PITTSBURGH--(BUSINESS WIRE)--Evoqua Water Technologies Corp. (NYSE:AQUA) today reported results for
its fiscal 2017 fourth quarter and full year ended September 30, 2017
following its successful initial public offering last month.
Evoqua reported revenues for the fourth quarter of 2017 of $356.5
million, an 11.6% increase as compared to the fourth quarter of the
prior year. Net income for the quarter was $13.0 million, up $12.8
million year-over-year. The Company delivered Adjusted EBITDA of $71.4
million in the fourth quarter 2017, an increase of 20.1% year-over-year.
For the full year fiscal 2017, Evoqua reported revenues of $1.25
billion, a 9.7% increase year-over-year. Net income for the year was
$6.4 million and the Company delivered Adjusted EBITDA of $207.7 million
for the full year fiscal 2017, a 29.7% increase over the prior year.
“For both the quarter and full-year Evoqua employees generated record
sales, net income and Adjusted EBITDA by focusing on our 38,000
customers across the world,” said Ron Keating, Evoqua CEO. “Following
our successful initial public offering on November 2, we are well
positioned to continue to capture organic and inorganic growth
opportunities as we leverage our iconic brands and differentiated
technologies to capitalize on favorable industry dynamics, and further
strengthen our number one market position in North America.”
Fourth Quarter and Full Year Segment Results
The Company has three reportable segments – Industrial, Municipal and
Products.
Industrial
The Industrial segment combines equipment and services to improve
operational reliability and environmental compliance for heavy and light
industry, commercial and institutional markets. Their customers span
industries including hydrocarbon processing, chemical processing, power,
food and beverage, life sciences, health services and microelectronics.
Industrial revenues were $182.5 million for the three months ended
September 30, 2017, as compared to $160.4 million for the three months
ended September 30, 2016, an increase of $22.1 million or 13.8%. The
increase in the three month period was driven by capital and service
revenues of $9.8 million primarily in the power market. In addition, the
acquisitions of ADI Systems, Inc. (“ADI”), Environmental Treatment
Systems (“ETS”) and Noble Water Technologies (“Noble”), contributed
$15.1 million of the increased revenue for the three months ended
September 30, 2017. This was offset by a decrease of $1.9 million in
revenues that did not reoccur related to the sales at the Company’s
former Vernon, California, facility because of the disposition of that
facility (the “Vernon Disposition”) as of September 30, 2016.
Revenues increased $39.2 million, or 6.5%, to $643.4 million in the
fiscal year ended September 30, 2017 from $604.2 million in the fiscal
year ended September 30, 2016. Throughout the fiscal year, the increase
in service and capital revenues was driven by new account penetration in
power and hydrocarbon and chemical processing end markets and higher
customer production levels in general manufacturing and pharmaceutical
and healthcare end markets. In addition, our acquisitions of ETS, ADI
and Noble during the year ended September 30, 2017 contributed $19.4
million of revenues, partially offset by a decrease of $7.9 million in
revenues that did not reoccur related to the sales at the Company’s
former Vernon, California, facility because of the Vernon Disposition as
of September 30, 2016.
Operating profit in the Industrial segment increased $5.3 million, or
17.6%, to $35.5 million for the three months ended September 30, 2017 as
compared to $30.2 million for the three months ended September 30, 2016.
EBITDA increased $7.4 million, or 18.4%, to $47.3 million from $39.9
million.
For the fiscal year ended September 30, 2017, operating profit increased
$18.6 million, or 20.3%, to $110.0 million from $91.4 million in the
fiscal year ended September 30, 2016. EBITDA increased $19.8 million, or
15.3%, to $149.4 million in the fiscal year ended September 30, 2017
from $129.7 million in the fiscal year ended September 30, 2016. The
increase in operating profit and EBITDA was primarily related to the
increased revenue volume as well as benefits experienced from supply
chain initiatives, including lower procurement costs and continued
operating efficiencies.
Municipal
The Municipal segment helps engineers and municipalities meet new
demands for plant performance through market-leading equipment,
solutions and services backed by trusted brands and over 100 years of
applications experience. The segment’s customers include waste water and
drinking water collection and distribution systems and utility
operators. The segment’s services include odor and corrosion control
services.
Municipal revenues were $79.7 million for the three months ended
September 30, 2017, as compared to $78.5 million for the three months
ended September 30, 2016, an increase of $1.2 million or 1.5%.
For the fiscal year ended September 30, 2017, revenues increased
slightly by $0.6 million, or 0.2%, to $278.6 million from $278.0 million
in the fiscal year ended September 30, 2016. Excluding the operations in
Italy, which the Company is in the process of closing and which resulted
in a decline of $1.6 million in revenues over the same period, the
overall business grew by $2.2 million, or 0.8%.
Operating profit increased $3.2 million, or 32.7%, to $13.1 million for
the three months ended September 30, 2017 as compared to $9.9 million
for the three months ended September 30, 2016. EBTIDA increased $3.1
million, or 26%, to $15.1 million from $12.0 million.
In the fiscal year ended September 30, 2017, operating profit increased
for the Municipal segment by $5.4 million, or 17.1%, to $36.6 million
from $31.3 million in 2016. EBITDA increased $5.3 million, or 13.5%, to
$44.8 million from $39.4 million in the prior fiscal year. The increase
in operating profit and EBITDA was primarily due to the continued
benefits in both project execution and procurement savings. This was
partially offset by increased labor costs.
Products
The Products segment has distinct business operating units, each built
on well-known brands and technologies that are sold globally through
multiple sales and aftermarket channels. Additionally, the Products
segment also offers industrial, municipal and recreational users
improved operational reliability and environmental compliance. The
segment’s customers include original equipment manufacturers, regional
and global distributors, engineering, procurement and contracting
customers, and end users in the municipal, industrial and commercial
industries including hotels, resorts, colleges, universities,
waterparks, aquariums and zoos.
Products revenues increased $13.8 million, or 17.1%, to $94.3 million
for the three months ended September 30, 2017 from $80.5 million for the
three months ended September 30, 2016.
In the fiscal year ended September 30, 2017, revenues increased $70.4
million, or 27.6%, to $325.4 million from $255.0 million in fiscal 2016.
The increase in revenues was primarily due to the acquisitions of
Neptune-Benson, Valve and Filtration Systems, Ltd (“VAF”), Delta Ultra
Violet Corporation (“Delta UV”), Magneto and Olson Irrigation Systems
(“Olson”). These acquisitions accounted for an aggregate of $48.7
million of the increased revenues. The Products segment also saw strong
results in the Aquatics and Disinfection division, driven by strong
demand across its end markets. The segment saw additional growth in the
power and microelectronics markets, and higher sales of
electrodeionization equipment in China.
Operating profit increased $0.1 million, or 0.5%, to $20.7 million for
the three months ended September 30, 2017 from $20.5 million for the
three months ended September 30, 2016. EBITDA also increased $0.6
million, or 2.6%, to $23.8 million from $23.2 million.
Operating profit for the fiscal year ended September 30, 2017 increased
$17.2 million, or 35.3%, to $65.9 million from $48.7 million in fiscal
2016. EBITDA increased $22.3 million, or 40.5%, to $77.4 million in
fiscal 2017 from $55.1 million in fiscal 2016. The increase in operating
profit and EBITDA was primarily due to the additional revenue volume and
profitability associated with the acquisitions of Neptune-Benson, VAF,
Delta UV, Magneto and Olson. Operating profit and EBITDA improved in the
Aquatics and Disinfection division, and the electrodeionization
equipment division due to the increased revenues in the Asia region. The
balance of improved operating profit resulted from other restructuring
and cost improvement activities.
Summary and Outlook
“We had a very strong close to the year with fourth quarter revenues and
Adjusted EBITDA each up double digits,” said Keating. “All three
segments performed well and market trends across the industry and our
end markets continue to be favorable for continued profitable growth.
For 2018, we expect revenues to be in the range of $1.33 billion and
$1.36 billion and Adjusted EBITDA to be in the range of $235 million and
$255 million.”
About Evoqua Water Technologies
Evoqua Water Technologies is a leading provider of mission critical
water treatment solutions, offering services, systems and technologies
to support its customers’ full water lifecycle needs. Evoqua Water
Technologies has worked to protect water, the environment and its
employees for more than 100 years, earning a reputation for quality,
safety and reliability around the world. Headquartered in Pittsburgh,
Pennsylvania, Evoqua operates 160 locations in eight countries and, with
over 200,000 installations and 87 service branches, holds leading
positions in the North American industrial, commercial and municipal
water treatment markets, serving more than 38,000 customers worldwide.
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2016
|
|
2017
|
Revenue from product sales
|
|
$
|
533,649
|
|
|
$
|
587,087
|
|
|
$
|
674,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from services
|
|
|
527,317
|
|
|
|
550,109
|
|
|
|
572,427
|
|
|
|
|
1,060,966
|
|
|
|
1,137,196
|
|
|
|
1,247,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales
|
|
|
(385,243
|
)
|
|
|
(407,354
|
)
|
|
|
(445,890
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
(383,306
|
)
|
|
|
(396,777
|
)
|
|
|
(401,783
|
)
|
|
|
|
(768,549
|
)
|
|
|
(804,131
|
)
|
|
|
(847,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
292,417
|
|
|
|
333,065
|
|
|
|
399,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
|
(147,663
|
)
|
|
|
(144,771
|
)
|
|
|
(169,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expense
|
|
|
(124,429
|
)
|
|
|
(135,208
|
)
|
|
|
(142,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expense
|
|
|
(25,909
|
)
|
|
|
(22,897
|
)
|
|
|
(19,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income
|
|
|
1,237
|
|
|
|
10,079
|
|
|
|
2,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expense
|
|
|
(1,163
|
)
|
|
|
(3,113
|
)
|
|
|
(860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(34,060
|
)
|
|
|
(42,518
|
)
|
|
|
(55,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of non-consolidated affiliate
|
|
|
1,424
|
|
|
|
—
|
|
|
|
—
|
|
(Loss) income before income taxes
|
|
|
(38,146
|
)
|
|
|
(5,363
|
)
|
|
|
13,827
|
|
Income tax benefit (expense)
|
|
|
(47,905
|
)
|
|
|
18,394
|
|
|
|
(7,417
|
)
|
Net (loss) income
|
|
|
(86,051
|
)
|
|
|
13,031
|
|
|
|
6,410
|
|
Net income attributable to non-controlling interest
|
|
|
—
|
|
|
|
1,392
|
|
|
|
4,247
|
|
Net (loss) income attributable to Evoqua Water Technologies Corp.
|
|
$
|
(86,051
|
)
|
|
$
|
11,639
|
|
|
$
|
2,163
|
|
Basic (loss) earnings per common share
|
|
$
|
(0.85
|
)
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
Diluted (loss) earnings per common share
|
|
$
|
(0.85
|
)
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(in thousands, except per share amounts)
|
|
|
September 30,
|
|
September 30,
|
|
|
2016
|
|
2017
|
ASSETS
|
|
|
|
|
Current assets
|
|
$
|
418,336
|
|
|
$
|
512,240
|
|
Cash and cash equivalents
|
|
|
50,362
|
|
|
|
59,254
|
|
Receivables, net
|
|
|
184,789
|
|
|
|
245,248
|
|
Inventories, net
|
|
|
112,392
|
|
|
|
120,047
|
|
Cost and earnings in excess of billings on uncompleted contracts
|
|
|
50,081
|
|
|
|
66,814
|
|
Prepaid and other current assets
|
|
|
16,255
|
|
|
|
20,046
|
|
Income tax receivable
|
|
|
4,457
|
|
|
|
831
|
|
Property, plant, and equipment, net
|
|
|
256,765
|
|
|
|
280,043
|
|
Goodwill
|
|
|
267,643
|
|
|
|
321,913
|
|
Intangible assets, net
|
|
|
323,478
|
|
|
|
333,746
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
2,968
|
|
Other non-current assets
|
|
|
30,009
|
|
|
|
22,399
|
|
Total assets
|
|
$
|
1,296,231
|
|
|
$
|
1,473,309
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities
|
|
$
|
284,862
|
|
|
$
|
291,899
|
|
Accounts payable
|
|
|
102,379
|
|
|
|
114,932
|
|
Current portion of debt
|
|
|
30,024
|
|
|
|
11,325
|
|
Billings in excess of costs incurred
|
|
|
22,175
|
|
|
|
27,124
|
|
Product warranties
|
|
|
16,860
|
|
|
|
11,164
|
|
Accrued expenses and other liabilities
|
|
|
111,307
|
|
|
|
121,923
|
|
Income tax payable
|
|
|
2,117
|
|
|
|
5,431
|
|
Non-current liabilities
|
|
|
807,434
|
|
|
|
964,835
|
|
Long-term debt
|
|
|
728,132
|
|
|
|
878,524
|
|
Product warranties
|
|
|
6,449
|
|
|
|
6,110
|
|
Other non-current liabilities
|
|
|
64,290
|
|
|
|
67,673
|
|
Deferred income taxes
|
|
|
8,563
|
|
|
|
12,528
|
|
Total liabilities
|
|
|
1,092,296
|
|
|
|
1,256,734
|
|
Commitments and Contingent Liabilities
|
|
|
—
|
|
|
|
—
|
|
Shareholders’ equity
|
|
|
|
|
Common stock, par value $0.01: authorized 1,000,000 shares; issued
104,495 shares, outstanding 104,250 at September 30, 2016; issued
105,359 shares, outstanding 104,964 shares at September 30, 2017
|
|
|
1,045
|
|
|
|
1,054
|
|
Treasury stock: 245 shares at September 30, 2016 and 395 shares at
September 30, 2017
|
|
|
(1,133
|
)
|
|
|
(2,607
|
)
|
Additional paid-in capital
|
|
|
381,223
|
|
|
|
388,986
|
|
Retained deficit
|
|
|
(172,169
|
)
|
|
|
(170,006
|
)
|
Accumulated other comprehensive loss, net of tax
|
|
|
(10,671
|
)
|
|
|
(5,989
|
)
|
Total Evoqua Water Technologies Corp. equity
|
|
|
198,295
|
|
|
|
211,438
|
|
Non-controlling interest
|
|
|
5,640
|
|
|
|
5,137
|
|
Total shareholders’ equity
|
|
|
203,935
|
|
|
|
216,575
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,296,231
|
|
|
$
|
1,473,309
|
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(in thousands)
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2016
|
|
2017
|
Operating activities
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(86,051
|
)
|
|
$
|
13,031
|
|
|
$
|
6,410
|
|
Reconciliation of net loss to cash flows from operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
58,139
|
|
|
|
69,289
|
|
|
|
77,886
|
|
Amortization of deferred financing costs (includes $0, $0 and $3,904
write off of deferred financing fees)
|
|
|
3,514
|
|
|
|
4,121
|
|
|
|
8,511
|
|
Deferred income taxes
|
|
|
45,254
|
|
|
|
(21,215
|
)
|
|
|
1,273
|
|
Share based compensation
|
|
|
1,587
|
|
|
|
1,999
|
|
|
|
2,251
|
|
Equity in net income (loss) of affiliate, net of cash received
|
|
|
76
|
|
|
|
—
|
|
|
|
—
|
|
Gain on sale of property, plant and equipment
|
|
|
(20
|
)
|
|
|
(11,120
|
)
|
|
|
1,230
|
|
Foreign currency losses on intracompany loans
|
|
|
19,288
|
|
|
|
51
|
|
|
|
(5,625
|
)
|
Changes in assets and liabilities
|
|
|
|
|
|
|
Accounts receivable
|
|
|
9,496
|
|
|
|
(3,973
|
)
|
|
|
(44,047
|
)
|
Inventories
|
|
|
(44
|
)
|
|
|
2,484
|
|
|
|
(5,948
|
)
|
Cost and earnings in excess of billings on uncompleted contracts
|
|
|
17,848
|
|
|
|
(15,258
|
)
|
|
|
(17,296
|
)
|
|
|
|
|
|
|
|
Prepaids and other current assets
|
|
|
4,287
|
|
|
|
1,326
|
|
|
|
(2,971
|
)
|
Accounts payable
|
|
|
(14,941
|
)
|
|
|
15,682
|
|
|
|
4,707
|
|
Accrued expenses and other liabilities
|
|
|
(14,568
|
)
|
|
|
(31,446
|
)
|
|
|
(2,243
|
)
|
Billings in excess of costs incurred
|
|
|
7,497
|
|
|
|
(13,389
|
)
|
|
|
1,301
|
|
Income taxes
|
|
|
(6,224
|
)
|
|
|
4,329
|
|
|
|
6,656
|
|
Other non-current assets and liabilities
|
|
|
(3,194
|
)
|
|
|
16,008
|
|
|
|
(3,593
|
)
|
Net cash provided by operating activities
|
|
|
41,944
|
|
|
|
31,919
|
|
|
|
28,502
|
|
Investing activities
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(44,079
|
)
|
|
|
(47,728
|
)
|
|
|
(57,775
|
)
|
Purchase of intangibles
|
|
|
(4,705
|
)
|
|
|
(248
|
)
|
|
|
(4,914
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
1,918
|
|
|
|
5,191
|
|
|
|
5,422
|
|
Proceeds from sale of business
|
|
|
—
|
|
|
|
4,547
|
|
|
|
Acquisitions, net of cash acquired of $0, $11,486 and $209
respectively
|
|
|
—
|
|
|
|
(306,372
|
)
|
|
|
(77,628
|
)
|
Net cash used in investing activities
|
|
|
(46,866
|
)
|
|
|
(344,610
|
)
|
|
|
(134,895
|
)
|
Financing activities
|
|
|
|
|
|
|
Issuance of debt related to acquisitions, net of deferred issuance
costs
|
|
|
—
|
|
|
|
178,704
|
|
|
|
415,602
|
|
Borrowings under credit facility
|
|
|
—
|
|
|
|
81,000
|
|
|
|
131,000
|
|
Repayment of debt
|
|
|
(5,050
|
)
|
|
|
(74,461
|
)
|
|
|
(423,418
|
)
|
Repayment of capital lease obligation
|
|
|
(1,650
|
)
|
|
|
(7,683
|
)
|
|
|
(7,962
|
)
|
Proceeds from capital contribution
|
|
|
—
|
|
|
|
6,895
|
|
|
|
—
|
|
Proceeds from issuance of common stock
|
|
|
847
|
|
|
|
10,282
|
|
|
|
5,521
|
|
Stock repurchases
|
|
|
(410
|
)
|
|
|
(723
|
)
|
|
|
(1,474
|
)
|
Investor transaction fees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Distribution to non-controlling interest
|
|
|
—
|
|
|
|
(2,625
|
)
|
|
|
(4,750
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(6,263
|
)
|
|
|
191,389
|
|
|
|
114,519
|
|
Effect of exchange rate changes on cash
|
|
|
(5,225
|
)
|
|
|
2,637
|
|
|
|
766
|
|
Change in cash and cash equivalents
|
|
|
(16,410
|
)
|
|
|
(118,665
|
)
|
|
|
8,892
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning of period
|
|
|
185,437
|
|
|
|
169,027
|
|
|
|
50,362
|
|
End of period
|
|
$
|
169,027
|
|
|
$
|
50,362
|
|
|
$
|
59,254
|
|
|
|
|
|
|
|
|
Evoqua Water Technologies Non-GAAP Measures
Adjusted EBITDA
We make use of the non-GAAP financial measure “Adjusted EBITDA” in
evaluating our past performance and future prospects. Adjusted EBITDA is
defined as net income (loss) before interest expense, income tax expense
(benefit) and depreciation and amortization, adjusted for the impact of
certain other items, including restructuring and related business
transformation costs, purchase accounting adjustment costs, non cash
stock based compensation, sponsor fees, transaction costs and other
gains, losses and expenses.
Adjusted EBITDA is one of the primary metrics used by management to
evaluate the financial performance of our business. We present Adjusted
EBITDA, which is not a recognized financial measure under GAAP, because
we believe it is frequently used by analysts, investors and other
interested parties to evaluate companies in our industry. Further, we
believe it is helpful in highlighting trends in our operating results,
because it excludes, among other things, certain results of decisions
that are outside the control of management, while other measures can
differ significantly depending on long term strategic decisions
regarding capital structure, the tax jurisdictions in which we operate
and capital investments. Management uses Adjusted EBITDA to supplement
GAAP measures of performance as follows:
-
to assist investors and analysts in comparing our operating
performance across reporting periods on a consistent basis by
excluding items that we do not believe are indicative of our core
operating performance;
-
in our management incentive compensation which is based in part on
components of Adjusted EBITDA;
-
in certain calculations under our senior secured credit facilities,
which use components of Adjusted EBITDA.
-
to evaluate the effectiveness of our business strategies;
-
to make budgeting decisions; and
-
to compare our performance against that of other peer companies using
similar measures.
In addition to the above, our chief operating decision maker uses EBITDA
of each reportable segment to evaluate the operating performance of such
segments.
You are encouraged to evaluate each adjustment and the reasons we
consider it appropriate for supplemental analysis. In addition, in
evaluating Adjusted EBITDA, you should be aware that in the future, we
may incur expenses similar to the adjustments in the presentation of
Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be
construed as an inference that our future results will be unaffected by
unusual or non recurring items. In addition, Adjusted EBITDA may not be
comparable to similarly titled measures used by other companies in our
industry or across different industries.
The following is a reconciliation of our net income (loss) to Adjusted
EBITDA (amounts in thousands):
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
|
|
September 30
|
|
Year Ended September 30,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
164
|
|
|
$
|
12,960
|
|
|
$
|
13,031
|
|
|
$
|
6,410
|
|
Interest expense
|
|
|
13,051
|
|
|
|
16,260
|
|
|
|
42,518
|
|
|
|
55,377
|
|
Income tax (benefit) expense
|
|
|
2,025
|
|
|
|
7,122
|
|
|
|
(18,394
|
)
|
|
|
7,417
|
|
Depreciation and amortization
|
|
|
18,303
|
|
|
|
22,073
|
|
|
|
69,289
|
|
|
|
77,886
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
33,543
|
|
|
|
58,415
|
|
|
|
106,444
|
|
|
|
147,090
|
|
Restructuring and related business transformation costs (a)
|
|
|
24,867
|
|
|
|
14,948
|
|
|
|
43,075
|
|
|
|
51,331
|
|
Purchase accounting adjustment costs (b)
|
|
|
1,267
|
|
|
|
-
|
|
|
|
1,267
|
|
|
|
229
|
|
Stock-based compensation (c)
|
|
|
553
|
|
|
|
617
|
|
|
|
1,999
|
|
|
|
2,251
|
|
Sponsor fees (d)
|
|
|
948
|
|
|
|
1,132
|
|
|
|
3,758
|
|
|
|
4,174
|
|
Transaction costs (e)
|
|
|
1,431
|
|
|
|
1,683
|
|
|
|
5,374
|
|
|
|
7,342
|
|
Other gains, losses and expenses (f)
|
|
|
(3,189
|
)
|
|
|
(5,432
|
)
|
|
|
(1,864
|
)
|
|
|
(4,750
|
)
|
Adjusted EBITDA
|
|
$
|
59,420
|
|
|
$
|
71,364
|
|
|
$
|
160,053
|
|
|
$
|
207,666
|
|
|
|
|
|
|
|
|
|
|
_______________________
(a) Represents:
(i) costs and expenses in connection with various restructuring
initiatives since our acquisition, through our wholly-owned entities,
EWT Holdings II Corp. and EWT Holdings III Corp., of all of the
outstanding shares of Siemens Water Technologies, a group of legal
entity businesses formerly owned by Siemens Aktiengesellschaft, on
January 15, 2014 (the “the AEA Acquisition”), including severance costs,
relocation costs, recruiting expenses, write-offs of inventory and fixed
assets and third-party consultant costs to assist with these initiatives
(includes (A) $16.9 million for the three months ended September 30,
2016 and $0.9 million in the three months ended September 30, 2017,
$16.9 million in fiscal 2016 (all of which is reflected as a component
of Restructuring charges in “Note 12—Restructuring and Related Charges”
to our audited consolidated financial statements to be included in our
Annual Report on Form 10-K for the fiscal year ended September 30, 2017)
and $20.1 million in fiscal 2017 (all of which is reflected as a
component of Restructuring charges in “Note 12—Restructuring and Related
Charges” to our audited consolidated financial statements to be included
in our Annual Report on Form 10-K for the fiscal year ended September
30, 2017) related to our voluntary separation plan pursuant to which
approximately 220 employees accepted separation packages, and (B) $1.8
million for the three months ended September 30, 2016, reflected as a
components of Cost of product sales and services ($0.3 million), Sales
and marketing expense ($0.3 million), Research and development expense
($0.1 million), General and administrative expense ($1.0 million), and
Other income/expense ($0.1 million), and $6.7 million for the three
months ended September 30, 2017, reflected as components of Cost of
product sales and services ($4.8 million), Sales and marketing expense
($.6 million) and General and administrative expense ($1.3 million),
$11.1 million (all of which is reflected as a component of Restructuring
charges in “Note 12—Restructuring and Related Charges” to our audited
consolidated financial statements to be included in our Annual Report on
Form 10-K for the fiscal year ended September 30, 2017) in fiscal 2016
and $13.2 million (of which $12.3 million is reflected as a component of
Restructuring charges in “Note 12—Restructuring and Related Charges” to
our audited consolidated financial statements to be included in our
Annual Report on Form 10-K for the fiscal year ended September 30, 2017)
in fiscal 2017 related to various other initiatives implemented to
restructure and reorganize our business with the appropriate management
team and cost structure). Differences between amounts reflected as
Restructuring charges in fiscal 2017 in “Note 12—Restructuring and
Related Charges” to our audited consolidated financial statements to be
included in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2017 and amounts reflected in this adjustment relate
primarily to impairment charges related to assets in our Italy
operations that have been reflected as a component of Cost of product
sales and services ($.9 million);
(ii) legal settlement costs and intellectual property related fees
associated with legacy matters prior to the AEA Acquisition, including
fees and settlement costs related to product warranty litigation on
MEMCOR products and certain discontinued products ($2.6 million for the
three months ended September 30, 2016, primarily reflected as a
component of General and administrative expense, $0.7 million in the
three months ended September 30, 2017, primarily reflected as a
component of General and administrative expense, $5.1 million, primarily
reflected as a component of Cost of product sales and services in fiscal
2016 and $2.5 million, primarily reflected as a components of Cost of
product sales and services ($.4 million) and General and administrative
expenses ($2.1 million) in fiscal 2017);
(iii) expenses associated with our information technology and functional
infrastructure transformation following the AEA Acquisition, including
activities to optimize information technology systems and functional
infrastructure processes ($3.4 million for the three months ended
September 30, 2016, primarily reflected as components of Cost of product
sales and services ($1.5 million), Research and development expense
($0.1 million), Sales and marketing expense ($0.8 million) and General
and administrative expense ($1.0 million), and $2.6 million in the three
months ended September 30, 2017, primarily reflected as components of
Cost of product sales and services ($1.2 million), Sales and marketing
expense ($.8 million) and General and administrative expense ($.6
million), $9.5 million, primarily reflected as components of Cost of
product sales and services ($3.6 million), Sales and marketing expense
($2.5 million), General and administrative expense ($3.1 million) and
Research and development expense ($0.3 million) in fiscal 2016 and
$7.3 million, primarily reflected as components of Cost of product sales
and services ($3.3 million), Sales and marketing expense ($1.5 million),
and General and administrative expense ($2.5 million) in fiscal 2017);
and
(iv) costs incurred by us in connection with the IPO, including
consultant costs and public company compliance costs ($0.2 million for
the three months ended September 30, 2016 and $4.1 million in the three
months ended September 30, 2017, $0.5 million in fiscal 2016, and $8.3
million in fiscal 2017, all reflected as a component of General and
administrative expense).
(b) Represents adjustments for the effect of the purchase accounting
step-up in the value of inventory to fair value recognized in cost of
goods sold as a result of the AEA Acquisition and the acquisition of
Magneto.
(c) Represents non-cash stock-based compensation expenses related to
option awards. See Note 15 to our audited financial statements to be
included in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2017 for further detail.
(d) Represents management fees paid to AEA pursuant to the management
agreement. Pursuant to the management agreement, AEA provided advisory
and consulting services to us in connection with the AEA Acquisition,
including investment banking, due diligence, financial advisory and
valuation services. AEA also provides ongoing advisory and consulting
services (similar in nature to the services provided in connection with
the AEA Acquisition) to us pursuant to the management agreement. In
connection with the IPO, the management agreement was terminated. See
Note 18 to our audited financial statements to be included in our Annual
Report on Form 10-K for the fiscal year ended September 30, 2017 for
further detail.
(e) Represents expenses associated with acquisition and
divestiture-related activities and post-acquisition integration costs
and accounting, tax, consulting, legal and other fees and expenses
associated with acquisition transactions ($1.4 million in the three
months ended September 30, 2016 and $1.7 million in the three months
ended September 30, 2017, $5.4 million in fiscal 2016 and $7.3 million
in fiscal 2017).
(f) Represents:
(i) impact of foreign exchange gains and losses ($0.9 million gain in
the three months ended September 30, 2016 and $5.8 million gain in the
three months ended September 30, 2017, $0.5 million loss in fiscal 2016
and $7.8 million gain in fiscal 2017);
(ii) $3.5 million gain on the sale of assets, primarily related to the
Vernon Disposition;
(iii) foreign exchange impact related to headquarter allocations ($0.6
million gain in the three months ended September 30, 2016 and $0.1
million loss in the three months ended September 30, 2017, $0.7 million
gain in fiscal 2016, and $1.2 million loss in fiscal 2017); and
(iv) expenses related to maintaining non-operational business locations
($1.8 million in the three months ended September 30, 2016 and $0.2
million in the three months ended September 30, 2017, $1.8 million in
fiscal 2016 and $1.9 million in fiscal 2017).
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All of
these forward-looking statements, including, but not limited to,
expected financial outlook for fiscal 2018, are based on our current
expectations, assumptions, estimates and projections. While we believe
these expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions and
involve known and unknown risks and uncertainties, many of which are
beyond our control. These and other important factors may cause our
actual results, performance or achievements to differ materially from
any future results, performance or achievements expressed or implied by
these forward-looking statements, or could affect our share price. Some
of the factors that could cause actual results to differ materially from
those expressed or implied by the forward-looking statements include
among other things, general global economic and business conditions; our
ability to compete successfully in our markets; our ability to continue
to develop or acquire new products, services and solutions and adapt our
business to meet the demands of our customers, comply with changes to
government regulations and achieve market acceptance with acceptable
margins; our ability to implement our growth strategy, including
acquisitions and our ability to identify suitable acquisition targets;
our ability to operate or integrate any acquired businesses, assets or
product lines profitably or otherwise successfully implement our growth
strategy; delays in enactment or repeals of environmental laws and
regulations; the potential for us to become subject to claims relating
to handling, storage, release or disposal of hazardous materials; risks
associated with product defects and unanticipated or improper use of our
products; the potential for us to incur liabilities to customers as a
result of warranty claims of failure to meet performance guarantees; our
ability to meet our customers’ safety standards or the potential for
adverse publicity affecting our reputation as a result of incidents such
as workplace accidents, mechanical failures, spills, uncontrolled
discharges, damage to customer or third-party property or the
transmission of contaminants or diseases; litigation, regulatory or
enforcement actions and reputational risk as a result of the nature of
our business or our participation in large-scale projects; seasonality
of sales and weather conditions; risks related to government customers,
including potential challenges to our government contracts or our
eligibility to serve government customers; the potential for our
contracts with federal, state and local governments to be terminated or
adversely modified prior to completion; risks related to foreign,
federal, state and local environmental, health and safety laws and
regulations and the costs associated therewith; risks associated with
international sales and operations, including our operations in China;
our ability to adequately protect our intellectual property from
third-party infringement; our increasing dependence on the continuous
and reliable operation of our information technology systems; risks
related to our substantial indebtedness; our need for a significant
amount of cash, which depends on many factors beyond our control; AEA’s
influence over us; and other factors to be described in the “Risk
Factors” section in our Annual Report on Form 10-K for the fiscal year
ended September 30, 2017 and in other periodic reports we file with the
SEC. Additionally, this press release speaks only as of December 1,
2017. We undertake no obligation to update or revise, or to publicly
announce any update or revision to, any of the forward-looking
statements made herein, whether as a result of new information, future
events or otherwise. These forward-looking statements should not be
relied upon as representing the Company’s views as of any date
subsequent to December 1, 2017.