UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 31, 2024
(Exact name of registrant as specified in charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (214 ) 884-3777
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined by Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 31, 2024, CSW Industrials, Inc., a Delaware corporation (the “Company”), issued a press release announcing its financial results for the fiscal first quarter ended June 30, 2024. A copy of the Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Exhibit Description | |||||||||||||
| 99.1 | ||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: July 31, 2024
| By: | /s/ Luke E. Alverson | |||||||
| Name: | Luke E. Alverson | |||||||
| Title: | Senior Vice President, General Counsel & Secretary | |||||||
CSW Industrials Reports Record Fiscal 2025 First Quarter Results Delivering All-Time Highs for Quarterly Revenue, Net Income, Earnings per Diluted Share, EBITDA, and Operating Cash Flow
DALLAS, July 31, 2024 (GLOBE NEWSWIRE) - CSW Industrials, Inc. (Nasdaq: CSWI or the "Company") today reported record results for the fiscal 2025 first quarter period ended June 30, 2024.
Fiscal 2025 First Quarter Highlights (comparisons to fiscal 2024 first quarter)
•Total revenue increased 11.2% to $226.2 million, driven by organic growth of 7.7% and inorganic growth of 3.5% from the recent acquisition of Dust Free
•Net income attributable to CSWI increased 26.1% to $38.6 million, compared to $30.6 million
•Earnings per diluted share (EPS) increased 25.4% to $2.47, compared to $1.97
•EBITDA grew 19.9% to $65.3 million, including margin expansion of 210 bps to 28.9%
•Cash flow from operations increased 24.7% to $62.7 million, compared to $50.3 million
•Paid down $51.0 million of debt, further improving the strength of the balance sheet, resulting in a leverage ratio (Debt to EBITDA), in accordance with our credit facility, of 0.49x
Comments from the Chairman, President, and Chief Executive Officer
Joseph B. Armes, CSW Industrials’ Chairman, President, and Chief Executive Officer, commented, "Once again, superior execution by our team has resulted in record financial results for the fiscal first quarter of 2025. CSWI's record revenue for the quarter was fueled by organic unit volume growth, pricing initiatives, and enhanced by our strategic acquisition of Dust Free. We further enhanced our healthy gross margin and drove record profitability while delivering record cash flow for the quarter. We continue to deliver on our commitment to build long-term shareholder value through disciplined capital allocation and by consistently outperforming the markets we serve."
Fiscal 2025 First Quarter Consolidated Results
Fiscal first quarter revenue was $226.2 million, a $22.8 million or 11.2% increase over the prior year period. Total revenue growth included $15.7 million of organic growth contributed from Contractor Solutions and Engineered Building Solutions (7.7% of the total 11.2% growth), with the remainder contributed by the Dust Free acquisition, which is reported in the Contractor Solutions segment. In the current quarter, volume growth drove most of the revenue growth, while pricing initiatives and acquisition revenue also contributed.
Gross profit in the fiscal first quarter was $107.4 million, representing 16.6% growth over $92.2 million in the prior year period. Gross profit margin expanded 220 bps to 47.5%,
compared to 45.3% in the prior year period. The gross profit margin increase was primarily a result of favorable product mix, volume leverage, and pricing initiatives.
Operating expenses as a percentage of revenue were 23.2% in the current period, which was slightly above the prior year period of 23.1%. Operating expenses were $52.4 million in the current year period, compared to $47.0 million in the prior year period and was in line with our revenue growth as we made investments related to employees, integration, and the Dust Free acquisition.
Operating income in the current period was $55.1 million, compared to $45.2 million in the prior year period. Operating income as a percent of revenue was 24.3% in fiscal 2025 first quarter, compared to 22.2% in the prior year period. The 210 bps improvement in operating income margin was a result of the previously mentioned improvement in the gross profit margin while holding operating expenses relatively flat as a percentage of revenue.
Net income attributable to CSWI (net of non-controlling interest in the joint venture) increased 26.1% to $38.6 million, compared to the prior year period of $30.6 million, and EPS increased 25.4% to $2.47, compared to $1.97 in the prior year period.
Fiscal 2025 first quarter EBITDA increased 19.9% to $65.3 million, up from $54.4 million in the prior year period. EBITDA margin expanded 210 bps to 28.9%, compared to 26.8% in the prior year period.
During the fiscal first quarter, the Company paid down $51.0 million of debt, utilizing the record quarterly cash flows from operations of $62.7 million. The resulting leverage ratio (Debt to EBITDA) for the Company, in accordance with our credit facility, was 0.49x.
Following quarter-end, the Company announced its twenty-second consecutive regular quarterly cash dividend. This dividend of $0.21 per share will be paid on August 9, 2024, to shareholders of record on July 26, 2024.
The Company’s effective tax rate for the fiscal first quarter was 26.4%.
Fiscal 2025 First Quarter Segment Results
The Contractor Solutions segment revenue was $160.4 million, a $20.5 million or 14.6% increase over the prior year period, comprised of organic growth of $13.3 million (9.5% of the total 14.6% growth) driven by increased unit volumes and pricing, and inorganic growth from the recently acquired Dust Free business of $7.2 million. As compared to the prior year period, net revenue growth was driven by the HVAC/R, architecturally-specified building products, general industrial, and plumbing end markets. Segment operating income improved to $49.9 million, compared to $39.7 million in the prior year period. The incremental profit resulted from revenue growth, gross profit leverage, and the inclusion of recently acquired Dust Free and was partially offset by increased spending on business integrations, strategic development activities, and employee compensation. Segment operating income margin in the fiscal first quarter was 31.1%, compared to 28.3% in the prior year period. Segment EBITDA in the fiscal first quarter was $58.3 million, or 36.3% of revenue, compared to $46.7 million, or 33.4% of revenue in the prior year period.
The Specialized Reliability Solutions segment revenue was $36.8 million, a $0.9 million or 2.4% decrease from the prior year period. Decreased net revenue was driven by a contraction in the mining and energy end markets. Segment operating income improved to $7.2 million, as compared to $7.0 million in the prior year period, an increase of 2.7%. Segment operating income margin in the fiscal first quarter was 19.4%, compared to the prior year period of 18.5% as a result of a favorable inventory adjustment. Segment EBITDA improved by 0.6% to $8.5 million in the fiscal first quarter, with an EBITDA margin of 23.1% as compared to 22.4% in the prior year period.
The Engineered Building Solutions segment revenue was $30.9 million, a 12.0% increase compared to $27.6 million in the prior year period, driven by commercial initiatives. Segment operating income was $5.7 million, or 18.5% of revenue, compared to the prior year period of $4.3 million, or 15.4% of revenue, due to expense and volume leverage. Segment EBITDA and EBITDA margin also improved to $6.2 million and 20.1% in the fiscal first quarter, compared to $4.7 million and 17.1% 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 https://cswindustrials.gcs-web.com/. To access the call, participants may dial 1-877-407-0784, international callers may use 1-201-689-8560, and request to join the CSW Industrials earnings call.
A telephonic replay will be available shortly after the conclusion of the call and until Wednesday, August 14, 2024. Participants may access the replay at 1-844-512-2921, international callers may use 1-412-317-6671, and enter access code 13747993. The call will also be available for replay via webcast link on the Investors portion of the CSWI website www.cswindustrials.com.
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 diluted earnings per share attributable to CSWI, adjusted net income attributable to CSWI, adjusted operating income and free cash flows, which are non-GAAP financial measures of performance. Attributable to CSWI is defined to exclude the income attributable to the non-controlling interest in the Whitmore JV.
CSWI utilizes adjusted EBITDA (earnings before interest, tax, depreciation and amortization) as an additional consolidated, non-GAAP financial measure, which consists of consolidated net income including income attributable to the non-controlling interest in the Whitmore JV, adjusted to remove the impact of income taxes, interest expense, depreciation, amortization and impairment, and significant nonrecurring items.
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, Inc.
CSW Industrials is a diversified industrial growth company with industry-leading operations in three segments: Contractor Solutions, Specialized Reliability Solutions, and Engineered Building Solutions. CSWI provides niche, value-added products with two essential commonalities: performance and reliability. The primary end markets we serve with our well-known brands include: HVAC/R, plumbing, general industrial, architecturally-specified building products, energy, mining, and rail transportation. For more information, please visit www.cswindustrials.com.
Investor Relations
Alexa Huerta
Vice President, Investor Relations and Treasurer
214-489-7113
alexa.huerta@cswindustrials.com
CSW INDUSTRIALS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| Three Months Ended June 30, | ||||||||||||||
| (Amounts in thousands, except per share amounts) | 2024 | 2023 | ||||||||||||
| Revenues, net | $ | 226,177 | $ | 203,360 | ||||||||||
| Cost of revenues | (118,756) | (111,193) | ||||||||||||
| Gross profit | 107,421 | 92,167 | ||||||||||||
| Selling, general and administrative expenses | (52,361) | (46,961) | ||||||||||||
| Operating income | 55,060 | 45,206 | ||||||||||||
| Interest expense, net | (2,520) | (4,009) | ||||||||||||
| Other income, net | 260 | 314 | ||||||||||||
| Income before income taxes | 52,800 | 41,511 | ||||||||||||
| Provision for income taxes | (13,950) | (10,455) | ||||||||||||
| Net income | 38,850 | 31,056 | ||||||||||||
| Less: Income attributable to redeemable noncontrolling interest | (259) | (445) | ||||||||||||
| Net income attributable to CSW Industrials, Inc. | $ | 38,591 | $ | 30,611 | ||||||||||
| Net income per share attributable to CSW Industrials, Inc. | ||||||||||||||
| Basic | $ | 2.48 | $ | 1.97 | ||||||||||
| Diluted | 2.47 | 1.97 | ||||||||||||
| Weighted average number of shares outstanding: | ||||||||||||||
| Basic | 15,534 | 15,520 | ||||||||||||
| Diluted | 15,596 | 15,547 | ||||||||||||
CSW INDUSTRIALS, INC.
CONSOLIDATED BALANCE SHEETS
| (unaudited) | ||||||||||||||
| (Amounts in thousands, except for per share amounts) | June 30, 2024 | March 31, 2024 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 18,852 | $ | 22,156 | ||||||||||
| Accounts receivable, net of allowance for expected credit losses of $945 and $908, respectively | 143,195 | 142,665 | ||||||||||||
| Inventories, net | 156,791 | 150,749 | ||||||||||||
| Prepaid expenses and other current assets | 12,381 | 15,840 | ||||||||||||
| Total current assets | 331,219 | 331,410 | ||||||||||||
| Property, plant and equipment, net of accumulated depreciation of $106,976 and $103,515, respectively | 92,371 | 92,811 | ||||||||||||
| Goodwill | 246,402 | 247,191 | ||||||||||||
| Intangible assets, net | 312,898 | 318,819 | ||||||||||||
| Other assets | 67,636 | 53,095 | ||||||||||||
| Total assets | $ | 1,050,526 | $ | 1,043,326 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 55,025 | $ | 48,387 | ||||||||||
| Accrued and other current liabilities | 66,460 | 67,449 | ||||||||||||
| Total current liabilities | 121,485 | 115,836 | ||||||||||||
| Long-term debt | 115,000 | 166,000 | ||||||||||||
| Retirement benefits payable | 1,103 | 1,114 | ||||||||||||
| Other long-term liabilities | 143,166 | 125,298 | ||||||||||||
| Total liabilities | 380,754 | 408,248 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Redeemable noncontrolling interest | 19,614 | 19,355 | ||||||||||||
| Equity: | ||||||||||||||
| Common shares, $0.01 par value | 164 | 164 | ||||||||||||
| Additional paid-in capital | 143,970 | 137,253 | ||||||||||||
| Treasury shares, at cost (968 and 952 shares, respectively) | (102,406) | (95,643) | ||||||||||||
| Retained earnings | 618,381 | 583,075 | ||||||||||||
| Accumulated other comprehensive loss | (9,951) | (9,126) | ||||||||||||
| Total equity | 650,158 | 615,723 | ||||||||||||
| Total liabilities, redeemable noncontrolling interest and equity | $ | 1,050,526 | $ | 1,043,326 | ||||||||||
CSW INDUSTRIALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Three Months Ended June 30, | ||||||||||||||
| (Amounts in thousands) | 2024 | 2023 | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | 38,850 | $ | 31,056 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation | 3,622 | 3,239 | ||||||||||||
| Amortization of intangible and other assets | 6,503 | 5,868 | ||||||||||||
| Provision for inventory reserves | 517 | 2,509 | ||||||||||||
| Provision for credit losses | 378 | 108 | ||||||||||||
| Share-based compensation | 3,746 | 2,805 | ||||||||||||
| Gain on disposals of property, plant and equipment | (13) | (12) | ||||||||||||
| Net pension benefit | 16 | 17 | ||||||||||||
| Impairment of assets | — | 92 | ||||||||||||
| Deferred taxes | 2,084 | 843 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | (998) | (4,319) | ||||||||||||
| Inventories | (6,766) | 2,141 | ||||||||||||
| Prepaid expenses and other current assets | 3,438 | 2,443 | ||||||||||||
| Other assets | 28 | (788) | ||||||||||||
| Accounts payable and other current liabilities | 10,923 | 3,233 | ||||||||||||
| Retirement benefits payable and other liabilities | 327 | 1,022 | ||||||||||||
| Net cash provided by operating activities | 62,655 | 50,257 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | (3,101) | (4,971) | ||||||||||||
| Proceeds from sale of assets | 13 | 12 | ||||||||||||
| Cash paid for investments | (500) | — | ||||||||||||
| Cash paid for acquisitions | (163) | (112) | ||||||||||||
| Proceeds from acquisitions true-up | 470 | — | ||||||||||||
| Net cash used in investing activities | (3,281) | (5,071) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Borrowings on line of credit | 7,723 | 15,432 | ||||||||||||
| Repayments of line of credit | (58,723) | (58,432) | ||||||||||||
| Purchase of treasury shares | (7,891) | (2,864) | ||||||||||||
| Dividends | (3,262) | (2,947) | ||||||||||||
| Net cash used in financing activities | (62,153) | (48,811) | ||||||||||||
| Effect of exchange rate changes on cash and equivalents | (525) | (42) | ||||||||||||
| Net change in cash and cash equivalents | (3,304) | (3,667) | ||||||||||||
| Cash and cash equivalents, beginning of period | 22,156 | 18,455 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 18,852 | $ | 14,788 | ||||||||||
Reconciliation of Non-GAAP Measures
We use adjusted earnings per share attributable to CSWI, adjusted net income attributable to CSWI, adjusted operating income, and adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue, cost of revenue, operating expense, operating income and net income attributable to CSWI, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. Free cash flow is a non-GAAP financial measure and is defined as cash flow from operations less capital expenditures. We also believe these measures are useful for investors to assess the operating performance of our business without the effect of non-recurring items. In the following tables, there could be immaterial differences in amounts presented due to rounding.
| CSW Industrials, Inc. | ||||||||||||||
| Reconciliation of Net Income Attributable to CSWI to EBITDA | ||||||||||||||
| (unaudited) | ||||||||||||||
| (Amounts in thousands) | Three months ended June 30, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Net Income attributable to CSWI | $ | 38,591 | $ | 30,611 | ||||||||||
| Plus: Income attributable to redeemable noncontrolling interest | 259 | 445 | ||||||||||||
| Net Income | $ | 38,850 | $ | 31,056 | ||||||||||
| Adjusting Items: | ||||||||||||||
| Interest Expense | 2,520 | 4,009 | ||||||||||||
| Income Tax Expense | 13,950 | 10,455 | ||||||||||||
| Depreciation & amortization | 9,932 | 8,915 | ||||||||||||
| EBITDA | $ | 65,252 | $ | 54,435 | ||||||||||
| EBITDA % Revenue | 28.9 | % | 26.8 | % | ||||||||||
| CSW Industrials, Inc. | |||||||||||||||||
| Reconciliation of Segment Operating Income to Segment EBITDA | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| (Amounts in thousands) | Three months ended June 30, 2024 | ||||||||||||||||
| Contractor Solutions | Specialized Reliability Solutions | Engineered Building Solutions | Corporate and Other | Consolidated | |||||||||||||
| Revenue, net | $ | 160,418 | $ | 36,791 | $ | 30,893 | $ | (1,926) | $ | 226,177 | |||||||
| Operating Income | $ | 49,884 | $ | 7,150 | $ | 5,723 | $ | (7,698) | $ | 55,060 | |||||||
| % Revenue | 31.1 | % | 19.4 | % | 18.5 | % | 24.3 | % | |||||||||
| Adjusting Items: | |||||||||||||||||
| Other income (expense) | 396 | (63) | (7) | (66) | 260 | ||||||||||||
| Depreciation & amortization | 7,983 | 1,423 | 485 | 41 | 9,932 | ||||||||||||
| EBITDA | $ | 58,263 | $ | 8,511 | $ | 6,201 | $ | (7,723) | $ | 65,252 | |||||||
| % Revenue | 36.3 | % | 23.1 | % | 20.1 | % | 28.9 | % | |||||||||
| (Amounts in thousands) | Three months ended June 30, 2023 | ||||||||||||||||
| Contractor Solutions | Specialized Reliability Solutions | Engineered Building Solutions | Corporate and Other | Consolidated | |||||||||||||
| Revenue, net | $ | 139,954 | $ | 37,711 | $ | 27,587 | $ | (1,892) | $ | 203,360 | |||||||
| Operating Income | $ | 39,667 | $ | 6,966 | $ | 4,260 | $ | (5,686) | $ | 45,206 | |||||||
| % Revenue | 28.3 | % | 18.5 | % | 15.4 | % | 22.2 | % | |||||||||
| Adjusting Items: | |||||||||||||||||
| Other income (expense) | 172 | (37) | 8 | 172 | 314 | ||||||||||||
| Depreciation & amortization | 6,895 | 1,530 | 441 | 48 | 8,915 | ||||||||||||
| EBITDA | $ | 46,734 | $ | 8,458 | $ | 4,708 | $ | (5,466) | $ | 54,435 | |||||||
| % Revenue | 33.4 | % | 22.4 | % | 17.1 | % | 26.8 | % | |||||||||
| CSW INDUSTRIALS, INC. | ||||||||||||||
| Reconciliation of Operating Cash Flow to Free Cash Flow | ||||||||||||||
| (Unaudited) | ||||||||||||||
| (Amounts in thousands) | Three Months Ended June 30, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Net cash provided by operating activities | $ | 62,655 | $ | 50,257 | ||||||||||
| Less: Capital Expenditures | (3,101) | (4,971) | ||||||||||||
| Free Cash Flow | $ | 59,554 | $ | 45,286 | ||||||||||
| Free Cash Flow % Net Income | 153.3 | % | 145.8 | % | ||||||||||