Zurn Elkay Water Solutions (ZWS) - 2021 Q3 - Quarterly Report

Financial Performance - For the three months ended September 30, 2021, consolidated net sales were $557.2 million, an increase of 12.9% compared to $493.6 million for the same period in 2020[165] - Net income attributable to Zurn for the three months ended September 30, 2021, was $64.1 million, an increase of 41.5% from $45.4 million in the same period of 2020[175] - For the nine months ended September 30, 2021, consolidated net sales were $1,651.6 million, a 10.9% increase from $1,489.7 million in the same period of 2020[176] - Net income attributable to Zurn for the nine months ended September 30, 2021, was $187.3 million, up from $118.2 million for the same period in 2020, representing a year-over-year increase of approximately 58.5%[198] Segment Performance - Water Management net sales increased by 15% year over year to $229.7 million, driven by increased demand across nearly all product categories[166] - Water Management net sales increased by 21.7% year over year to $678.6 million for the nine months ended September 30, 2021[176] - Process & Motion Control income from operations was $57.3 million, representing 17.5% of net sales, an increase of 60.1% compared to the prior year[167] - Process & Motion Control income from operations was $179.1 million, representing 18.4% of net sales, a 30.9% increase from $136.8 million in the same period of 2020[179] - Core sales increased by 12% year over year in Water Management, driven by increased demand across most product categories[178] Operational Highlights - The company acquired Advance Technology Solutions for $4.5 million on April 16, 2021, enhancing its Water Management platform[157] - The acquisition of Hadrian Manufacturing was completed for $101.3 million on December 11, 2020, complementing the existing Water Management platform[158] - Restructuring charges for the three months ended September 30, 2021, totaled $2.0 million, down from $6.6 million in the same period of 2020[164] - The ongoing COVID-19 pandemic has caused intermittent disruptions, but as of September 30, 2021, all global facilities were operating with only minor interruptions[155] Financial Ratios and Tax - The effective income tax rate for the nine months ended September 30, 2021, was 23.3%, down from 26.5% in the same period of 2020[186] - The net leverage ratio as of September 30, 2021, was 1.7 to 1.0, well below the maximum allowable ratio of 6.75 to 1.0[192] - The company reported a total net leverage ratio of 1.7 as of September 30, 2021, indicating a stable financial position relative to its Adjusted EBITDA[200] Cash Flow and Investments - Cash provided by operating activities increased to $245.8 million for the nine months ended September 30, 2021, compared to $237.7 million for the same period in 2020[209] - Cash used for investing activities was $6.5 million during the nine months ended September 30, 2021, a significant decrease from $81.6 million in the same period of 2020[210] - The company incurred $32.6 million for common stock dividends during the nine months ended September 30, 2021, compared to $29.0 million in the same period of 2020[211] - Cash flows from financing activities decreased to $13.1 million during the nine months ended September 30, 2021, compared to $108.8 million in the same period of 2020[211] Debt and Credit Facilities - Total indebtedness as of September 30, 2021, was $1,191.8 million, with a term loan of $622.2 million and 4.875% Senior Notes due 2025 amounting to $496.9 million[212] - Cash and cash equivalents as of September 30, 2021, were $477.6 million, with an additional borrowing capacity of $255.8 million under the revolving credit facility[202] - The Restated Credit Agreement includes a $550 million Term B Loan and a $200 million revolving line of credit, with a maturity date for the revolving line of credit set for October 4, 2026[205] Management and Controls - As of September 30, 2021, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are adequate and effective[218] - There have been no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are likely to materially affect, internal control over financial reporting[220] Market Risks - The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates, managed through derivative financial instruments[215]