Zurn Elkay Water Solutions (US:ZWS)2020-10-27 20:29Financial Performance - For the three months ended September 30, 2020, consolidated net sales were $493.6 million, a decrease of 5.3% compared to $521.3 million for the same period in 2019[160]. - Income from operations for the consolidated entity was $72.4 million, down 18.2% from $88.5 million in the prior year, with a decrease in operating margin from 17.0% to 14.7%[164]. - Net income from continuing operations was $45.4 million for the three months ended September 30, 2020, down from $56.7 million in the same period of 2019, resulting in diluted net income per share of $0.37[173]. - Consolidated net sales for the six months ended September 30, 2020, were $942.7 million, a decrease of 8.4% compared to $1,029.6 million for the same period in 2019[175]. - Income from operations for the consolidated entity was $138.4 million, down 18.0% from $168.7 million in the prior year, with a corresponding decrease in operating margin from 16.4% to 14.7%[178]. - Net income from continuing operations was $81.2 million for the six months ended September 30, 2020, compared to $105.2 million in the same period of 2019, resulting in diluted net income per share of $0.66, down from $0.85[186]. - Adjusted EBITDA for the six months ended September 30, 2020, was reported at $211.6 million, reflecting the company's operational performance[192]. - Adjusted EBITDA for the six months ended September 30, 2020, was $211.6 million, compared to $229.2 million for the same period in 2019, reflecting a decrease of approximately 7.4%[205]. Sales Performance - Process & Motion Control net sales decreased by 12.8% year over year to $293.9 million, while Water Management net sales increased by 8.4% to $199.7 million[160]. - Process & Motion Control net sales decreased by 14.8% to $568.3 million, while Water Management net sales increased by 3.3% to $374.4 million[176][177]. - Core sales, excluding acquisitions and foreign currency translation, showed a flat performance in Water Management, despite a 3% increase in net sales due to acquisitions[190]. Expenses and Charges - Restructuring charges for the three months ended September 30, 2020, totaled $6.6 million, compared to $2.1 million for the same period in 2019[159]. - Interest expense decreased to $11.5 million for the three months ended September 30, 2020, from $15.3 million in the same period of 2019, primarily due to lower borrowings and interest rates[168]. - Corporate expenses decreased to $12.1 million for the three months ended September 30, 2020, from $13.5 million in the same period of 2019, reflecting cost reduction initiatives[167]. - Interest expense decreased to $24.9 million from $30.8 million year-over-year, primarily due to lower outstanding borrowings and interest rates[182]. - Corporate expenses decreased to $25.8 million from $28.4 million, attributed to cost reduction initiatives[181]. Taxation - The effective income tax rate for the three months ended September 30, 2020, was 26.2%, compared to 25.6% in the same period of 2019[170]. - The effective income tax rate increased to 29.1% for the six months ended September 30, 2020, compared to 24.6% in the prior year, influenced by foreign income tax accruals[184]. Cash Flow and Debt - Cash provided by operating activities increased to $113.8 million for the six months ended September 30, 2020, up from $86.3 million in the same period of 2019[209]. - Total indebtedness as of September 30, 2020, was $1,195.8 million, with long-term debt comprising $1,192.6 million[212]. - Cash and cash equivalents as of September 30, 2020, were $326.6 million, down from $573.4 million as of March 31, 2020[207]. - Cash used for financing activities was $362.2 million during the six months ended September 30, 2020, significantly higher than $15.8 million in the same period of 2019[211]. - Capital expenditures for the six months ended September 30, 2020, were $15.3 million, compared to $13.2 million in the same period of 2019[210]. - The net leverage ratio as of September 30, 2020, was 2.2 to 1.0, indicating the company's compliance with its credit agreement covenants[193]. - Total net leverage ratio as of September 30, 2020, was 2.2, calculated based on consolidated indebtedness of $956.9 million and Adjusted EBITDA[205]. - The company had $355.1 million of additional borrowing capacity as of September 30, 2020, including $261.2 million under the revolving credit facility[207]. Market Conditions - The company experienced increased demand for touchless and hygienic solutions in its Water Management platform due to the COVID-19 pandemic[153]. - The company is exposed to market risks from changes in foreign currency exchange rates and interest rates, managed through derivative financial instruments[214]. Acquisitions - The company acquired Just Manufacturing for $59.4 million on January 28, 2020, enhancing its Water Management platform[156].