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Press Release: CSW Industrials Reports Fiscal Third Quarter and Year-to-Date 2021 Results

· 02/05/2021 07:30
-- Quarterly revenue of $89.9 million, a 7.4% increase (2.1% organic) compared to $83.7 million in the prior year period -- Quarterly earnings per diluted common share (EPS) of $0.16, or $0.59 as adjusted to exclude transaction expenses, compared to $0.48 in the prior year period -- Heating, ventilation, air conditioning, and refrigeration (HVAC/R) and architecturally specified building products (ASBP) end markets report 20.8% (15.7% organic) and 3.3% (all organic) year-to-date sales growth, respectively, over the prior year period -- Year-to-date 2021 EPS of $2.06, or $2.49 adjusted to exclude transaction expenses, compared to adjusted EPS of $2.35 in the prior year-to-date period -- Year-to-date net cash provided by operating activities of $54.0 million -- Successfully closed the previously announced acquisition of TRUaire on December 15, 2020, for total consideration of $385.7 million, enhancing future organic HVAC/R growth potential -- Maintained balance sheet strength with a post-acquisition leverage ratio, in accordance with our credit facility, net of cash on hand, of 1.95x -- Subsequent to quarter close, announced a definitive agreement to form a strategic joint venture and an expanded distribution relationship with Shell Lubricants

CSW Industrials Reports Fiscal Third Quarter and Year-to-Date 2021 Results

DALLAS, Feb. 05, 2021 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (Nasdaq: CSWI or the "Company") today reported results for the fiscal third quarter 2021 and year-to-date periods ended December 31, 2020.

Fiscal Third Quarter and Year-to-Date 2021 Highlights

Joseph B. Armes, CSW Industrials' Chairman, President, and Chief Executive Officer, commented, "Our third quarter results extended the trend of strong performance, highlighted by 23% growth in adjusted EPS. During the quarter, we consummated the TRUaire acquisition, broadening our HVAC/R product portfolio, increasing our market share, and meaningfully expanding sales into our fastest growing and most profitable end market. Subsequent to quarter end, our Whitmore operating company and Shell Lubricants announced an agreement to form a joint venture that we expect will be an organic growth catalyst, and will conduct operations at our world-class specialty chemical manufacturing facility."

Armes continued, "We continue to be guided by the objectives we outlined in May of 2020: to treat our employees well, serve our customers well, manage our supply chains effectively, and thus position CSWI for sustainable, long-term growth and profitability. Consistent with our capital allocation strategy, we have continued investing for organic and inorganic growth to maximize risk adjusted returns for our shareholders. Since our spin-off in October of 2015, we have invested $465 million in six acquisitions, and since the third quarter of 2018 have returned approximately $100 million to shareholders through our quarterly dividend and share repurchase programs."

Fiscal Third Quarter 2021 Results of Operations

Fiscal third quarter consolidated revenue was $89.9 million, compared to $83.7 million in the prior year period, with $10.1 million of increased sales in the Industrial Products segment, partially offset by a sales decrease of $3.9 million in the Specialty Chemicals segment. Organic sales growth of 2.1%, as compared to the prior year quarter, was driven primarily by increased sales into the HVAC/R ($4.7 million) and ASBP ($3.7 million) end markets, partially offset by decreased sales volumes into the energy ($2.0 million), rail ($1.7 million), plumbing ($1.0 million), general industrial ($0.7 million), and mining ($0.6 million) end markets.

Strength in the HVAC/R end market was primarily attributable to a sustained number of people working from home and the incremental contribution from the TRUaire acquisition ($4.5 million). Increased sales in ASBP were associated with the acceleration of projects already underway and continued success in taking market share, despite the general reduction in activity across the construction industry. The modest reduction in sales into the plumbing end market was primarily associated with selling HVAC/R products to traditional plumbing customers; hence normal HVAC/R buying patterns impacted plumbing end market sales. As compared to the prior year period, COVID-19 pandemic-driven demand degradation continued to impact sales in the other end markets served. Despite this, cumulative fiscal third quarter sales into the energy, mining, rail, and general industrial end markets slightly exceeded the fiscal first and second quarters of 2021.

Consolidated gross profit in the fiscal third quarter was $39.3 million, compared to $37.7 million, in the prior year period, with the increased profit resulting primarily from increased sales. Gross profit margin as a percentage of sales was 43.7%, compared to 45.0% in the prior year period, with this slight decline primarily due to costs associated with the accelerated lower margin projects in the ASBP end market as mentioned above.

Consolidated GAAP operating expenses in the current quarter were $35.2 million, or 39.2% of revenue, compared to the prior year period of $27.2 million, or 32.5% of revenue. The increased operating expenses were due to transaction expenses related to the TRUaire acquisition ($6.9 million) and the efforts to establish the joint venture ("JV") ($1.1 million), resulting in increased operating expenses as a percentage of sales. Adjusted to exclude these transaction expenses, fiscal third quarter 2021 operating expenses were $27.3 million, or 30.3% of revenue, a 220 basis-point improvement over the prior year period.

Reported operating income in the current period was $4.1 million, compared to $10.5 million in the prior year period. Adjusted to exclude the aforementioned transaction expenses, fiscal third quarter 2021 operating income was $12.1 million, a 15.1% increase over the prior year period. Reported operating income margin in fiscal third quarter 2021 was 4.6%, or 13.4% on an adjusted basis, a 90 basis-point improvement over the prior year period. There were no adjustments to operating income in fiscal third quarter 2020.

Net income in the fiscal third quarter of 2021 was $2.3 million, or $0.16 per diluted share, compared to $7.3 million, or $0.48 in the prior year period. Adjusted to exclude tax-effected transaction expenses in the current period, adjusted net income was $8.8 million, or $0.59 per diluted share.

Industrial Products segment revenue was $58.8 million, a $10.1 million increase, or 20.8%, from the prior year period, as increased organic sales volumes into the HVAC/R ($4.5 million) and ASBP ($3.7 million) end markets, plus the inorganic growth from TRUaire ($4.5 million), were partially offset by decreased sales volumes into plumbing ($1.0 million), rail ($0.8 million), and general industrials ($0.8 million) end markets. GAAP segment operating income was $3.0 million, compared to $8.6 million the prior year period, due primarily to the $6.9 million TRUaire transaction expenses, which were partially offset by increased sales. Operating income margin in the fiscal third quarter was 5.1%, compared to 17.8% in the prior year period, due to TRUaire transaction expenses. Adjusted to exclude transaction expenses, adjusted segment operating income was $9.9 million, or 16.9% of revenue. There were no adjustments in fiscal third quarter 2020.

Specialty Chemicals segment revenue was $31.1 million, a $3.9 million decrease from the prior year period primarily due to decreased sales volumes into energy ($2.0 million), rail ($0.9 million), and mining ($0.6 million) end markets. GAAP segment operating income was $4.7 million, a $0.7 million decrease compared to the prior year period, due to decreased sales and transaction expenses related to the efforts to establish the JV, partially offset by decreases in sales commissions, travel and personnel expenses. Reported operating income margin in the fiscal third quarter was 15.1%, compared to the prior year period of 15.4%. Adjusted to exclude JV-related transaction expenses, adjusted segment operating income was $5.8 million, or 18.5% of revenue. There were no adjustments in fiscal third quarter 2020.

Following quarter end, the Company declared its ninth consecutive quarterly regular cash dividend of $0.135 per share, which will be paid on February 12, 2021, to shareholders of record on January 29, 2021.

The Company's effective tax rate for the fiscal third quarter was 23.2% on a GAAP basis.

Year-to-Date 2021 Results of Operations

Consolidated revenue of $285.8 million in the current year-to-date period compared favorably to $287.4 million in the prior year period as improving sales in the fiscal second and third quarters nearly offset declines realized in the fiscal first quarter. As compared to the prior year period, strong sales growth into the HVAC/R ($18.4 million) and ASBP ($2.8 million) end markets were more than offset by decreased sales volumes primarily into the energy ($7.9 million), general industrial ($7.2 million), rail ($4.6 million), and mining ($1.5 million) end markets. HVAC/R end market sales growth of 20.8% over the prior year period was due to organic growth of 15.7%, or $14.0 million, and inorganic growth from the TRUaire acquisition of $4.5 million, while all of the ASBP growth was organic. As mentioned in the fiscal third quarter end market commentary, COVID-19 pandemic driven demand degradation has impacted other end market sales, with a more positive sales trend in recent months.

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February 05, 2021 07:30 ET (12:30 GMT)