REXNORD CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware | 20-5197013 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
4701 West Greenfield Avenue, Milwaukee, Wisconsin | 53214 | |
(Address of Principal Executive Offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Exhibits. |
Exhibit No. | Description |
99.1 | Earnings Release dated October 24, 2013 |
REXNORD CORPORATION | ||
BY: | /S/ Mark W. Peterson | |
Mark W. Peterson | ||
Senior Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Earnings Release dated October 24, 2013 |
Press Release | |
October 24, 2013 | Contact Information: |
For Immediate Release | Mark Peterson |
Senior Vice President and Chief Financial Officer | |
414.643.3739 |
• | Net sales increased 3% (+3% core sales) to $515 million |
• | Income from operations increased 10% to $73 million year-over-year resulting in a 90 basis point increase in operating margin to 14% |
• | Adjusted earnings per share increased 29% from the prior year to $0.31 |
• | Debt refinancing will provide annualized EPS accretion of $0.30; $0.18 benefit to fiscal year 2014 |
• | Adjusted EBITDA of $103 million resulting in an adjusted EBITDA margin of 20% |
Second Quarter Ended | Six Months Ended | |||||||||||||||
September 28, 2013 | September 29, 2012 | September 28, 2013 | September 29, 2012 | |||||||||||||
Net sales | $ | 514.5 | $ | 499.5 | $ | 1,023.2 | $ | 993.1 | ||||||||
Cost of sales | 322.7 | 312.9 | 649.5 | 627.8 | ||||||||||||
Gross profit | 191.8 | 186.6 | 373.7 | 365.3 | ||||||||||||
Selling, general and administrative expenses | 105.4 | 104.8 | 212.0 | 203.8 | ||||||||||||
Zurn PEX loss contingency | — | — | — | 10.1 | ||||||||||||
Restructuring and other similar charges | 1.2 | 2.4 | 3.0 | 4.0 | ||||||||||||
Amortization of intangible assets | 12.6 | 13.3 | 25.1 | 26.3 | ||||||||||||
Income from operations | 72.6 | 66.1 | 133.6 | 121.1 | ||||||||||||
Non-operating (expense) income: | ||||||||||||||||
Interest expense, net | (29.2 | ) | (37.2 | ) | (64.2 | ) | (75.5 | ) | ||||||||
Loss on the extinguishment of debt | (129.2 | ) | — | (133.2 | ) | (21.1 | ) | |||||||||
Other income (expense), net | 0.1 | 0.2 | (6.1 | ) | 0.7 | |||||||||||
(Loss) income from continuing operations before income taxes | (85.7 | ) | 29.1 | (69.9 | ) | 25.2 | ||||||||||
(Benefit) provision for income taxes | (33.2 | ) | 8.8 | (31.0 | ) | 5.6 | ||||||||||
Net (loss) income from continuing operations | (52.5 | ) | 20.3 | (38.9 | ) | 19.6 | ||||||||||
Loss from discontinued operations, net of tax | — | (1.1 | ) | — | (2.6 | ) | ||||||||||
Net (loss) income | $ | (52.5 | ) | $ | 19.2 | $ | (38.9 | ) | $ | 17.0 | ||||||
Non-controlling interest loss | (0.2 | ) | — | (0.4 | ) | — | ||||||||||
Net (loss) income attributable to Rexnord | $ | (52.3 | ) | $ | 19.2 | $ | (38.5 | ) | $ | 17.0 | ||||||
Net (loss) income per share from continuing operations: | ||||||||||||||||
Basic | $ | (0.54 | ) | $ | 0.21 | $ | (0.40 | ) | $ | 0.21 | ||||||
Diluted | $ | (0.54 | ) | $ | 0.20 | $ | (0.40 | ) | $ | 0.20 | ||||||
Net loss per share from discontinued operations: | ||||||||||||||||
Basic | $ | — | $ | (0.01 | ) | $ | — | $ | (0.03 | ) | ||||||
Diluted | $ | — | $ | (0.01 | ) | $ | — | $ | (0.03 | ) | ||||||
Net (loss) income per share attributable to Rexnord: | ||||||||||||||||
Basic | $ | (0.54 | ) | $ | 0.20 | $ | (0.40 | ) | $ | 0.18 | ||||||
Diluted | $ | (0.54 | ) | $ | 0.19 | $ | (0.40 | ) | $ | 0.17 | ||||||
Weighted-average number of shares outstanding (in thousands): | ||||||||||||||||
Basic | 97,457 | 95,878 | 97,347 | 94,991 | ||||||||||||
Effect of dilutive stock options | — | 3,868 | — | 4,378 | ||||||||||||
Diluted | 97,457 | 99,746 | 97,347 | 99,369 |
Second Quarter Ended | Six Months Ended | ||||||||||||||
September 28, 2013 | September 29, 2012 | September 28, 2013 | September 29, 2012 | ||||||||||||
Net (loss) income | $ | (52.5 | ) | $ | 19.2 | $ | (38.9 | ) | $ | 17.0 | |||||
Interest expense, net | 29.2 | 37.2 | 64.2 | 75.5 | |||||||||||
Income tax (benefit) provision | (33.2 | ) | 8.8 | (31.0 | ) | 5.6 | |||||||||
Depreciation and amortization | 26.4 | 28.9 | 53.9 | 57.0 | |||||||||||
EBITDA | (30.1 | ) | 94.1 | 48.2 | 155.1 | ||||||||||
Adjustments to EBITDA | |||||||||||||||
Actuarial loss on pension and postretirement benefit obligation | — | — | — | 0.2 | |||||||||||
Loss from discontinued operations, net of tax | — | 1.1 | — | 2.6 | |||||||||||
Restructuring and other similar costs | 1.2 | 2.4 | 3.0 | 4.0 | |||||||||||
Loss on the extinguishment of debt | 129.2 | — | 133.2 | 21.1 | |||||||||||
Stock-based compensation expense | 2.0 | 1.9 | 3.5 | 3.5 | |||||||||||
LIFO expense | 0.5 | 1.2 | 1.5 | 2.1 | |||||||||||
Zurn PEX loss contingency | — | — | — | 10.1 | |||||||||||
Other (income) expense, net (1) | (0.1 | ) | (0.2 | ) | 6.1 | (0.7 | ) | ||||||||
Subtotal of adjustments to EBITDA | 132.8 | 6.4 | 147.3 | 42.9 | |||||||||||
Adjusted EBITDA | $ | 102.7 | $ | 100.5 | $ | 195.5 | $ | 198.0 |
Second Quarter Ended | Six Months Ended | ||||||||||||||
Adjusted Net Income and Earnings Per Share | September 28, 2013 | September 29, 2012 | September 28, 2013 | September 29, 2012 | |||||||||||
Net (loss) income | $ | (52.5 | ) | $ | 19.2 | $ | (38.9 | ) | $ | 17.0 | |||||
Loss from discontinued operations, net of tax | — | 1.1 | — | 2.6 | |||||||||||
Restructuring and other similar costs | 1.2 | 2.4 | 3.0 | 4.0 | |||||||||||
Loss on the extinguishment of debt | 129.2 | — | 133.2 | 21.1 | |||||||||||
Stock-based compensation expense | 2.0 | 1.9 | 3.5 | 3.5 | |||||||||||
LIFO expense | 0.5 | 1.2 | 1.5 | 2.1 | |||||||||||
Actuarial loss on pension and postretirement benefit obligation | — | — | — | 0.2 | |||||||||||
Zurn PEX loss contingency | — | — | — | 10.1 | |||||||||||
Other (income) expense, net (1) | (0.1 | ) | (0.2 | ) | 6.1 | (0.7 | ) | ||||||||
Tax effect on above items | (49.6 | ) | (1.5 | ) | (53.6 | ) | (13.1 | ) | |||||||
Adjusted net income | $ | 30.7 | $ | 24.1 | $ | 54.8 | $ | 46.8 | |||||||
Weighted-average number of shares outstanding (in thousands) | |||||||||||||||
Basic | 97,457 | 95,878 | 97,347 | 94,991 | |||||||||||
Effect of dilutive stock options | 3,095 | 3,868 | 3,143 | 4,378 | |||||||||||
Diluted | 100,552 | 99,746 | 100,490 | 99,369 | |||||||||||
Adjusted earnings per share - diluted | $ | 0.31 | $ | 0.24 | $ | 0.55 | $ | 0.47 | |||||||
Net (loss) income per share - diluted (in accordance with GAAP) | $ | (0.54 | ) | $ | 0.19 | $ | (0.40 | ) | $ | 0.17 |
(1) | Other income, net for the quarter ended September 28, 2013, consists of foreign currency transaction gains of $1.5 million, $0.7 million loss on sale of property, plant and equipment and other miscellaneous losses of $0.7 million. Other income, net for the quarter ended September 29, 2012, consists of foreign currency transaction losses of $0.1 million, loss on sale of assets of $0.1 million and other miscellaneous income of $0.4 million. Other expense, net for the first six months of fiscal 2014, consists of $3.0 million of costs attributable to our Board of Directors' review of strategic alternatives, foreign currency transaction losses of $1.3 million, $1.1 million loss on sale of property, plant and equipment and other miscellaneous losses of $0.7 million. Other income, net for the first six months of fiscal 2013, consists of management fee expense of $15.0 million to terminate our management agreement with Apollo, foreign currency transaction losses of $4.9 million, a CDSOA recovery of $16.6 million, a $4.1 million gain on the sale of property, plant and equipment and other miscellaneous losses of $0.1 million. |
Second Quarter Ended | Six Months Ended | ||||||||||||||
September 28, 2013 | September 29, 2012 | September 28, 2013 | September 29, 2012 | ||||||||||||
Net (loss) income attributable to Rexnord | $ | (52.3 | ) | $ | 19.2 | $ | (38.5 | ) | $ | 17.0 | |||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments | 10.4 | 6.3 | 7.9 | (6.4 | ) | ||||||||||
Change in pension and other postretirement defined benefit plans, net of tax | (0.2 | ) | 0.3 | (0.5 | ) | 0.6 | |||||||||
Other comprehensive income (loss), net of tax | 10.2 | 6.6 | 7.4 | (5.8 | ) | ||||||||||
Non-controlling interest loss | (0.2 | ) | — | (0.4 | ) | — | |||||||||
Total comprehensive (loss) income | $ | (42.3 | ) | $ | 25.8 | $ | (31.5 | ) | $ | 11.2 |
September 28, 2013 | March 31, 2013 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 206.4 | $ | 524.1 | ||||
Receivables, net | 352.8 | 350.4 | ||||||
Inventories, net | 355.7 | 326.2 | ||||||
Other current assets | 48.9 | 46.4 | ||||||
Total current assets | 963.8 | 1,247.1 | ||||||
Property, plant and equipment, net | 408.1 | 410.7 | ||||||
Intangible assets, net | 601.7 | 613.5 | ||||||
Goodwill | 1,133.9 | 1,118.4 | ||||||
Insurance for asbestos claims | 35.0 | 35.0 | ||||||
Other assets | 43.6 | 49.1 | ||||||
Total assets | $ | 3,186.1 | $ | 3,473.8 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Current maturities of debt | $ | 33.2 | $ | 169.3 | ||||
Trade payables | 204.1 | 208.3 | ||||||
Compensation and benefits | 52.1 | 55.6 | ||||||
Current portion of pension and postretirement benefit obligations | 5.8 | 5.7 | ||||||
Interest payable | 0.3 | 48.1 | ||||||
Other current liabilities | 110.2 | 121.2 | ||||||
Total current liabilities | 405.7 | 608.2 | ||||||
Long-term debt | 1,952.2 | 1,962.3 | ||||||
Pension and postretirement benefit obligations | 165.1 | 170.8 | ||||||
Deferred income taxes | 191.0 | 231.6 | ||||||
Reserve for asbestos claims | 35.0 | 35.0 | ||||||
Other liabilities | 32.5 | 37.4 | ||||||
Total liabilities | 2,781.5 | 3,045.3 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued | — | — | ||||||
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued: 98,598,655 at September 28, 2013 and 98,108,438 at March 31, 2013 | 1.0 | 1.0 | ||||||
Additional paid-in capital | 791.2 | 784.0 | ||||||
Retained deficit | (350.0 | ) | (311.5 | ) | ||||
Accumulated other comprehensive loss | (31.3 | ) | (38.7 | ) | ||||
Treasury stock at cost; 900,904 shares at September 28, 2013 and March 31, 2013 | (6.3 | ) | (6.3 | ) | ||||
Total Rexnord stockholders' equity | 404.6 | 428.5 | ||||||
Non-controlling interest | — | — | ||||||
Total stockholders' equity | 404.6 | 428.5 | ||||||
Total liabilities and stockholders' equity | $ | 3,186.1 | $ | 3,473.8 |
Six Months Ended | ||||||||
September 28, 2013 | September 29, 2012 | |||||||
Operating activities | ||||||||
Net (loss) income | $ | (38.9 | ) | $ | 17.0 | |||
Adjustments to reconcile net (loss) income to cash provided by for operating activities: | ||||||||
Depreciation | 28.8 | 30.7 | ||||||
Amortization of intangible assets | 25.1 | 26.3 | ||||||
Amortization of deferred financing costs | 1.6 | 2.0 | ||||||
Loss (gain) on dispositions of property, plant and equipment | 1.1 | (4.1 | ) | |||||
Deferred income taxes | (37.7 | ) | (14.9 | ) | ||||
Other non-cash (credits) charges | (1.6 | ) | 5.7 | |||||
Loss on debt extinguishment | 133.2 | 21.1 | ||||||
Stock-based compensation expense | 3.5 | 3.5 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | — | 3.4 | ||||||
Inventories | (20.7 | ) | (33.4 | ) | ||||
Other assets | (4.3 | ) | 1.4 | |||||
Accounts payable | (7.8 | ) | (31.1 | ) | ||||
Accruals and other | (73.2 | ) | (19.1 | ) | ||||
Cash provided by operating activities | 9.1 | 8.5 | ||||||
Investing activities | ||||||||
Expenditures for property, plant and equipment | (19.2 | ) | (32.5 | ) | ||||
Acquisitions, net of cash | (34.4 | ) | — | |||||
Loan receivable for financing under New Market Tax Credit incentive program | — | (9.7 | ) | |||||
Proceeds from dispositions of property, plant and equipment | — | 5.5 | ||||||
Cash used for investing activities | (53.6 | ) | (36.7 | ) | ||||
Financing activities | ||||||||
Proceeds from borrowings of long-term debt | 1,930.5 | 1.4 | ||||||
Repayments of long-term debt | (1,933.2 | ) | (307.3 | ) | ||||
Proceeds from borrowings of short-term debt | 6.0 | 7.3 | ||||||
Repayments of short-term debt | (154.2 | ) | (0.7 | ) | ||||
Proceeds from financing under New Market Tax Credit incentive program | — | 14.0 | ||||||
Payment of deferred financing fees | (16.3 | ) | (0.4 | ) | ||||
Payment of early redemption premium on long-term debt | (109.9 | ) | (17.6 | ) | ||||
Net proceeds from issuance of common stock | — | 458.3 | ||||||
Proceeds from exercise of stock options | 1.3 | 2.3 | ||||||
Third party investment in non-controlling interest | 0.4 | — | ||||||
Excess tax benefit on exercise of stock options | 2.4 | 14.6 | ||||||
Cash (used for) provided by financing activities | (273.0 | ) | 171.9 | |||||
Effect of exchange rate changes on cash and cash equivalents | (0.2 | ) | (1.5 | ) | ||||
(Decrease) increase in cash and cash equivalents | (317.7 | ) | 142.2 | |||||
Cash and cash equivalents at beginning of period | 524.1 | 298.0 | ||||||
Cash and cash equivalents at end of period | $ | 206.4 | $ | 440.2 |
Fiscal 2014 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||||||
Net sales | |||||||||||||||||||
Process & Motion Control | $ | 314.6 | $ | 311.8 | $ | 626.4 | |||||||||||||
Water Management | 194.1 | 202.7 | 396.8 | ||||||||||||||||
Corporate | — | — | — | ||||||||||||||||
Total | $ | 508.7 | $ | 514.5 | $ | 1,023.2 | |||||||||||||
Adjusted EBITDA | |||||||||||||||||||
Process & Motion Control | $ | 70.8 | $ | 77.6 | $ | 148.4 | |||||||||||||
Water Management | 29.5 | 32.1 | 61.6 | ||||||||||||||||
Corporate | (7.5 | ) | (7.0 | ) | (14.5 | ) | |||||||||||||
Total | $ | 92.8 | $ | 102.7 | $ | 195.5 | |||||||||||||
Adjusted EBITDA % | |||||||||||||||||||
Process & Motion Control | 22.5 | % | 24.9 | % | 23.7 | % | |||||||||||||
Water Management | 15.2 | % | 15.8 | % | 15.5 | % | |||||||||||||
Total (including Corporate) | 18.2 | % | 20.0 | % | 19.1 | % | |||||||||||||
Fiscal 2013 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||||||
Net sales | |||||||||||||||||||
Process & Motion Control | $ | 313.9 | $ | 309.1 | $ | 302.9 | $ | 340.2 | $ | 1,266.1 | |||||||||
Water Management | 179.7 | 190.4 | 168.8 | 200.1 | 739.0 | ||||||||||||||
Corporate | — | — | — | — | — | ||||||||||||||
Total | $ | 493.6 | $ | 499.5 | $ | 471.7 | $ | 540.3 | $ | 2,005.1 | |||||||||
Adjusted EBITDA | |||||||||||||||||||
Process & Motion Control | $ | 74.2 | $ | 77.7 | $ | 74.9 | $ | 89.0 | $ | 315.8 | |||||||||
Water Management | 29.3 | 30.5 | 23.7 | 30.7 | 114.2 | ||||||||||||||
Corporate | (6.0 | ) | (7.7 | ) | (6.6 | ) | (4.7 | ) | (25.0 | ) | |||||||||
Total | $ | 97.5 | $ | 100.5 | $ | 92.0 | $ | 115.0 | $ | 405.0 | |||||||||
Adjusted EBITDA % | |||||||||||||||||||
Process & Motion Control | 23.6 | % | 25.1 | % | 24.7 | % | 26.2 | % | 24.9 | % | |||||||||
Water Management | 16.3 | % | 16.0 | % | 14.0 | % | 15.3 | % | 15.5 | % | |||||||||
Total (including Corporate) | 19.8 | % | 20.1 | % | 19.5 | % | 21.3 | % | 20.2 | % |
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