  (in thousands) Quarter Ended December 31,   Nine Months Ended December 31,    
    2018   2017   2018
  2017    
                     
GAAP Operating Income- Continuing Operations $ 9,421   $ 7,940   $ 44,369     $ 39,163    
                     
Adjusting items:                  
  Restructuring & realignment   -     -     -       1,243    
  Gain on sale of property & other   -     -     (1,839 )     -    
  M&A transaction costs   -     -         110    
                     
Adjusted Operating Income--Continuing Operations $ 9,421   $ 7,940   $ 42,530     $ 40,516    
                     

 

Reconciliation of Net Income to Adjusted Net Income---Continuing Operations                
                     
    (unaudited)    
  (in thousands, except share data) Quarter Ended December 31,   Nine Months Ended December 31,    
    2018   2017   2018
  2017    
                     
GAAP Net Income---Continuing Operations $ 5,997   $ 2,635   $ 32,427     $ 22,072    
                     
Adjusting items, net of tax:                  
  Restructuring & realignment   -     -     -       808    
  Gain on sale of property & other   -     -     (1,361 )     -    
  M&A transaction costs   -     -     -       71    
  Discrete Tax Provisions & Other   1,009     2,419     452       2,635    
                     
Adjusted Net Income---Continuing Operations $ 7,006   $ 5,054   $ 31,518     $ 25,586    
                     
GAAP Diluted income per common share, Continuing operations $ 0.39   $ 0.17   $ 2.07     $ 1.41    
                     
Adjusting items, per diluted common share:                  
  Restructuring & realignment   -     -     -       0.06    
  Gain on sale of property & other   -     -     (0.08 )     -    
  M&A transaction costs   -     -         0.01    
  Discrete Tax Provisions & Other   0.07     0.15     0.03       0.16    
                     
Adjusted earnings per diluted common share $ 0.46   $ 0.32   $ 2.02     $ 1.64    
                     
Weighted-average shares outstanding (in thousands)                  
Diluted   15,353     15,694     15,645       15,659    
                     

 

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income                        
                                     
    (unaudited)    
  (in thousands, except percentages) For the Three Months Ended December 31, 2018   For the Three Months Ended December 31, 2017    
    Industrial Products   Specialty Chemicals   Corporate and Other   Consolidated
Continuing
Operations
  Industrial Products   Specialty Chemicals   Corporate and Other   Consolidated
Continuing
Operations
   
                                     
Revenue $ 43,652     $ 33,836     $ -     $ 77,488     $ 37,906     $ 31,129     $ 1     $ 69,036      
                                     
Operating Income $ 8,059     $ 4,574     $ (3,212 )   $ 9,421     $ 7,323     $ 3,890     $ (3,273 )   $ 7,940      
                                     
No Adjusting items:                                  
Adjusted Operating Income $ 8,059     $ 4,574     $ (3,212 )   $ 9,421     $ 7,323     $ 3,890     $ (3,273 )   $ 7,940      
% of revenue   18.5 %     13.5 %         12.2 %     19.3 %     12.5 %         11.5 %    
                                     
                                     
    (unaudited)    
  (in thousands, except percentages) Year to date December 31, 2018   Year to date December 31, 2017    
    Industrial Products   Specialty Chemicals   Corporate
and Other
  Consolidated
Continuing Operations
  Industrial Products   Specialty Chemicals   Corporate
and Other
  Consolidated
Continuing Operations
   
                                     
Revenue $ 152,239     $ 106,437     $ 2     $ 258,678     $ 139,654     $ 103,101     $ 2     $ 242,757      
                                     
Operating Income $ 36,164     $ 17,205     $ (9,000 )   $ 44,369     $ 33,285     $ 14,670     $ (8,792 )   $ 39,163      
                                     
Adjusting items:                                  
  Restructuring & realignment   -       -       -       -       367       876       -       1,243      
  Gain on sale of property & other   (253 )     (1,586 )     -       (1,839 )     -       -       -       -      
  M&A transaction costs   -       -       -       -       110       -       -       110      
                                     
Adjusted Operating Income $ 35,911     $ 15,619     $ (9,000 )   $ 42,530     $ 33,762     $ 15,546     $ (8,792 )   $ 40,516      
% of revenue   23.6 %     14.7 %         16.4 %     24.2 %     15.1 %         16.7 %    
                                     

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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