Highlights
- First quarter 2018 revenue of $98.0 million, up 16.6% compared to $84.1 million in the prior year period.
- First quarter 2018 organic growth of 11.0%; second consecutive quarter of double digit organic growth.
- First quarter 2018 GAAP operating income of $14.3 million; Non-GAAP operating income of $16.8 million.
- First quarter 2018 GAAP net earnings of $8.5 million, or $0.54 per diluted share; Non-GAAP net earnings of $10.1 million, or
$0.64 per diluted share.
DALLAS, Aug. 09, 2017 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (NASDAQ:CSWI), a diversified industrial growth
company with well-established, scalable platforms and domain expertise across three segments: Industrial Products; Coatings,
Sealants & Adhesives; and Specialty Chemicals, today reported results for the fiscal first quarter ended June 30, 2017.
Net revenue during the fiscal first quarter of 2018 increased 16.6% to $98.0 million, compared to the prior year
period of $84.1 million. Organic growth was 11.0%, and acquisitions contributed 5.6% to total growth. The increase in revenue
was primarily attributable to increases in our HVAC, mining, plumbing and energy end markets.
Net income in the fiscal first quarter of 2018 was $8.5 million, or $0.54 per diluted share, compared to $4.1
million, or $0.26 per diluted share, in the prior year period. Adjusted to exclude one-time expenses and applying a normalized tax
rate, adjusted net income in the fiscal first quarter of 2018 was up 26.4% to $10.1 million, or $0.64 per diluted share, compared
to $8.0 million, or $0.51 per diluted share, in the prior year period.
Joseph B. Armes, CSW Industrials’ Chief Executive Officer, commented, “We are pleased with the strong start to
fiscal 2018, as we saw strength across both our Industrial Products and Specialty Chemicals segments and began to realize the
benefits of our efficiency initiatives. While we are encouraged by our results, we still see discrete challenges in some of the
markets we serve. We will continue to diligently manage our businesses, being mindful of costs and exploiting the positive
opportunities we see.” Armes continued “Our team is highly focused on continuing to integrate our business segments and drive
efficiency initiatives. We are gratified that our manufacturing footprint rationalization programs are beginning to bear fruit as
we continue to enhance shareholder value.”
First Quarter Results of Operations
Consolidated revenue increased to $98.0 million, compared with the prior year level of $84.1 million.
Industrial Products segment revenue was $53.3 million, compared to the prior year of $43.5 million. Higher
revenue was mainly the result of strong sales into HVAC and plumbing end markets, coupled with acquisition related revenue.
GAAP segment operating income increased to $13.6 million, compared to the prior year of $10.6 million. Adjusted to
exclude non-recurring expenses primarily related to restructuring and realignment, segment operating income increased 28.9% to
$13.9 million, compared to $10.8 million in the prior year.
Coatings, Sealants and Adhesives (CS&A) segment revenue was $23.4 million, flat compared to the prior year
of $23.4 million. GAAP segment operating income was $1.0 million, compared to the prior year of $1.6 million. Adjusted to exclude
non-recurring costs primarily related to restructuring and realignment, segment operating income was $2.4 million, compared to $2.6
million in the prior year.
Specialty Chemicals segment revenue was $21.4 million, compared to the prior year of $17.2 million. Higher sales
were driven by increases in our energy, mining and HVAC end markets. GAAP segment operating income was $1.9 million, compared to
the prior year of $1.1 million. Adjusted to exclude non-recurring costs primarily related to restructuring and realignment, segment
operating income increased to $2.8 million, compared to $1.8 million in the prior year.
Consolidated gross profit increased to $42.4 million, compared to the prior year level of $38.2 million.
Gross margin as a percentage of sales was 43.2%, compared to 45.4% in the prior year period. Lower gross margin compared to the
prior year primarily reflected the effect of restructuring and realignment costs and negative mix. In total, the Company incurred
$2.5 million in restructuring and realignment costs during the current period, of which $2.2 million impacted gross margin.
Consolidated operating expenses decreased 8.7% to $28.1 million, or 28.7% of sales, compared to the prior year
level of $30.8 million, or 36.6% of sales. Lower operating costs compared to the prior year were primarily
attributable to CFO transition and severance costs and impairment due to consolidation of facilities that did not
recur, partially offset by increases relating to acquisitions and variable operating costs associated with the increased organic
revenue.
Consolidated net income was $8.5 million, or $0.54 per diluted share, compared to $4.1 million, or $0.26 per
diluted share in the prior year period. Adjusted to exclude one-time expenses and applying a normalized tax rate, adjusted net
income in the first quarter of 2018 was $10.1 million, or $0.64 per diluted share, compared to $8.0 million, or $0.51 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 13667378. The telephonic replay will be available beginning at 1:00 p.m. ET on
Wednesday, August 9, 2017, and will last through 11:59 p.m. ET on Wednesday, August 23, 2017. 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, 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 three
segments: Industrial Products; Coatings, Sealants & Adhesives; 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, coatings and 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 STATEMENTS OF
INCOME |
|
|
|
|
| (unaudited) |
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
Three Months Ended |
|
|
|
|
| |
|
|
June 30, |
|
|
|
|
| |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
(in thousands, except per
share amounts) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
Revenues, net |
|
$ |
98,027 |
|
|
$ |
84,107 |
|
|
|
|
|
| |
Cost of revenues |
|
|
(55,658 |
) |
|
|
(45,904 |
) |
|
|
|
|
| |
Gross profit |
|
|
42,369 |
|
|
|
38,203 |
|
|
|
|
|
| |
Selling, general and administrative expenses |
|
|
(28,106 |
) |
|
|
(29,711 |
) |
|
|
|
|
| |
Impairment expenses |
|
|
- |
|
|
|
(1,082 |
) |
|
|
|
|
| |
Operating income |
|
|
14,263 |
|
|
|
7,410 |
|
|
|
|
|
| |
Interest expense, net |
|
|
(631 |
) |
|
|
(748 |
) |
|
|
|
|
| |
Other income (expense), net |
|
|
(313 |
) |
|
|
538 |
|
|
|
|
|
| |
Income before income taxes |
|
|
13,319 |
|
|
|
7,200 |
|
|
|
|
|
| |
Provision for income taxes |
|
|
(4,805 |
) |
|
|
(3,104 |
) |
|
|
|
|
| |
Net income |
|
$ |
8,514 |
|
|
$ |
4,096 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
Net earnings per common share: |
|
|
|
|
|
|
|
|
| |
Basic |
|
$ |
0.54 |
|
|
$ |
0.26 |
|
|
|
|
|
| |
Diluted |
|
|
0.54 |
|
|
|
0.26 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
CONSOLIDATED BALANCE SHEETS
|
|
|
| |
|
(unaudited) |
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
June 30, |
|
March 31, |
|
|
| |
|
|
|
|
2017 |
|
|
2017 |
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Cash and equivalents |
|
$ |
27,755 |
|
$ |
24,922 |
|
|
| |
|
Accounts receivable, net |
|
|
71,270 |
|
|
63,782 |
|
|
| |
|
Inventory, net |
|
|
51,194 |
|
|
50,401 |
|
|
| |
|
Prepaid expenses and other current assets |
|
|
6,938 |
|
|
7,178 |
|
|
| |
|
Total current assets |
|
|
157,157 |
|
|
146,283 |
|
|
| |
|
PP&E, net |
|
|
64,048 |
|
|
63,897 |
|
|
| |
|
Goodwill and intangible assets |
|
|
170,180 |
|
|
171,473 |
|
|
| |
|
Other assets |
|
|
16,165 |
|
|
16,011 |
|
|
| |
|
Total assets |
|
$ |
407,550 |
|
$ |
397,664 |
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Accts payable and other current liabilities |
|
$ |
48,392 |
|
$ |
37,175 |
|
|
| |
|
Current portion of long-term debt |
|
|
561 |
|
|
561 |
|
|
| |
|
Total current liabilities |
|
|
48,953 |
|
|
37,736 |
|
|
| |
|
Long-term debt |
|
|
66,630 |
|
|
72,646 |
|
|
| |
|
Retirement benefits and other liabilities |
|
|
8,382 |
|
|
14,844 |
|
|
| |
|
Total liabilities |
|
|
123,965 |
|
|
125,226 |
|
|
| |
|
Total equity |
|
|
283,585 |
|
|
272,438 |
|
|
| |
|
Total liabilities and equity |
|
$ |
407,550 |
|
$ |
397,664 |
|
|
| |
|
|
|
|
|
|
|
|
| |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
| |
(unaudited) |
|
| |
|
|
| |
|
|
Three Months Ended |
|
| |
|
|
June 30, |
|
| |
|
|
|
2017 |
|
|
|
2016 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
(in thousands) |
|
| |
Cash flows from operating activities: |
|
|
|
|
|
| |
Net income |
|
$ |
8,514 |
|
|
$ |
4,096 |
|
|
| |
Adjustments to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
| |
Depreciation |
|
|
2,017 |
|
|
|
2,141 |
|
|
| |
Amortization of intangible and other assets |
|
|
2,215 |
|
|
|
1,986 |
|
|
| |
Provision for inventory reserves |
|
|
175 |
|
|
|
- |
|
|
| |
Share-based and other executive compensation |
|
|
1,017 |
|
|
|
2,730 |
|
|
| |
Net loss (gain) on sales of property, plant and equipment |
|
|
105 |
|
|
|
(266 |
) |
|
| |
Net pension benefit |
|
|
(319 |
) |
|
|
(313 |
) |
|
| |
Impairment of assets |
|
|
- |
|
|
|
1,082 |
|
|
| |
Net deferred taxes |
|
|
(173 |
) |
|
|
553 |
|
|
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
| |
Accounts receivable, net |
|
|
(7,277 |
) |
|
|
(5,977 |
) |
|
| |
Inventories, net |
|
|
(853 |
) |
|
|
586 |
|
|
| |
Prepaid expenses and other current assets |
|
|
262 |
|
|
|
69 |
|
|
| |
Other assets |
|
|
6 |
|
|
|
54 |
|
|
| |
Accounts payable and other current liabilities |
|
|
4,665 |
|
|
|
(2,486 |
) |
|
| |
Retirement benefits payable and other liabilities |
|
|
95 |
|
|
|
(404 |
) |
|
| |
Net cash provided by operating activities |
|
|
10,449 |
|
|
|
3,851 |
|
|
| |
Cash flows from investing activities: |
|
|
|
|
|
| |
Capital expenditures |
|
|
(2,300 |
) |
|
|
(2,772 |
) |
|
| |
Proceeds from sale of assets held for investment |
|
|
- |
|
|
|
252 |
|
|
| |
Net change in bank time deposits |
|
|
(5 |
) |
|
|
(39 |
) |
|
| |
Cash paid for acquisitions |
|
|
(44 |
) |
|
|
- |
|
|
| |
Net cash used in investing activities |
|
|
(2,349 |
) |
|
|
(2,559 |
) |
|
| |
Cash flows from financing activities: |
|
|
|
|
|
| |
Repayments of lines of credit |
|
|
(6,015 |
) |
|
|
(5,140 |
) |
|
| |
Purchase of treasury shares |
|
|
(10 |
) |
|
|
(556 |
) |
|
| |
Net cash used in financing activities |
|
|
(6,025 |
) |
|
|
(5,696 |
) |
|
| |
Effect of exchange rate changes on cash and equivalents |
|
|
705 |
|
|
|
127 |
|
|
| |
Net change in cash and cash equivalents |
|
|
2,780 |
|
|
|
(4,277 |
) |
|
| |
Cash and cash equivalents, beginning of period |
|
|
23,146 |
|
|
|
25,987 |
|
|
| |
Cash and cash equivalents, end of period |
|
$ |
25,926 |
|
|
$ |
21,710 |
|
|
| |
|
|
|
|
|
|
Reconciliation of Non-GAAP Measures
| Reconciliation of Operating Income to Adjusted Operating
Income |
|
|
| |
|
|
|
|
|
|
| |
|
(unaudited)
|
|
|
| |
(in thousands) |
For the Three Months
Ended
June 30, |
|
|
| |
|
|
2017 |
|
|
2016 |
|
|
| |
|
|
|
|
|
|
| GAAP Operating Income |
$ |
14,263 |
|
$ |
7,410 |
|
|
| |
|
|
|
|
|
|
| Adjusting items: |
|
|
|
|
|
| |
Restructuring & realignment |
|
2,516 |
|
|
1,551 |
|
|
| |
Consulting projects |
|
- |
|
|
594 |
|
|
| |
CFO Transition |
|
- |
|
|
2,841 |
|
|
| |
|
|
|
|
|
|
| Adjusted Operating Income |
$ |
16,779 |
|
$ |
12,396 |
|
|
| |
|
|
|
|
|
|
| Reconciliation of Net Income to Adjusted Net
Income |
|
|
| |
|
|
|
|
|
|
| |
|
(unaudited)
|
|
|
| |
(in thousands, except per share data) |
For the Three Months
Ended
June 30, |
|
|
| |
|
|
2017 |
|
|
2016 |
|
|
| |
|
|
|
|
|
|
| GAAP Net Income |
$ |
8,514 |
|
$ |
4,096 |
|
|
| |
|
|
|
|
|
|
| Adjusting items, net of tax: |
|
|
|
|
|
| |
Restructuring & realignment |
|
1,635 |
|
|
1,087 |
|
|
| |
Consulting projects |
|
- |
|
|
386 |
|
|
| |
CFO Transition |
|
- |
|
|
1,847 |
|
|
| |
Discrete Tax Provisions |
|
- |
|
|
612 |
|
|
| |
|
|
|
|
|
|
| Adjusted Net Income |
$ |
10,149 |
|
$ |
8,028 |
|
|
| |
|
|
|
|
|
|
| GAAP Diluted income per common share |
$ |
0.54 |
|
$ |
0.26 |
|
|
| |
|
|
|
|
|
|
| Adjusting items, per diluted common share: |
|
|
|
|
|
| |
Restructuring & realignment |
|
0.10 |
|
|
0.07 |
|
|
| |
Consulting projects |
|
- |
|
|
0.02 |
|
|
| |
CFO Transition |
|
- |
|
|
0.12 |
|
|
| |
Discrete Tax Provisions |
|
- |
|
|
0.04 |
|
|
| |
|
|
|
|
|
|
| Adjusted earnings per diluted common share |
$ |
0.64 |
|
$ |
0.51 |
|
|
| Weighted-average shares outstanding (in thousands) |
|
|
|
|
|
| Diluted |
|
15,923 |
|
|
15,778 |
|
|
| |
|
|
|
|
|
|
| Reconciliation of Segment Operating Income to Adjusted Segment
Operating Income |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(unaudited) |
|
|
| |
(in thousands, except percentages) |
For the Three Months
Ended June 30, 2017 |
|
For the Three Months
Ended June 30, 2016 |
|
|
| |
|
Industrial
Products |
|
Coatings,
Sealants &
Adhesives |
|
Specialty
Chemicals |
|
Corporate and
Other |
|
Consolidated |
|
Industrial
Products |
|
Coatings,
Sealants &
Adhesives |
|
Specialty
Chemicals |
|
Corporate and
Other |
|
Consolidated |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
$ |
53,261 |
|
|
$ |
23,382 |
|
|
$ |
21,382 |
|
|
$ |
2 |
|
|
$ |
98,027 |
|
|
$ |
43,475 |
|
|
$ |
23,424 |
|
|
$ |
17,187 |
|
|
$ |
21 |
|
|
$ |
84,107 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Income |
$ |
13,633 |
|
|
$ |
990 |
|
|
$ |
1,911 |
|
|
$ |
(2,271 |
) |
|
$ |
14,263 |
|
|
$ |
10,607 |
|
|
$ |
1,649 |
|
|
$ |
1,121 |
|
|
$ |
(5,967 |
) |
|
$ |
7,410 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusting items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Restructuring & realignment |
|
232 |
|
|
|
1,408 |
|
|
|
876 |
|
|
|
- |
|
|
|
2,516 |
|
|
|
90 |
|
|
|
856 |
|
|
|
605 |
|
|
|
- |
|
|
|
1,551 |
|
|
|
| |
Consulting projects |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
61 |
|
|
|
121 |
|
|
|
68 |
|
|
|
344 |
|
|
|
594 |
|
|
|
| |
CFO Transition |
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,841 |
|
|
|
2,841 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted Operating Income |
$ |
13,865 |
|
|
$ |
2,398 |
|
|
$ |
2,787 |
|
|
$ |
(2,271 |
) |
|
$ |
16,779 |
|
|
$ |
10,758 |
|
|
$ |
2,626 |
|
|
$ |
1,794 |
|
|
$ |
(2,782 |
) |
|
$ |
12,396 |
|
|
|
| % of revenue |
|
26.0% |
|
|
|
10.3% |
|
|
|
13.0% |
|
|
|
|
|
17.1% |
|
|
|
24.7% |
|
|
|
11.2% |
|
|
|
10.4% |
|
|
|
|
|
14.7% |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 asses 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
