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.) | |
247 Freshwater Way, Suite 300, Milwaukee, Wisconsin | 53204 | |
(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 August 4, 2015 |
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 August 4, 2015 |
Press Release | |
August 4, 2015 | Contact Information: |
For Immediate Release | Rob McCarthy |
Vice President - Investor Relations | |
414.223.1615 |
• | Net sales were $485 million. Net sales decreased 4% year over year (-1% core sales, 2% acquisitions, -5% foreign currency) |
• | Diluted earnings per share from continuing operations was $0.20 compared to $0.11 in the prior year |
• | Adjusted earnings per share was $0.30 |
• | Adjusted EBITDA was $85 million or 18% of net sales |
• | Launched supply chain optimization and footprint repositioning initiatives |
• | Allocated $40 million to share repurchases |
• | Total liquidity was $673 million ($330 million of cash plus $343 million of available borrowings) |
First Quarter Ended | ||||||||
June 30, 2015 | June 30, 2014 | |||||||
Net sales | $ | 485.1 | $ | 503.6 | ||||
Cost of sales | 315.3 | 325.4 | ||||||
Gross profit | 169.8 | 178.2 | ||||||
Selling, general and administrative expenses | 100.4 | 104.4 | ||||||
Restructuring and other similar charges | 1.9 | 3.4 | ||||||
Amortization of intangible assets | 14.3 | 13.5 | ||||||
Income from operations | 53.2 | 56.9 | ||||||
Non-operating expense: | ||||||||
Interest expense, net | (21.6 | ) | (22.5 | ) | ||||
Other expense, net | (0.4 | ) | (1.3 | ) | ||||
Income from continuing operations before income taxes | 31.2 | 33.1 | ||||||
Provision for income taxes | 10.0 | 21.5 | ||||||
Net income from continuing operations | 21.2 | 11.6 | ||||||
Income from discontinued operations, net of tax | — | 0.4 | ||||||
Net income | 21.2 | 12.0 | ||||||
Non-controlling interest loss | (0.1 | ) | (0.1 | ) | ||||
Net income attributable to Rexnord | $ | 21.3 | $ | 12.1 | ||||
Net income from continuing operations per share: | ||||||||
Basic | $ | 0.21 | $ | 0.11 | ||||
Diluted | $ | 0.20 | $ | 0.11 | ||||
Net loss per share from discontinued operations: | ||||||||
Basic | $ | — | $ | — | ||||
Diluted | $ | — | $ | — | ||||
Net income per share attributable to Rexnord: | ||||||||
Basic | $ | 0.21 | $ | 0.12 | ||||
Diluted | $ | 0.20 | $ | 0.12 | ||||
Weighted-average number of shares outstanding (in thousands): | ||||||||
Basic | 101,409 | 101,235 | ||||||
Effect of dilutive equity awards | 2,958 | 3,294 | ||||||
Diluted | 104,367 | 104,529 |
First Quarter Ended | |||||||
Adjusted EBITDA | June 30, 2015 | June 30, 2014 | |||||
Net income | $ | 21.2 | $ | 12.0 | |||
Interest expense, net | 21.6 | 22.5 | |||||
Income tax provision | 10.0 | 21.5 | |||||
Depreciation and amortization | 28.2 | 28.2 | |||||
EBITDA | 81.0 | 84.2 | |||||
Adjustments to EBITDA | |||||||
Income from discontinued operations, net of tax | — | (0.4 | ) | ||||
Restructuring and other similar charges | 1.9 | 3.4 | |||||
Stock-based compensation expense | 1.9 | 1.6 | |||||
Last-in first-out inventory adjustments | — | 0.2 | |||||
Impact of inventory fair value adjustment | — | 1.4 | |||||
Other expense, net (2) | 0.4 | 1.3 | |||||
Subtotal of adjustments to EBITDA | 4.2 | 7.5 | |||||
Adjusted EBITDA | $ | 85.2 | $ | 91.7 |
First Quarter Ended | |||||||
Adjusted Net Income (1) and Earnings Per Share | June 30, 2015 | June 30, 2014 | |||||
Net income from continuing operations | 21.2 | 11.6 | |||||
Restructuring and other similar charges | 1.9 | 3.4 | |||||
Impact of inventory fair value adjustment | — | 1.4 | |||||
Amortization of intangible assets | 14.3 | 13.5 | |||||
Other expense, net (2) | 0.4 | 1.3 | |||||
Tax effect on above items | (6.0 | ) | (6.9 | ) | |||
Tax restructuring (3) | — | 10.1 | |||||
Adjusted net income from continuing operations | $ | 31.8 | $ | 34.4 | |||
Weighted-average number of shares outstanding (in thousands) | |||||||
Basic | 101,409 | 101,235 | |||||
Effect of dilutive equity awards | 2,958 | 3,294 | |||||
Diluted | 104,367 | 104,529 | |||||
Adjusted earnings per share - diluted | $ | 0.30 | $ | 0.33 | |||
Net income per share from continuing operations - diluted (in accordance with GAAP) | $ | 0.20 | $ | 0.11 |
(1) | Effective April 1, 2015, Management modified this GAAP metric to include stock option expense and LIFO, while excluding amortization (all net of tax). The corresponding tax impact on amortization for the first quarter ended June 30, 2015 and 2014 was $5.3 and $5.1 million, respectively. We believe this modification increases transparency to our stakeholders, as well as enhances comparability with our peer set. |
(2) | Other expense, net includes the impact of foreign currency transactions, sale of property, plant and equipment and other miscellaneous expenses. See "Management Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-Q for the first quarter ended June 30, 2015 for further information. |
(3) | The first three months of fiscal 2015 includes a non-recurring, non-cash tax expense related to a change in the U.S. income tax entity classification of a foreign subsidiary. |
First Quarter Ended | |||||||||||||||
June 30, 2015 | June 30, 2014 | ||||||||||||||
Adjusted EBITDA by Segment | Process & Motion Control | Water Management | Process & Motion Control | Water Management | |||||||||||
Income from operations | $ | 35.6 | $ | 27.4 | $ | 47.6 | $ | 18.5 | |||||||
Operating margin | 13.1 | % | 12.8 | % | 16.0 | % | 9.0 | % | |||||||
Depreciation and amortization | 19.2 | 9.0 | 18.6 | 9.6 | |||||||||||
Restructuring and other similar charges | 1.3 | 0.6 | 1.9 | 1.5 | |||||||||||
Stock-based compensation expense | 0.6 | 0.3 | 0.4 | 0.2 | |||||||||||
Last-in first-out inventory adjustments | 0.3 | (0.3 | ) | 0.4 | (0.2 | ) | |||||||||
Impact of inventory fair value adjustments | — | — | 0.8 | 0.6 | |||||||||||
Adjusted EBITDA | $ | 57.0 | $ | 37.0 | $ | 69.7 | $ | 30.2 | |||||||
Adjusted EBITDA margin | 21.0 | % | 17.3 | % | 23.4 | % | 14.7 | % |
Earnings Guidance for | Earnings Guidance for | |||||||
the Three Months Ending | the Twelve Months Ending | |||||||
Adjusted net income per diluted share | September 30, 2015 | March 31, 2016 | ||||||
Net income per diluted share (1) | $0.22 to $0.24 | $1.17 to $1.25 | ||||||
Restructuring and other similar charges | — | 0.02 | ||||||
Amortization of intangible assets | 0.14 | 0.53 | ||||||
Other expense, net | — | — | ||||||
Tax impact on adjustments | (0.05) | (0.22) | ||||||
Adjusted net income per diluted share (2) | $0.31 to $0.33 | $1.50 to $1.58 |
(1) | Our guidance for net income per diluted share 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 the periods noted above. Our actual net income per diluted share 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, gains (losses) recognized on the disposal of tangible assets, gains (losses) on debt extinguishment, 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 gaines or (losses) for these items in our forward-looking guidance. |
(2) | Effective April 1, 2015, Management modified this GAAP metric to include stock option expense and LIFO, while excluding amortization (all net of tax). We believe this modification increases transparency to our stakeholders, as well as enhances comparability to our peer set. |
First Quarter Ended | |||||||
June 30, 2015 | June 30, 2014 | ||||||
Net income attributable to Rexnord | $ | 21.3 | $ | 12.1 | |||
Other comprehensive (loss) income: | |||||||
Foreign currency translation adjustments | 4.4 | (1.7 | ) | ||||
Unrealized income on interest rate derivatives, net of tax | — | (3.7 | ) | ||||
Change in pension and other postretirement defined benefit plans, net of tax | (0.3 | ) | (0.3 | ) | |||
Other comprehensive income (loss), net of tax | 4.1 | (5.7 | ) | ||||
Non-controlling interest loss | (0.1 | ) | (0.1 | ) | |||
Total comprehensive income | $ | 25.3 | $ | 6.3 |
June 30, 2015 | March 31, 2015 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 329.7 | $ | 370.3 | ||||
Receivables, net | 318.5 | 336.0 | ||||||
Inventories, net | 372.6 | 367.7 | ||||||
Assets held for sale | 2.6 | 2.6 | ||||||
Other current assets | 49.5 | 49.7 | ||||||
Total current assets | 1,072.9 | 1,126.3 | ||||||
Property, plant and equipment, net | 412.8 | 417.6 | ||||||
Intangible assets, net | 574.6 | 587.7 | ||||||
Goodwill | 1,201.3 | 1,202.3 | ||||||
Insurance for asbestos claims | 35.0 | 35.0 | ||||||
Other assets | 32.5 | 33.1 | ||||||
Total assets | $ | 3,329.1 | $ | 3,402.0 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Current maturities of debt | $ | 23.6 | $ | 24.3 | ||||
Trade payables | 192.6 | 234.1 | ||||||
Compensation and benefits | 50.5 | 53.9 | ||||||
Current portion of pension and postretirement benefit obligations | 5.0 | 5.0 | ||||||
Other current liabilities | 120.9 | 127.3 | ||||||
Total current liabilities | 392.6 | 444.6 | ||||||
Long-term debt | 1,912.0 | 1,915.7 | ||||||
Pension and postretirement benefit obligations | 201.3 | 203.0 | ||||||
Deferred income taxes | 179.9 | 184.4 | ||||||
Reserve for asbestos claims | 35.0 | 35.0 | ||||||
Other liabilities | 67.4 | 66.6 | ||||||
Total liabilities | 2,788.2 | 2,849.3 | ||||||
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: 100,348,016 at June 30, 2015 and 102,681,964 at March 31, 2015 | 1.0 | 1.0 | ||||||
Additional paid-in capital | 842.5 | 885.9 | ||||||
Retained deficit | (176.2 | ) | (197.5 | ) | ||||
Accumulated other comprehensive loss | (126.1 | ) | (130.2 | ) | ||||
Treasury stock at cost; 0 and 900,904 shares at June 30, 2015 and March 31, 2015, respectively | — | (6.3 | ) | |||||
Total Rexnord stockholders' equity | 541.2 | 552.9 | ||||||
Non-controlling interest | (0.3 | ) | (0.2 | ) | ||||
Total stockholders' equity | 540.9 | 552.7 | ||||||
Total liabilities and stockholders' equity | $ | 3,329.1 | $ | 3,402.0 |
Three Months Ended | ||||||||
June 30, 2015 | June 30, 2014 | |||||||
Operating activities | ||||||||
Net income | 21.2 | $ | 12.0 | |||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation | 13.9 | 14.7 | ||||||
Amortization of intangible assets | 14.3 | 13.5 | ||||||
Amortization of deferred financing costs | 0.5 | 0.4 | ||||||
Gain on dispositions of property, plant and equipment | (0.1 | ) | — | |||||
Deferred income taxes | (1.7 | ) | 14.4 | |||||
Other non-cash charges | (1.6 | ) | (0.1 | ) | ||||
Stock-based compensation expense | 1.9 | 1.6 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | 4.3 | 19.8 | ||||||
Inventories | (3.8 | ) | (19.3 | ) | ||||
Other assets | 1.0 | 1.5 | ||||||
Accounts payable | (42.8 | ) | (43.2 | ) | ||||
Accruals and other | 0.8 | (8.9 | ) | |||||
Cash provided by operating activities | 7.9 | 6.4 | ||||||
Investing activities | ||||||||
Expenditures for property, plant and equipment | (7.7 | ) | (8.7 | ) | ||||
Acquisitions, net of cash acquired | 1.1 | (27.7 | ) | |||||
Proceeds from dispositions of long-lived assets | 0.5 | — | ||||||
Cash used for investing activities | (6.1 | ) | (36.4 | ) | ||||
Financing activities | ||||||||
Repayments of long-term debt | (4.9 | ) | (4.9 | ) | ||||
Proceeds from borrowings of short-term debt | — | 4.6 | ||||||
Repayments of short-term debt | (0.7 | ) | (0.1 | ) | ||||
Proceeds from exercise of stock options | — | 0.4 | ||||||
Repurchase of Company common stock | (40.0 | ) | — | |||||
Excess tax benefit on exercise of stock options | 1.0 | 1.6 | ||||||
Cash (used for) provided by financing activities | (44.6 | ) | 1.6 | |||||
Effect of exchange rate changes on cash and cash equivalents | 2.2 | 0.7 | ||||||
Decrease in cash and cash equivalents | (40.6 | ) | (27.7 | ) | ||||
Cash and cash equivalents at beginning of period | 370.3 | 339.0 | ||||||
Cash and cash equivalents at end of period | $ | 329.7 | $ | 311.3 |
Fiscal 2016 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Year-to-Date Total | |||||||||||||||
Net sales | |||||||||||||||||||
Process & Motion Control | $ | 271.6 | $ | 271.6 | |||||||||||||||
Water Management | 213.5 | 213.5 | |||||||||||||||||
Total | $ | 485.1 | $ | 485.1 | |||||||||||||||
Adjusted EBITDA | |||||||||||||||||||
Process & Motion Control | $ | 57.0 | $ | 57.0 | |||||||||||||||
Water Management | 37.0 | 37.0 | |||||||||||||||||
Corporate | (8.8 | ) | (8.8 | ) | |||||||||||||||
Total | $ | 85.2 | $ | 85.2 | |||||||||||||||
Adjusted EBITDA % | |||||||||||||||||||
Process & Motion Control | 21.0 | % | 21.0 | % | |||||||||||||||
Water Management | 17.3 | % | 17.3 | % | |||||||||||||||
Total (including Corporate) | 17.6 | % | 17.6 | % | |||||||||||||||
Fiscal 2015 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Year-to-Date Total | |||||||||||||||
Net sales | |||||||||||||||||||
Process & Motion Control | $ | 298.4 | $ | 304.8 | $ | 298.9 | $ | 328.1 | $ | 1,230.2 | |||||||||
Water Management | 205.2 | 226.2 | 198.2 | 190.4 | 820.0 | ||||||||||||||
Total | $ | 503.6 | $ | 531.0 | $ | 497.1 | $ | 518.5 | $ | 2,050.2 | |||||||||
Adjusted EBITDA | |||||||||||||||||||
Process & Motion Control | $ | 69.7 | $ | 77.3 | $ | 73.2 | $ | 86.8 | $ | 307.0 | |||||||||
Water Management | 30.2 | 39.4 | 32.4 | 19.0 | 121.0 | ||||||||||||||
Corporate | (8.2 | ) | (7.2 | ) | (6.4 | ) | (10.1 | ) | (31.9 | ) | |||||||||
Total | $ | 91.7 | $ | 109.5 | $ | 99.2 | $ | 95.7 | $ | 396.1 | |||||||||
Adjusted EBITDA % | |||||||||||||||||||
Process & Motion Control | 23.4 | % | 25.4 | % | 24.5 | % | 26.5 | % | 25.0 | % | |||||||||
Water Management | 14.7 | % | 17.4 | % | 16.3 | % | 10.0 | % | 14.8 | % | |||||||||
Total (including Corporate) | 18.2 | % | 20.6 | % | 20.0 | % | 18.5 | % | 19.3 | % |
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