- Fourth quarter 2017 revenue of $87.3 million, up 14.5% compared to $76.3 million in the prior year period, led by organic revenue growth of 12.9%.
- Full Year 2017 revenue of $327.1 million, up 2.3% compared to $319.8 million in the prior year period, including organic revenue growth of 0.6%.
- Fourth quarter 2017 GAAP operating income of $4.7 million; Non-GAAP operating income of $11.1 million.
- Fourth quarter 2017 GAAP net earnings of $2.7 million, or $0.17 per diluted share; Non-GAAP net earnings of $6.9 million, or $0.43 per diluted share.
DALLAS, June 14, 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 fourth quarter and full year ended March 31, 2017.
Net revenue during the fiscal fourth quarter of 2017 increased 14.5% to $87.3 million, compared to the prior year period of $76.3 million. Organic growth was 12.9%, and acquisitions contributed 1.6% to total growth. The increase in revenue was primarily attributable to increases in architecturally-specified building products and HVAC end markets, partially offset by decreases in the rail end market.
Net income in the fiscal fourth quarter of 2017 was $2.7 million, or $0.17 per diluted share, compared to $1.9 million, or $0.12 per diluted share, in the prior year period. Adjusted to exclude one-time expenses, adjusted net income in the fiscal fourth quarter of 2017 was up 23.5% to $6.9 million, or $0.43 per diluted share, compared to $5.6 million, or $0.35 per diluted share, in the prior year period.
During the fiscal fourth quarter 2017 the Company announced the acquisition of Greco Aluminum Railings, a leading manufacturer of high-quality engineered railing and safety systems for multi-family and commercial structures in the United States and Canada. The acquisition underscored CSWI’s strategy to identify best-in-class products and leverage existing routes to market and served end markets to drive profitable growth, creating a strong strategic fit within the Company’s architecturally-specified building product category. The integration of this acquisition is progressing well, and results are included in CSWI’s Industrial Products business segment.
Joseph B. Armes, CSW Industrials’ Chief Executive Officer, commented, “We are pleased to report the successful completion of our first full-year as a public company. We achieved several milestones during the year, including successfully rationalizing the footprint of our Jet-Lube operations and the acquisition of Greco. We finished the fourth quarter with a record-breaking performance in several of our construction related end markets, and while we are still managing macro pressure in rail and the volatility in the energy markets, we are beginning to see some stability and modest recovery in some areas.” Armes concluded, “Fiscal 2017 was a year of transition, which included a substantial effort to optimize our management structure and our operations as a new public company against a backdrop of mixed end market conditions. We are excited to enter Fiscal 2018 with the bulk of our most significant reorganization efforts behind us, and we expect to leverage our greater efficiency to drive further improvement in our results.”
Fourth Quarter Results of Operations
Consolidated revenue increased to $87.3 million, compared with the prior year level of $76.3 million.
Industrial Products segment revenue was $41.6 million, compared to the prior year of $33.9 million. Higher revenue was mainly the result of strong sales of our architecturally-specified products, plumbing and HVAC end markets. GAAP operating income increased to $8.4 million, compared to the prior year of $6.3 million. Adjusted to exclude non-recurring expenses, segment operating income increased 52.2% to $9.6 million, compared to the prior year period of $6.3 million.
Coatings, Sealants and Adhesives (CS&A) segment revenue was $26.7 million, compared to the prior year of $25.3 million. Higher sales were attributable to new business associated with fire stopping sealants, HVAC and plumbing, partially offset by lower OEM rail volume with existing customers. GAAP segment operating loss was $59.0 thousand, compared to the prior year loss of $63.0 thousand. Adjusted to exclude non-recurring costs primarily related to realignment and restructuring, segment operating income was $1.9 million, compared to the prior year period of $424 thousand.
Specialty Chemicals segment revenue was $19.1 million, compared to the prior year of $16.9 million. Higher sales were driven by drilling compounds plus new industrial lubricant business in cement and power generation end markets. GAAP segment operating loss was $817 thousand, compared to prior year period operating income of $3.1 million. Adjusted to exclude non-recurring costs, segment operating income decreased to $2.4 million, compared to $3.1 million in the prior year.
Consolidated gross profit was $31.1 million, a 9.7% decrease compared to the prior year level of $34.4 million. Gross margin as a percentage of sales was 35.6%, compared to 45.1% in the prior year period. Lower gross margin compared to the prior year primarily reflected increased costs related to restructuring and realignment as the Company improves its operational footprint. In total, the Company incurred $5.3 million in restructuring and realignment costs during the period.
Consolidated operating expenses decreased 4.6% to $26.4 million, or 30.2% of sales, compared to the prior year level of $27.6 million, or 36.2% of sales. Lower operating costs compared to the prior year were primarily attributable to reduced compensation and benefit expenses.
Consolidated net income was $2.7 million, or $0.17 per diluted share, compared to $1.9 million, or $0.12 per diluted share in the fiscal 2016. Adjusted to exclude one-time expenses and applying a normalized tax rate, adjusted net income in the fourth quarter of fiscal 2017 was up 23.5% to $6.9 million, or $0.43 per diluted share, compared to $5.6 million, or $0.35 per diluted share, in the prior year period.
Full Year Results of Operations
Consolidated revenue increased 2.3% to $327.1 million, compared with prior year revenue of $319.8 million. Higher revenue was attributed to recent acquisitions, coupled with organic growth in HVAC, plumbing and architecturally-specified building products. Higher construction related volume was partially offset by decreased volumes in rail, energy, and mining end markets.
Industrial Products segment revenue increased to $158.7 million, compared to the prior year level of $138.6 million. The increase in revenue was mainly the result of strong organic growth and acquisitions made in the past twelve months. GAAP operating income increased to $32.9 million, over the prior year level of $31.1 million. Segment adjusted operating income increased to $34.6 million compared to the prior year of $27.9 million.
CS&A segment revenue decreased to $96.9 million, compared to the prior year level of $106.0 million. Decreased sales were attributable to lower sales volumes in rail end markets, partially offset by higher sales into fire stopping sealants, HVAC and Plumbing end markets. GAAP operating income was $851 thousand, compared to the prior year period of $10.9 million. Segment adjusted operating income declined to $8.2 million, compared to the prior year level of $11.1 million.
Specialty Chemicals segment revenue decreased to $71.5 million, compared to the prior year level of $74.9 million. Lower sales were attributable to weakness in rail, mining and energy end markets. GAAP operating income was $2.0 million, compared to the prior year period of $12.5 million. Segment adjusted operating income declined to $8.6 million, compared to the prior year level of $9.6 million.
Consolidated organic revenue increased 0.6%, reflecting our strong sales in HVAC, plumbing and architecturally-specified building products.
Consolidated gross profit decreased 9.5% to $133.8 million over the prior year level of $147.9 million. Gross margin as a percentage of sales was 40.9%, compared to 46.2% in the prior year period. Lower gross margin compared to the prior year primarily reflects lower volume and profitability of products sold into energy and rail end markets, restructuring and realignment charges, and pension gain in the prior-year that did not recur and other discrete items.
Consolidated operating expenses were $111.4 million, or 34.0% of sales, compared to the prior year level of $100.4 million, or 31.4% of sales. Increased operating expenses were attributable to restructuring and other discrete items in the current year and the pension gain in the prior year that did not recur, partially offset by startup costs in the prior year which did not recur. In addition, the prior year reflects only half a year of corporate costs, as this was our first full year as a public company.
Consolidated net income was $11.1 million, or $0.70 per diluted share, compared with net income of $25.5 million, or $1.62 per diluted share, in the prior year period. Adjusted for one-time items and a normalized tax rate, net income was $26.7 million, or $1.68 per diluted share, compared to net income of $27.0 million, or $1.72 per diluted share in the prior year. Adjustments to net income are shown in the table below.
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 13663735. The telephonic replay will be available beginning at 1:00 p.m. ET on Wednesday, June 14, 2017, and will last through 11:59 p.m. ET on Wednesday, June 28, 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|
|Quarter Ended March 31, 2017||2017||2016|
|Cost of revenues||(56,276)||(41,832)|
|Gross profit margin||35.6%||45.1%|
|Total operating expenses||(26,352)||(27,631)|
|Operating expenses as a % of Sales||30.2%||36.2%|
|Interest expense, net||(532)||(743)|
|Other income (expense), net||(116)||(41)|
|Income before income taxes||4,073||6,012|
|Provision for income taxes||(1,345)||(4,152)|
|Year Ended March 31, 2017||2017||2016|
|Cost of revenues||(193,247)||(171,967)|
|Gross profit margin||40.9%||46.2%|
|Total operating expenses||(111,356)||(100,378)|
|Operating expenses as a % of Sales||34.0%||31.4%|
|Interest expense, net||(2,695)||(3,035)|
|Other income (expense), net||1,758||(226)|
|Income before income taxes||21,544||44,225|
|Provision for income taxes||(10,473)||(18,754)|
|Diluted shares QTD||15,919||15,717|
|Diluted shares YTD||15,839||15,675|
|CONSOLIDATED BALANCE SHEETS|
|(in thousands, except per share amounts)||2017||2016|
|Cash and cash equivalents||$||23,146||$||25,987|
|Bank time deposits||1,776||13,278|
|Accounts receivable, net||63,782||52,637|
|Prepaid expenses and other current assets||7,178||11,985|
|Total current assets||146,283||155,521|
|Property, plant and equipment, net||63,897||64,357|
|Intangible assets, net||90,610||88,727|
|LIABILITIES AND EQUITY|
|Accrued and other current liabilities||22,756||21,090|
|Current portion of long-term debt||561||561|
|Total current liabilities||37,735||31,563|
|Retirement benefits payable||1,464||1,746|
|Other long-term liabilities||13,380||11,820|
|Common shares, $0.01 par value||157||156|
|Shares authorized – 50,000|
|Shares issued – 15,846 and 15,659, respectively|
|Preferred shares, $0.01 par value||-||-|
|Shares authorized – 10,000|
|Shares issued – 0|
|Additional paid-in capital||38,701||31,597|
|Treasury shares, at cost||(1,011||)||-|
|Accumulated other comprehensive loss||(10,435||)||(7,698||)|
|Total liabilities and equity||$||397,663||$||392,260|
|CONSOLIDATED STATEMENTS OF CASH FLOWS|
|Fiscal Years Ended March 31,|
|(amounts in thousands)||2017||2016||2015|
|Cash flows from operating activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Amortization of intangible and other assets||7,939||7,129||4,593|
|Provision for inventory reserves||1,644||-||-|
|Provision for doubtful accounts||178||(282||)||1,515|
|Share-based and other executive compensation||4,641||2,231||-|
|Acquisition-related non-cash gain||(376||)||(1,950||)||-|
|Net loss (gain) on disposals of property, plant and equipment||221||60||(1,627||)|
|Pension plan curtailment benefit||-||(8,020||)||-|
|Net pension (benefit) expense||(1,092||)||3,506||3,392|
|Impairment of assets||4,115||-||710|
|Net deferred taxes||528||7,262||(7,887||)|
|Changes in operating assets and liabilities:|
|Accounts receivable, net||(5,762||)||2,522||(37||)|
|Prepaid expenses and other current assets||1,132||(4,945||)||4,351|
|Accounts payable and other current liabilities||4,706||910||1,086|
|Retirement benefits payable and other liabilities||2,385||(1,177||)||291|
|Net cash provided by operating activities||39,036||41,530||35,468|
|Cash flows from investing activities:|
|Proceeds from sale of assets held for investment||349||-||3,494|
|Proceeds from sale of assets||263||46||6,393|
|Net change in bank time deposits||10,968||(1,978||)||3,353|
|Cash paid for acquisitions||(28,179||)||(97,236||)||(7,193||)|
|Net cash provided by (used in) investing activities||(25,968||)||(110,221||)||(2,625||)|
|Cash flows from financing activities:|
|Borrowings on lines of credit||-||81,000||12,229|
|Repayments of lines of credit||(561||)||(94,561||)||(30,622||)|
|Borrowings on revolving credit agreement||30,000||98,040||-|
|Payments on revolving credit agreement||(45,915||)||(21,500||)||-|
|Payments of deferred loan costs||-||(1,081||)||-|
|Purchase of treasury shares||(1,011||)||-||(206||)|
|Cash contribution from Capital Southwest||-||13,000||-|
|Proceeds from stock option activity||2,169||96||-|
|Dividends paid to Capital Southwest||-||(300||)||(8,294||)|
|Net cash (used in) provided by financing activities||(15,318||)||74,694||(26,893||)|
|Effect of exchange rate changes on cash and equivalents||(591||)||(464||)||(913||)|
|Net change in cash and cash equivalents||(2,841||)||5,539||5,037|
|Cash and cash equivalents, beginning of period||25,987||20,448||15,411|
|Cash and cash equivalents, end of period||$||23,146||$||25,987||$||20,448|
Reconciliation of Non-GAAP Measures
|Reconciliation of Operating Income to Adjusted Operating Income|
|(in thousands)||For the Three Months Ended March 31,||For the Year Ended March 31,|
|GAAP Operating Income||$||4,721||$||6,796||$||22,481||$||47,486|
|Restructuring & realignment||5,257||-||9,964||-|
|Estimated reserve for excess inventory||-||-||719||-|
|Transaction and integration costs||431||487||431||2,128|
|Spin related costs||-||684||-||3,730|
|Adjusted Operating Income||$||11,138||$||7,967||$||41,604||$||45,324|
|Reconciliation of Net Income to Adjusted Net Income|
|(in thousands, except share data)||For the Three Months Ended March 31,||For the Year Ended March 31,|
|GAAP Net Income||$||2,728||$||1,860||$||11,071||$||25,471|
|Adjusting items, net of tax:|
|Restructuring & realignment||3,401||-||6,555||-|
|Estimated reserve for excess inventory||-||-||467||-|
|Transaction and integration costs||279||315||280||1,377|
|Spin related costs||-||443||-||2,413|
|Discrete Tax Provisions||-||2,953||3,073||2,953|
|Adjusted Net Income||$||6,879||$||5,571||$||26,653||$||27,001|
|GAAP Diluted income per common share||$||0.17||$||0.12||$||0.70||$||1.62|
|Adjusting items, per diluted common share:|
|Restructuring & realignment||0.21||-||0.41||-|
|Estimated reserve for excess inventory||-||-||0.03||-|
|Transaction and integration costs||0.02||0.02||0.02||0.09|
|Spin related costs||-||0.03||-||0.14|
|Discrete Tax Provisions||-||0.18||0.19||0.20|
|Adjusted earnings per diluted common share||$||0.43||$||0.35||$||1.68||$||1.72|
|Weighted-average shares outstanding (in thousands)|
|Reconciliation of Segment Operating Income to Adjusted Segment Operating Income|
|(in thousands, except percentages)||For the Three Months Ended March 31, 2017||For the Three Months Ended March 31, 2016|
|Specialty Chemicals||Corporate |
|Restructuring & realignment||624||1,803||2,830||(0||)||5,257||-||-||-||-||-|
|Transaction and integration costs||431||-||-||-||431||-||487||-||-||487|
|Spin related costs||-||-||-||-||-||-||-||-||684||684|
|Adjusted Operating Income||$||9,574||$||1,947||$||2,403||$||(2,787||)||$||11,138||$||6,289||$||424||$||3,068||$||(1,814||)||$||7,967|
|% of revenue||23.0||%||7.3||%||12.6||%||12.8||%||18.5||%||1.7||%||18.1||%||10.4||%|
|(in thousands, except percentages)||For the Year Ended March 31, 2017||For the Year Ended December 31, 2016|
Sealants & Adhesives
Sealants & Adhesives
|Restructuring & realignment||624||3,759||5,581||(0||)||9,964||-||-||-||-||-|
|Estimated reserve for excess inventory||17||279||423||-||719||-||-||-||-||-|
|Transaction and integration costs||431||-||-||-||431||-||1,620||508||-||2,128|
|Spin related costs||-||-||-||-||-||-||-||-||3,730||3,730|
|Adjusted Operating Income||$||34,563||$||8,155||$||8,607||$||(9,721||)||$||41,604||$||27,896||$||11,113||$||9,575||$||(3,260||)||$||45,324|
|% of revenue||21.8||%||8.4||%||12.0||%||12.7||%||20.1||%||10.5||%||12.8||%||14.2||%|
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