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EX-99.2 - EX-99.2 - Zep Inc.a13-2203_1ex99d2.htm
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Exhibit 99.1

 

 

News Release

Zep Inc.

 

 

 

 

 

1310 Seaboard Industrial Blvd., NW

 

 

Atlanta, GA 30318

 

 

 

 

 

 

 

www.zepinc.com

 

Zep Inc. Reports Solid First Quarter Results and Completes Strategic Acquisition

 

Compared to the first quarter of last year,

 

·                  Revenue grew 2.9% to $158.0 million

 

·                  EPS of $0.16 included $0.04 related to integration and acquisition expenses

 

·                  EBITDA of $10.4 million included $1.2 million of integration and acquisition expenses

 

·                  Free cash flow generation of $4.7 million represented a $6.8 million improvement

 

·                  Completed strategic acquisition and formed Zep Vehicle Care — creating a leading vehicle care business with the finest house of brands in the industry.

 

(ATLANTA — January 7, 2013) — Zep Inc. (NYSE: ZEP), a leading producer and marketer of a wide range of cleaning and maintenance solutions, today reported financial results for the three-month period ended November 30, 2012.

 

First quarter results reflected continued strong sales-growth gains in retail which were driven primarily by automotive aftermarket and home improvement retail outlets.  The sales and service organization achieved sales growth in the food, vehicle wash and industrial end markets while our distribution channel drove growth into industrial/MRO customers.  In addition, acquisitions added approximately $3.5 million to net sales during the quarter.

 

·                  Revenue in the first fiscal quarter of 2013 was $158.0 million, a 2.9% increase from the first fiscal quarter of 2012.

 

·                  Net income for the first fiscal quarter of 2013 was $3.5 million, a 2.7% decrease compared to net income of $3.6 million in the first fiscal quarter of 2012.  The first fiscal quarter of 2013 included a $0.8 million after-tax impact related to integration and acquisition expenses.

 

·                  Diluted earnings per share (EPS) for the first fiscal quarter of 2013 was $0.16 compared to EPS of $0.16 in the first fiscal quarter of 2012 and was impacted by $0.04 of integration and acquisition expenses.

 

·                  EBITDA (earnings before interest, taxes, depreciation and amortization expenses) for the first quarter of 2013 was $10.4 million compared to $10.5 million in the first fiscal quarter of 2012 and was impacted by $1.2 million of integration and acquisition expenses.

 



 

·                  EBITDA margin decreased approximately 20 basis points to 6.6% in the first fiscal quarter of 2013 compared to 6.8% during the first fiscal quarter of 2012 and was impacted by 80 basis points of integration and acquisition expenses.

 

·                  Free cash flow (defined as net cash provided by operating activities less purchases of property, plant, and equipment and proceeds from sale of property, plant, and equipment) generated during the first quarter of 2013 was $4.7 million, compared to a cash usage of $2.1 million in the same period last year, an increase of $6.8 million.

 

“The first quarter represented a number of significant achievements,” said John K. Morgan, Chairman, President and Chief Executive Officer of Zep Inc. “We announced the very strategic acquisition in the vehicle care market, which closed on December 1, 2012, reported much improved financial results, excluding integration and acquisition expenses, and continued to benefit from our customer-centric, multi-channel strategy.”

 

Mr. Morgan continued, “I’m pleased to report continued progress in expanding our access to markets to reach the customer on their terms.  Our multi-channel strategy allows us to invest in key vertical markets like transportation where we can leverage our experience across all three sales channels.”

 

A more detailed discussion of the Company’s long-term objectives and financial goals may be found in our Forms 10-K and 10-Q filed with the Securities and Exchange Commission (“SEC”). The Forms 10-K and 10-Q are available via the Company’s website at www.zepinc.com.

 

Conference Call

 

The Company will host a conference call to discuss first quarter operating results on Monday, January 7, 2013 at 8:30 a.m. ET. The call and accompanying presentation will be webcast and may be accessed through the Company’s website at www.zepinc.com or by dialing in at 253-237-1190, conference ID: 81569854. A replay of the call will be posted to the website within two hours of completion of the conference call.

 

About Zep Inc.

 

Zep Inc., with fiscal year 2012 net sales of $654 million, is a leading producer and marketer of a wide range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets. Zep Inc.’s product portfolio includes anti-bacterial and industrial hand care products, cleaners, degreasers, deodorizers, disinfectants, floor finishes, sanitizers, and pest and weed control products, as well as high performance products and professional grade chemical products for the automotive, fleet maintenance, industrial/MRO supply, institutional supply and motorcycle markets. We market these products and services under well recognized and established brand names, such as Zep®, Zep Commercial®, Zep Professional®, Enforcer®, National Chemical™, Selig™, Misty®, Next Dimension™, Petro®, i-Chem®, TimeMist®, TimeWick™, MicrobeMax®, Country Vet®, Konk®, Blue Coral®, Black Magic®, Rain-X®, Niagara National™, Washtronics™, FC Forward Chemicals®, Rexodan®, Mykal™, and a number of private labeled brands.  Founded in 1937, some of Zep’s brands have been in existence since 1896. Zep Inc. is headquartered in Atlanta, Georgia. Visit our website at www.zepinc.com.

 



 

Forward Looking Statements and use of Non-GAAP Information

 

This release contains, and other written or oral statements made by or on behalf of Zep may include, forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents that are filed with the SEC or in connection with oral statements made to the press, potential investors or others. Specifically, forward-looking statements may include, but are not limited to, statements relating to our future economic performance, business prospects, revenue, income, and financial condition; and statements preceded by, followed by, or that include the words “expects,” “believes,” “intends,” “will,” “anticipates,” and similar terms that relate to future events, performance, or our results. Examples of forward-looking statements in this press release include but are not limited to: statements regarding growth and other benefits that we may realize as a result of executing our long-term initiatives.

 

Our forward-looking statements are subject to certain risks and uncertainties that could cause actual results, expectations, or outcomes to differ materially from our historical experience as well as management’s present expectations or projections. These risks and uncertainties include, but are not limited to:

 

·                  economic conditions in general;

 

·                  customer and supplier relationships and prices;

 

·                  competition;

 

·                  ability to realize anticipated benefits from strategic planning initiatives and timing of benefits;

 

·                  market demand; and

 

·                  litigation and other contingent liabilities, such as environmental matters.

 

A variety of other risks and uncertainties could cause our actual results to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. A number of those risks are discussed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended August 31, 2012. Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events.

 

The unaudited consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (“GAAP”) are supplemented by a table of adjusted operating results, which includes non-GAAP financial information that is referenced in this press release, which includes EBITDA. This non-GAAP financial information is provided to enhance the user’s overall understanding of our financial performance. Specifically, management believes the non-GAAP financial information provides useful information to investors by excluding or adjusting certain items affecting reported operating results that were unusual or not indicative of our core operating results. This non-GAAP financial information should be considered in addition to, and not as a substitute for, or superior to, results prepared in accordance with GAAP. Moreover, this non-GAAP information may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial information included in this earnings release has been reconciled to the nearest GAAP measure in the tables at the end of this press release.

 



 

Zep Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

 

 

 

NOVEMBER 30, 2012

 

AUGUST 31, 2012

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

3,916

 

$

3,513

 

Accounts receivable, less reserve for doubtful accounts of $3,733 at November 30, 2012, and $3,595 at August 31, 2012

 

86,753

 

93,522

 

Inventories

 

76,790

 

71,451

 

Deferred income taxes

 

6,737

 

6,702

 

Prepayments and other current assets

 

25,111

 

22,333

 

Total Current Assets

 

199,307

 

197,521

 

Property, Plant, and Equipment, at cost:

 

 

 

 

 

Land

 

5,703

 

5,680

 

Buildings and leasehold improvements

 

61,636

 

62,208

 

Machinery and equipment

 

118,272

 

114,310

 

Total Property, Plant, and Equipment

 

185,611

 

182,198

 

Less - Accumulated depreciation and amortization

 

103,265

 

101,277

 

Property, Plant, and Equipment, net

 

82,346

 

80,921

 

Other Assets:

 

 

 

 

 

Goodwill

 

84,702

 

84,604

 

Identifiable intangible assets

 

64,739

 

65,707

 

Deferred income taxes

 

1,009

 

979

 

Restricted Cash

 

116,916

 

 

Other long-term assets

 

5,643

 

5,555

 

Total Other Assets

 

273,009

 

156,845

 

Total Assets

 

$

554,662

 

$

435,287

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

$

15,000

 

$

15,000

 

Accounts payable

 

57,658

 

53,461

 

Accrued compensation

 

17,856

 

17,334

 

Other accrued liabilities

 

25,223

 

27,947

 

Total Current Liabilities

 

115,737

 

113,742

 

Long-term debt, less current maturities

 

237,645

 

124,250

 

Deferred Income Taxes

 

8,651

 

8,574

 

Self-Insurance Reserves, less current portion

 

2,954

 

2,954

 

Other Long-Term Liabilities

 

17,550

 

17,850

 

Commitments and Contingencies

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued and outstanding

 

 

 

Common stock, $0.01 par value; 500,000,000 shares authorized; 21,888,408 issued and outstanding at November 30, 2012, and 21,832,328 issued and outstanding at August 31, 2012

 

219

 

218

 

Paid-in capital

 

98,267

 

97,481

 

Retained earnings

 

59,963

 

57,367

 

Accumulated other comprehensive income

 

13,676

 

12,851

 

Total Stockholders’ Equity

 

172,125

 

167,917

 

Total Liabilities and Stockholders’ Equity

 

$

554,662

 

$

435,287

 

 



 

Zep Inc.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per-share data)

 

 

 

For the Three Months Ended
November 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net Sales

 

$

158,026

 

$

153,498

 

Cost of Products Sold

 

83,064

 

80,571

 

Gross Profit

 

74,962

 

72,927

 

Selling, Distribution, and Administrative Expenses

 

66,791

 

65,521

 

Acquisition and Integration Costs

 

1,245

 

 

Operating Profit

 

6,926

 

7,406

 

Other Expense (Income):

 

 

 

 

 

Interest expense, net

 

1,245

 

1,432

 

Loss (Gain) on foreign currency transactions

 

18

 

250

 

Miscellaneous (income) expense, net

 

138

 

167

 

Total Other Expense

 

1,401

 

1,849

 

Income before Provision for Income Taxes

 

5,525

 

5,557

 

Provision for Income Taxes

 

2,044

 

1,978

 

Net Income

 

$

3,481

 

$

3,579

 

Earnings Per Share:

 

 

 

 

 

Basic Earnings per Share

 

$

0.16

 

$

0.16

 

Basic Weighted Average Number of Shares Outstanding

 

21,869

 

21,704

 

Diluted Earnings per Share

 

$

0.16

 

$

0.16

 

Diluted Weighted Average Number of Shares Outstanding

 

22,218

 

22,041

 

Dividends Declared per Share

 

$

0.04

 

$

0.04

 

 



 

Zep Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

 

 

THREE MONTHS ENDED
NOVEMBER 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Cash Provided by Operating Activities:

 

 

 

 

 

Net income

 

$

3,481

 

$

3,579

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

3,613

 

3,465

 

Gain on disposal of fixed assets

 

2

 

(43

)

Excess tax benefits from share-based payments

 

35

 

(6

)

Other non-cash charges

 

730

 

869

 

Deferred income taxes

 

11

 

78

 

Change in assets and liabilities, net of effect of acquisitions and divestitures -

 

 

 

 

 

Accounts receivable

 

7,434

 

8,939

 

Inventories

 

(5,076

)

(7,629

)

Prepayments and other current assets

 

(2,695

)

(3,190

)

Accounts payable

 

3,932

 

(580

)

Accrued compensation and other current liabilities

 

(2,468

)

(2,249

)

Self insurance and other long-term liabilities

 

(300

)

(760

)

Other assets

 

(204

)

(825

)

Net Cash Provided by Operating Activities

 

8,495

 

1,648

 

Cash Used for Investing Activities:

 

 

 

 

 

Purchases of property, plant, and equipment

 

(3,792

)

(3,767

)

Change in restricted cash

 

(116,916

)

 

Proceeds from sale of property, plant, and equipment

 

 

43

 

Net Cash Used for Investing Activities

 

(120,708

)

(3,724

)

Cash Provided by Financing Activities:

 

 

 

 

 

Proceeds from credit facility borrowings

 

203,808

 

93,300

 

Repayments of borrowings from credit facility

 

(90,413

)

(93,375

)

Employee stock issuances

 

56

 

58

 

Excess tax benefits from share-based payments

 

(35

)

6

 

Dividend payments

 

(885

)

(881

)

Net Cash Provided by (Used for) Financing Activities

 

112,531

 

(892

)

Effect of Exchange Rate Changes on Cash

 

85

 

(251

)

Net Change in Cash and Cash Equivalents

 

403

 

(3,219

)

Cash and Cash Equivalents at Beginning of Period

 

3,513

 

7,219

 

Cash and Cash Equivalents at End of Period

 

$

3,916

 

$

4,000

 

 



 

Zep Inc.

RECONCILIATION OF NON-GAAP MEASURES

(Unaudited; In thousands)

 

 

 

Three Months Ended
November 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Reported (GAAP) Net Income

 

$

3,481

 

$

3,579

 

 

 

 

 

 

 

Interest expense, net

 

1,245

 

1,432

 

Provision for Income Taxes

 

2,044

 

1,978

 

Depreciation and Amortization

 

3,613

 

3,465

 

 

 

 

 

 

 

 

 

EBITDA

 

$

10,383

 

$

10,454

 

 

Investor Contact:

 

Don De Laria

VP, Investor Relations & Communications

404-350-6266

don.delaria@zep.com