MILWAUKEE--(BUSINESS WIRE)--Rexnord Corporation (NYSE: RXN) is announcing its decision to exit a product line in its Water Management platform and the contribution of this product line to consolidated operating results in Rexnord’s fiscal year 2016 fourth quarter and full year. Rexnord is also previewing its expectations for certain key financial metrics in its fourth fiscal quarter of 2016. Separately, Rexnord is announcing the planned dates for its fourth quarter and full-year earnings release and subsequent investor conference call.
Rodney Hunt Fontaine (“RHF”) Product Line Exit
As it became clear during the fourth quarter that efforts to transition the RHF flow control gate operations to a less-vertically-integrated operating model would not deliver acceptable near-term and longer-term returns, Rexnord determined to exit this product line.
Rexnord’s original guidance for the fourth quarter of fiscal year 2016 included related RHF revenue and Adjusted EBITDA of approximately $14 million and $0, respectively. Preliminary RHF operating results for the quarter include related revenue of approximately $7 million and a loss of approximately $10 million of Adjusted EBITDA (including expenses triggered by the exit decision). For the full 2016 fiscal year, preliminary RHF operating results include related revenue of approximately $39 million and a loss of approximately $21 million of Adjusted EBITDA (again including exit expenses).
Todd Adams, President and Chief Executive Officer, commented “We would like to thank our dedicated employees for their efforts to develop a sustainable model for RHF going forward, but we are convinced that the planned exit from this non-strategic product line will be in the best interest of Rexnord’s shareholders. In order to provide investors with a more representative view of our operating results, we intend to exclude RHF results from our reporting of year-over-year core growth rates, Adjusted EBITDA, and Adjusted Earnings per Share and from our guidance going forward.”
Fourth Quarter and Full Year Preview
Based on its preliminary review, Rexnord anticipates fourth quarter fiscal 2016 revenue of approximately $492 million, including the approximately $7 million impact of the shortfall in RHF revenue. After excluding the RHF results from our fourth quarter results, we now expect Adjusted EPS will be in a range of approximately $0.35-0.36 and based on approximately 103 million fully diluted shares.
After excluding RHF results from our full-year operating results, Rexnord now anticipates full year fiscal 2016 core growth of approximately minus -3% and Adjusted EPS in a range of $1.45-1.46 based on approximately 103 million of fully diluted shares.
Rexnord ended the year with approximately $484 million of cash and equivalents; Free Cash Flow for fiscal 2016 was approximately $167 million. Reflecting our preliminary estimates for fiscal 2016, our financial leverage ratio was approximately 3.9x at fiscal year end.
Earnings Release Timing
Rexnord plans to release its financial results for the fourth quarter and full year 2016 after the market close on May 18, 2016 and to hold its investor conference call on the following day at 7:00 AM CDT. A live webcast of the call will be available on Rexnord’s investor website (investors.rexnord.com). Details regarding how to access the call via telephone will be issued via press release in early May.
