Highlights

  • Second quarter 2019 revenue from continuing operations of $91.6 million, compared to $84.4 million in the prior year period.
  • Second quarter 2019 GAAP operating income from continuing operations of $17.2 million or 18.8% of sales, compared to $14.6 million or 17.2% of sales in the prior year period.  
  • Second quarter 2019 GAAP net earnings from continuing operations of $12.4 million, or $0.79 per diluted share, compared to $9.2 million or $0.57 per diluted share in the prior year period; Non-GAAP net earnings from continuing operations of $12.4 million, or $0.79 per diluted share, compared to $9.6 million or $0.60 per diluted share in the prior year period.
  • In a separate press release, the Company announced a new, $75 million share repurchase program reauthorization and a more formalized capital allocation policy.

DALLAS, Nov. 07, 2018 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (NASDAQ:CSWI), a diversified industrial growth company with well-established, scalable platforms and domain expertise across two segments: Industrial Products and Specialty Chemicals, today reported results for the fiscal second quarter ended September 30, 2018.

Net revenue during the fiscal second quarter of 2019 was $91.6 million, compared to $84.4 million in the prior year period. Higher revenue was driven by increased sales in both Industrial Products and Specialty Chemicals segments.

GAAP operating income from continuing operations increased 17.8% to $17.2 million, compared to $14.6 million in the prior year period. The increase was driven by increased sales volumes and decreased operating expenses, partially offset by negative product mix and increased manufacturing costs. 

Net income from continuing operations in the fiscal second quarter of 2019 was $12.4 million, or $0.79 per diluted share, compared to $9.2 million, or $0.57 per diluted share, in the prior year period. Adjusted to exclude one-time items and applying a normalized tax rate, adjusted net income from continuing operations in the fiscal second quarter of 2019 was $12.4 million, or $0.79 per diluted share, compared to $9.6 million, or $0.60 per diluted share, in the prior year period.

Joseph B. Armes, CSW Industrials’ Chief Executive Officer, commented, “We are pleased to report very strong fiscal second quarter results, highlighted by 8.5% organic growth and a 32% year-over-year increase in adjusted earnings per share. Halfway through our fiscal year we are right on track with our full-year plan, as in the second fiscal quarter, we saw volume recover in our HVAC business during the peak summer months that helped offset the effect of a cooler spring we saw in the first quarter. We believe we are well positioned for the second half of the year, which is supported by continued underlying strength in our Industrial Products segment and expected benefits from our efficiency programs coming online in our Specialty Chemicals segment.”

Armes added, “We are also pleased to announce this morning that our Board authorized an additional $75 million in share repurchase capacity, as we completed our previous authorization and in the process returned $35 million to shareholders through share repurchases over the last two years.”

Further details of the share repurchase program and disclosures of the Company’s long-term capital allocation plan can be found in a separate release issued this morning at ir.cswindustrials.com.

Second Quarter Results of Operations
Consolidated revenue from continuing operations increased to $91.6 million, compared to $84.4 million in the prior year period.

Industrial Products segment revenue was $54.7 million, compared to $48.5 million in the prior year period. Higher revenue was mainly the result of increased sales volume in HVAC and higher volumes in the general industrial end markets. GAAP segment operating income increased 15.4% to $14.2 million, compared to $12.3 million in the prior year period. Adjusted to exclude non-recurring items in the prior year period, segment operating income was $14.2 million, compared to $12.5 million in the prior year.

Specialty Chemicals segment revenue was $36.9 million, compared to $35.9 million in the prior year period. Increased sales were driven by higher volumes in the HVAC and plumbing end markets. GAAP segment operating income increased 17.0% to $6.2 million, compared to $5.3 million in the prior year period.

Consolidated gross profit increased to $42.2 million, compared to $39.7 million in the prior year period. Gross margin as a percentage of sales decreased to 46.1%, compared to 47.0% in the prior year period, driven by negative product mix, increased freight and other manufacturing costs, more than offsetting sales leverage.

Consolidated operating expenses in the current quarter were $25.0 million or 27.3% of sales and improved 240 basis points over the prior year level of $25.1 million, or 29.7% of sales. The lower percent of sales was attributable to sales leverage.

Reported income from continuing operations was $12.4 million, or $0.79 per diluted share, compared to $9.2 million, or $0.57 per diluted share in the prior year period. Adjusted to exclude one-time items and applying a normalized tax rate, adjusted income from continuing operations in the fiscal second quarter of 2019 was $12.4 million, or $0.79 per diluted share, compared to adjusted income from continuing operations of $9.6 million, or $0.60 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 13684452. The telephonic replay will be available beginning at 1:00 p.m. ET on Wednesday, November 7, 2018, and will last through 11:59 p.m. ET on Wednesday, November 21, 2018. 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, effective tax rate, 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 two segments: Industrial Products 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, 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 Income Statements        
  (unaudited) (unaudited)
  Three Months Ended September 30, Six Months Ended September 30,
                 
                 
(Amounts in thousands, except per share amounts)  2018   2017   2018   2017 
Revenues, net $91,612  $84,422  $181,190  $173,721 
Cost of revenues  (49,403)  (44,761)  (96,892)  (92,187)
Gross profit  42,209   39,661   84,298   81,534 
Selling, general and administrative expenses  (25,005)  (25,109)  (49,349)  (50,311)
Operating income  17,204   14,552   34,949   31,223 
Interest expense, net  (420)  (671)  (805)  (1,302)
Other income, net  82   600   820   619 
Income before income taxes  16,866   14,481   34,964   30,540 
Provision for income taxes  (4,442)  (5,331)  (8,534)  (11,103)
Income from continuing operations  12,424   9,150   26,430   19,437 
Income (loss) from discontinued operations, net of tax  2,732   (1,848)  400   (3,621)
Net income $15,156  $7,302  $26,830  $15,816 
         
         
Basic earnings (loss) earnings per common share:        
Continuing operations $0.80  $0.58  $1.69  $1.23 
Discontinued operations  0.18   (0.12)  0.02   (0.23)
Net income $0.98  $0.46  $1.71  $1.00 
         
Diluted earnings (loss) earnings per common share:        
Continuing operations $0.79  $0.57  $1.67  $1.22 
Discontinued operations  0.18   (0.11)  0.03   (0.23)
Net income $0.97  $0.46  $1.70  $0.99 
         


     
Consolidated Balance Sheets    
     
  (unaudited)
(Amounts in thousands, except per share amounts) September 30, 2018 March 31, 2018
ASSETS    
Current assets:    
Cash and cash equivalents $  11,213  $  11,706 
Accounts receivable, net of allowance for doubtful accounts of $1,059 and $1,015, respectively    61,617     63,383 
Inventories, net    48,769     42,974 
Prepaid expenses and other current assets    11,232     7,077 
Current assets, discontinued operations    666     2,427 
Total current assets    133,497     127,567 
Property, plant and equipment, net of accumulated depreciation of $63,315 and $61,967, respectively    52,368     54,473 
Goodwill    81,340     81,764 
Intangible assets, net    49,266     53,054 
Other assets    14,453     23,958 
Total assets $  330,924  $  340,816 
     
LIABILITIES AND EQUITY    
Current liabilities:    
Accounts payable $  14,766  $  16,826 
Accrued and other current liabilities    26,265     23,501 
Current portion of long-term debt    561     561 
Current liabilities, discontinued operations    404     3,966 
Total current liabilities    41,996     44,854 
Long-term debt    21,179     23,459 
Retirement benefits payable    1,892     2,017 
Other long-term liabilities    4,577     4,721 
Noncurrent liabilities, discontinued operations    979     -  
Total liabilities    70,623     75,051 
Equity:    
Common shares, $0.01 par value    158     158 
Shares authorized – 50,000    
Shares issued – 15,942 and 15,957, respectively    
Additional paid-in capital    44,478     42,684 
Treasury shares, at cost (656 and 80 shares, respectively)    (34,249)    (3,252)
Retained earnings    258,557     233,650 
Accumulated other comprehensive loss    (8,643)    (7,475)
Total equity    260,301     265,765 
Total liabilities and equity $  330,924  $  340,816 
     


     
Consolidated Statements of Cash Flow    
  (unaudited)
  Six Months Ended September 30,
(Amounts in thousands)  2018   2017 
Cash flows from operating activities:    
Net income $26,830  $15,816 
Less:  Income (loss) from discontinued operations  400   (3,621)
Income from continuing operations  26,430   19,437 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation  3,750   3,730 
Amortization of intangible and other assets  3,236   3,633 
Provision for inventory reserves  700   - 
Share-based and other executive compensation  1,794   2,036 
Net gain on disposals of property, plant and equipment  (2,539)  (79)
Net pension benefit  (211)  (650)
Net deferred taxes  8,647   1,229 
Changes in operating assets and liabilities:    
Accounts receivable, net  1,473   (2,663)
Inventories  (5,749)  260 
Prepaid expenses and other current assets  (4,163)  703 
Other assets  190   26 
Accounts payable and other current liabilities  (1,153)  11,022 
Retirement benefits payable and other liabilities  109   (6,801)
Net cash provided by operating activities, continuing operations  32,514   31,883 
Net cash used in operating activities, discontinued operations  (7,574)  (6,427)
Net cash provided by operating activities  24,940   25,456 
Cash flows from investing activities:    
Capital expenditures  (2,742)  (2,964)
Proceeds from sale of assets held for investment  278   466 
Proceeds from sale of assets  3,269   11 
Net cash provided by (used in) investing activities, continuing operations  805   (2,487)
Net cash provided by (used  in) investing activities, discontinued operations  7,151   (883)
Net cash provided by  (used in)  investing activities  7,956   (3,370)
Cash flows from financing activities:    
Borrowings on lines of credit  8,000   - 
Repayments of lines of credit  (10,281)  (20,031)
Payments of deferred loan costs  -   (401)
Purchase of treasury shares  (30,997)  (26)
Proceeds from stock option activity  -   329 
Net cash used in financing activities  (33,278)  (20,129)
Effect of exchange rate changes on cash and equivalents  (111)  1,380 
Net change in cash and cash equivalents  (493)  3,337 
Cash and cash equivalents, beginning of period  11,706   23,146 
Cash and cash equivalents, end of period $11,213  $26,483 
         
         

Reconciliation of Non-GAAP Measures

        
Reconciliation of Operating Income to Adjusted Operating Income---Continuing Operations   
         
         
         
  (unaudited)
 (in thousands)Quarter Ended September 30, Six Months Ended September 30,
   2018  2017  2018   2017
         
GAAP Operating Income- Continuing Operations$17,204 $14,552 $34,949  $31,223
         
Adjusting items:       
 Restructuring & realignment -  135  -   1,243
 Gain on sale of property & other -  -  (1,839)  -
 M&A transaction costs -  110  -   110
         
Adjusted Operating Income--Continuing Operations$17,204 $14,797 $33,110  $32,576
         


        
Reconciliation of Net Income to Adjusted Net Income---Continuing Operations      
         
         
         
  (unaudited)
 (in thousands, except share data)Quarter Ended September 30, Six Months Ended September 30,
   2018  2017  2018   2017
         
GAAP Net Income---Continuing Operations$  12,424 $  9,150 $  26,430  $  19,437
         
Adjusting items, net of tax:       
 Restructuring & realignment   -     88    -      808
 Gain on sale of property & other   -     -     (1,361)    - 
 M&A transaction costs   -     71    -      71
 Discrete Tax Provisions & Other   -     265    (557)    265
         
Adjusted Net Income---Continuing Operations$  12,424 $  9,574 $  24,512  $  20,581
         
GAAP Diluted income per common share, Continuing operations$  0.79 $  0.57 $  1.67  $  1.22
         
Adjusting items, per diluted common share:       
 Restructuring & realignment   -     0.01    -      0.05
 Gain on sale of property & other   -     -     (0.08)    - 
 M&A transaction costs   -     -   -     0.01
 Discrete Tax Provisions & Other   -     0.02    (0.04)    0.01
         
Adjusted earnings per diluted common share$  0.79 $  0.60 $  1.55  $  1.29
         


                  
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income         
                   
                   
                   
  (unaudited)
 (in thousands, except percentages)For the Three Months Ended September 30, 2018 For the Three Months Ended September 30, 2017
  Industrial
Products
  Specialty
Chemicals
 Corporate
and Other
 Consolidated Continuing Operations Industrial
Products
  Specialty
Chemicals
 Corporate
and Other
 Consolidated Continuing Operations
                   
Revenue$  54,727   $  36,884  $  1  $  91,612  $  48,487   $  35,936  $  (1) $  84,422 
                   
Operating Income$  14,212   $  6,158  $  (3,166) $  17,204  $  12,299   $  5,281  $  (3,028) $  14,552 
                   
Adjusting items:                 
 Restructuring & realignment   -       -      -      -      135      -      -      135 
 M&A transaction costs   -       -      -      -      110      -      -      110 
                   
Adjusted Operating Income$  14,212   $  6,158  $  (3,166) $  17,204  $  12,544   $  5,281  $  (3,028) $  14,797 
% of revenue 26.0%    16.7%     18.8%   25.9%    14.7%     17.5% 
                   
                   
  (unaudited)
 (in thousands, except percentages)Year to date September 30, 2018 Year to date September 30, 2017
  Industrial
Products
  Specialty
Chemicals
 Corporate
and Other
 Consolidated Continuing Operations Industrial
Products
  Specialty
Chemicals
 Corporate
and Other
 Consolidated Continuing Operations
                   
Revenue$  108,587   $  72,602  $  1  $  181,190  $  101,748   $  71,972  $  1  $  173,721 
                   
Operating Income$  28,105   $  12,631  $  (5,787) $  34,949  $  25,962   $  10,780  $  (5,519) $  31,223 
                   
Adjusting items:                 
 Restructuring & realignment   -       -      -      -      367      876     -      1,243 
 Gain on sale of property & other   (253)     (1,586)    -      (1,839)    -       -      -      -  
 M&A transaction costs   -       -      -      -      110      -      -      110 
                   
Adjusted Operating Income$  27,852   $  11,045  $  (5,787) $  33,110  $  26,439   $  11,656  $  (5,519) $  32,576 
% of revenue 25.6%    15.2%     18.3%   26.0%    16.2%     18.8% 
                   

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 assess 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