News Column

Rexnord Corporation Reports Fourth Quarter and Full Fiscal Year 2014 Results

June 7, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- Rexnord Corporation (NYSE:RXN): Fourth Quarter Highlights Net sales increased 5% (+4% core sales, +2% acquisitions, -1% impact of foreign currency translation) to $570 million

Income from operations increased 5% year-over-year to $79 million or 13.8% of sales

Adjusted EBITDA of $120 million resulting in an adjusted EBITDA margin of 21.0%

Net income increased 67% from the prior year to $40 million

Diluted earnings per share from continuing operations was $0.39; adjusted earnings per share increased 56% from the prior year to $0.50 Fiscal 2014 Highlights Net sales were $2.082 billion for fiscal year 2014, an increase of 4% (+3% core sales, +1% acquisitions)

Income from continuing operations increased 10% year-over-year to $280 million or 13.4% of sales

Adjusted EBITDA of $413 million resulting in an adjusted EBITDA margin of 19.8%

Net income from continuing operations was $30 million in fiscal year 2014, inclusive of a $133 million loss on debt extinguishment associated with our August 2013 debt refinancing, compared to $55 million in fiscal year 2013

Diluted earnings per share from continuing operations was $0.29; adjusted earnings per share increased 42% from the prior year to $1.39

Free cash flow for fiscal year 2014 was $144 million and again exceeded adjusted net income, inclusive of $9 million of debt refinancing fees and costs associated with the Board of Directors' review of strategic alternatives that was concluded in June 2013

Total liquidity at year-end was $675 million ($339 million of cash plus $336 million of available borrowings), inclusive of $74 million in net proceeds from the issuance of our common stock in February 2014. Net debt leverage was 3.8x as of March 31, 2014

Todd A. Adams, President and Chief Executive Officer, commented, "We're pleased with our fourth quarter results in light of some challenging market conditions during the quarter. Core sales growth improved to 4% in the quarter, while our adjusted EBITDA margin was 21%. Despite the drag from unusually adverse winter weather and the impact of project shipment timing in Water Management, we achieved our adjusted EPS guidance for the fourth quarter and fiscal year.

"In our Process & Motion Control platform, we are seeing on-going stability in most of our end-markets. Core growth is expected to remain modest in the near term, driven by a lower backlog that impacts the first half of the year, but will be augmented by a full-year contribution from Precision Gear Holdings which we acquired in December 2013. For the full year, our adjusted EBITDA margin of 25.6% increased 70 basis points from last year's record margin on a 2% increase in sales (1% core growth) as we continue to drive margin expansion amidst, in total, stable end-markets. Looking ahead, the investments we have made in innovation, globalization and operational excellence driven through the Rexnord Business System gives us confidence in our ability to drive continued long-term growth and strong operating performance in the platform."

"In Water Management, despite the adverse impact of the winter weather and the timing of certain water infrastructure project shipments, core growth was 6% in the quarter and 8% for the fiscal year. Looking forward, we expect margins to expand meaningfully in fiscal 2015, and we continue to believe we will see significant benefits from a recovering non-residential construction market and from on-going global investment in water infrastructure." Fiscal 2015 Guidance Adams continued, "Our initial fiscal 2015 guidance is for core growth of +3% to +5%, incremental Adjusted EBITDA margins of approximately 30%, adjusted earnings per share range of $1.60 to $1.70 and free cash flow to again exceed adjusted net income. Our fiscal 2015 guidance excludes our non-core ring gear and pinion product line ("Mill Products") used in mining sector crushing machinery applications as our Board of Directors has approved a plan to assess the strategic alternatives for Mill Products. We expect to conclude this strategic review prior to our fiscal year-end, and therefore our fiscal 2015 guidance excludes the operations and any potential exit costs related to this business. Mill Products contributed approximately $50 million to revenue and $0.06 to EPS in fiscal 2014. Excluding Mill Products, our guidance represents a 24% comparable year-over-year growth in adjusted earnings per share at the midpoint of the range. With respect to the phasing of our core growth, we expect core sales to grow +2% to +4% in the first half of fiscal 2015 and +4% to +6% in the second half of the fiscal year. For the first quarter, we anticipate sales to be in the range of $500 to $510 million and adjusted earnings per share in the range of $0.24 to $0.26. Our guidance does not include the EPS accretion from acquisitions that we expect to complete over the course of the year." Fourth Quarter Fiscal 2014 Segment Highlights Process & Motion Control Process & Motion Control ("PMC") net sales were $359 million in the fourth quarter of fiscal 2014. Core net sales, which excludes the 3% favorable impact of acquisitions and 1% unfavorable impact from foreign currency, increased 3% year-over-year as single digit growth in the majority of our end-markets was partially offset by a decline in sales to our bulk material handling markets.

PMC Adjusted EBITDA in the fourth quarter increased 18% from the prior year to $105 million and Adjusted EBITDA as a percentage of sales increased 300 basis points year-over-year to 29.2%. Water Management Water Management net sales were $211 million in the fourth quarter of fiscal 2014. Core net sales, which excludes a 1% unfavorable impact from foreign currency, increased 6% year-over-year due to market share gains and increased alternative market sales in our non-residential construction end-markets, partially offset by the impact of severe weather in the fourth quarter of the current year.

Keywords for this news article include: Finance, Rexnord Corporation.

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Source: Investment Weekly News


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