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Rexnord Corporation Reports First Quarter Results For Fiscal 2013

Rexnord (NYSE:RXN)

Consolidated Highlights
  • Net sales increased 4% from the prior year first quarter to $497 million (+10% acquisitions, -3% divestiture/exit, -2% foreign currency translation, -1% core sales).
  • Adjusted net income increased 61% from the prior year to $22 million; reported net loss was $2 million.
  • Adjusted EBITDA increased 4% from the prior year to $97 million or 19.5% of net sales.
  • Adjusted earnings per share was $0.22; reported diluted net loss per share was $0.02.
  • Total liquidity of $713 million ($393 million of cash plus $320 million of available borrowings).

Todd A. Adams, President and Chief Executive Officer, commented, "Process & Motion Control core growth in the quarter was 2% despite headwinds from Europe and a weaker North American mining end-market. Our Process & Motion Control Adjusted EBITDA margin expanded by 160 basis points over the prior year to 23.3% led by Rexnord Business System ("RBS") driven growth and profitability initiatives. Water Management core sales contracted by 9% in the quarter, driven by lower shipments out of our North American municipal water and wastewater backlog, which was partially offset by our continued outperformance of the U.S. non-residential construction market. Our Water Management Adjusted EBITDA margin was 16.3% in the quarter, up 230 basis points sequentially as a result of prior year cost/footprint reductions and RBS initiatives. The VAG acquisition integration is on track and we are confident that our Water Management platform is well positioned to capture the secular global growth in water moving forward.”

Fiscal 2013 Outlook

Mr. Adams continued, “During the quarter we saw a slowing environment in several of our key vertical markets as well as in Europe. We have anticipated a lower growth environment for the balance of our fiscal year and have proactively taken steps to reduce our costs while protecting prioritized growth investments. As a result, we have modified our fiscal 2013 outlook.”
  1. We adjusted our assumed Euro translation rate to reflect the strengthening U.S. dollar (prior outlook was EUR:USD at $1.30, now $1.15 - $1.20).
  2. Our outlook reflects a product line divestiture and a business wind-down/exit.
  3. We reflected a reduced outlook for North American mining, slower European demand and slower North American water treatment/infrastructure demand, offset by our internal growth initiatives.
    Core Sales   Adjusted Operating  
Sales Growth Income Adjusted EBITDA
Prior outlook (May 9, 2012) $2,120 - 2,165 5-6% $317 - 332 $435 - 450
Euro translation $(25) $(4) $(4)
Divestitures/exits $(20)   $(3) $(3)
Subtotal $2,075 - 2,120 5-6% $310 - 325 $428 - 443
Changes to outlook $(55) - (60) (2-3%) $(16) - (18) $(16) - (18)
Current outlook (August 1, 2012) $2,020 - 2,060 3-4% $294 - 307 $412 - 425
Income as percentage of sales 14.6% - 14.9% 20.4% - 20.6%
Fiscal 2012 results $1,970 $269 $387
Year-over-year growth (using midpoint of range) + 4% + 12% + 8%
Incremental margin (using midpoint of range) + 45% + 45%

Our outlook excludes the impact of any future acquisitions or divestiture transactions, future restructuring actions or future other non-recurring costs. We will provide additional details regarding our fiscal 2013 outlook during our earnings call.

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