PITTSBURGH--(BUSINESS WIRE)--Evoqua Water Technologies Corp. (NYSE:AQUA) today reported results for
its second quarter of fiscal 2018.
Revenues for the second quarter of fiscal 2018 were $333.7 million, an
increase of $33.8 million or 11.3% as compared to the second quarter of
the prior year. Revenue growth was led by increases in the Industrial
segment related to capital projects in the power market, remediation
projects and revenues from recently acquired businesses. Additionally,
the Products segment contributed to year-over-year growth through volume
increases across multiple divisions.
Net income for the quarter was $13.0 million, an improvement of $8.1
million or 165.2% year-over-year. Diluted EPS for the quarter was $0.10
per share on 119.2 million weighted average shares outstanding.
Adjusted EBITDA was $57.7 million in the second quarter of fiscal 2018,
an increase of $13.8 million or 31.3% year-over-year. The improvement in
Adjusted EBITDA was driven by the increase in revenues and related
profit as well as a decrease in operating expenses year-over-year.
“Our businesses performed well in the second quarter, particularly
within our Industrial and Products segments,” said Ron Keating, Evoqua
CEO. “For the quarter, we reported strong Industrial segment capital
sales and broad-based growth across much of the Products business. Solid
cost controls along with volume leverage and margin improvement drove
overall EBITDA expansion and improved cash flow. We are very pleased to
have closed on the Pure Water Solutions and Pacific Ozone acquisitions
during the quarter to supplement organic growth.”
Mr. Keating continued, “Our value proposition uniquely positions Evoqua
to be the solutions provider of choice for capital, service and
aftermarket opportunities. Key vertical markets continue to be trending
positively and we are seeing more customers looking to outsource their
water treatment systems to companies like Evoqua, providing additional
growth opportunities.”
Second Quarter 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.
Revenues in the Industrial segment increased $20.8 million, or 13.0%, to
$181.3 million in the second quarter of fiscal 2018 as compared to
$160.5 million in the same period in the prior year -
-
Capital revenues increased $10.7 million, primarily in the power
market and with remediation projects.
-
Service revenues increased $0.6 million related to power, hydrocarbon
processing and chemical processing.
-
Acquisitions contributed $9.5 million of revenue from the additions of
ADI, Noble and Pure Water.
Operating profit in the Industrial segment increased $5.2 million, or
20.0%, to $31.0 million in the second quarter of fiscal 2018 from $25.8
million in the same period of the prior year -
-
$3.5 million of benefits were experienced as a result of lower
employment costs driven by restructuring and cost improvement
initiatives implemented in the current and prior fiscal year.
-
$2.3 million of profit was provided from the ADI, Noble and Pure Water
acquisitions.
-
Excluding the impact of acquisitions, Industrial segment profitability
was tempered by the product mix of higher capital projects revenue
growth as compared to higher margin services revenue growth.
-
Additionally, profitability improvements were partially offset by $1.2
million related to higher depreciation and amortization driven by
capital investment in service assets and the acquisitions mentioned
above.
EBITDA in the Industrial segment increased $6.3 million, or 17.9%, to
$41.7 million in the three months ended March 31, 2018 from $35.4
million in the three months ended March 31, 2017. The increase in EBITDA
resulted from the same factors which impacted operating profit, less the
change in depreciation and amortization.
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 increased slightly by $0.7 million, or 1.1%, to $64.3
million for the second quarter of fiscal 2018, as compared to $63.6
million for the comparable period in the prior year -
-
Large projects saw an increase of $2.9 million due to growth within
MEMCOR.
-
Service revenue experienced growth of $0.2 million.
-
Growth was partially offset by a decrease in revenue of $1.7 million
related to timing of aftermarket product sales as compared to the same
period of the prior year, and $0.6 million of lower revenue from our
Italian operations as this portion of our business approached final
wind down.
Operating profit in the Municipal segment increased $1.5 million, or
23.2%, to $8.0 million for the second quarter of fiscal 2018 from $6.5
million for the same period in the prior year -
-
$1.2 million improvement related primarily to lower employment
expenses resulting from the shift to a customer focused organizational
structure from administrative and back-office functions.
-
$1.7 million associated with a reduction in warranty costs due to
improved product quality and better project execution.
-
Lower depreciation expense of $0.3 million.
-
Operating profit decreased by $1.7 million as a result of the mix
shift to higher capital projects revenue growth as compared to higher
margin aftermarket revenue.
EBITDA in the Municipal segment increased $1.3 million, or 14.4%, to
$9.8 million in the three months ended March 31, 2018 from $8.5 million
in the three months ended March 31, 2017. EBITDA performance was driven
by the same factors which impacted operating profit, less the change
from depreciation and amortization.
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 industrial, municipal and commercial
industries.
Products revenues increased $12.2 million, or 16.2%, to $88.1 million in
the second quarter of fiscal 2018 from $75.9 million in the comparable
period of the prior year -
-
Growth of $7.2 million in revenues across the segment, comprised of
contributions from four of the five divisions.
-
Acquisitions contributed $1.3 million from the additions of Olson and
Pacific Ozone.
-
The positive impact of foreign currency was $3.8 million, primarily
related to transactions denominated in euro and pound sterling.
Operating profit in the Products segment increased $6.0 million, or
43.6%, to $19.9 million for the second quarter of fiscal 2018 as
compared to $13.9 million in the prior year period -
-
Overall increased volume and mix of product offerings as well as
operational efficiency delivered $2.8 million of operating profit.
-
$2.5 million of benefits were experienced as a result of lower
employment costs driven by restructuring and cost improvement
initiatives implemented in the current and prior fiscal year as well
as lower depreciation and amortization.
-
The positive impact of foreign currency was $0.5 million; and
-
The Olson and Pacific Ozone acquisitions contributed $0.2 million year
over year.
EBITDA in the Products segment increased $6.0 million, or 35.5%, to
$23.0 million in the three months ended March 31, 2018 from $17.0
million in the three months ended March 31, 2017. The increase in EBITDA
resulted from the same factors which impacted operating profit, less the
change in depreciation and amortization.
Second Quarter 2018 Earnings Call and Webcast
The Company will hold its second quarter earnings conference call
Tuesday, May 8 at 10:00 a.m. E.T. The live audio webcast and
presentation slides for the call will be accessible via Evoqua's
Investor Relations website,
http://aqua.evoqua.com/
.
The link to the webcast replay as well as the presentation slides will
also be posted on Evoqua's Investor Relations website.
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.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Revenue from product sales and services
|
|
$
|
299,901
|
|
|
$
|
333,690
|
|
|
$
|
579,773
|
|
|
$
|
630,740
|
|
Cost of product sales and services
|
|
|
(205,568
|
)
|
|
|
(225,693
|
)
|
|
|
(403,372
|
)
|
|
|
(434,364
|
)
|
Gross Profit
|
|
|
94,333
|
|
|
|
107,997
|
|
|
|
176,401
|
|
|
|
196,376
|
|
General and administrative expense
|
|
|
(40,211
|
)
|
|
|
(44,742
|
)
|
|
|
(89,397
|
)
|
|
|
(83,807
|
)
|
Sales and marketing expense
|
|
|
(36,690
|
)
|
|
|
(34,330
|
)
|
|
|
(71,783
|
)
|
|
|
(68,571
|
)
|
Research and development expense
|
|
|
(5,086
|
)
|
|
|
(4,021
|
)
|
|
|
(10,091
|
)
|
|
|
(8,674
|
)
|
Other operating (expense) income
|
|
|
(365
|
)
|
|
|
904
|
|
|
|
1,309
|
|
|
|
311
|
|
Interest expense
|
|
|
(11,898
|
)
|
|
|
(10,810
|
)
|
|
|
(26,651
|
)
|
|
|
(28,053
|
)
|
Earnings (loss) before income taxes
|
|
|
83
|
|
|
|
14,998
|
|
|
|
(20,212
|
)
|
|
|
7,582
|
|
Income tax benefit (expense)
|
|
|
4,812
|
|
|
|
(2,018
|
)
|
|
|
11,907
|
|
|
|
2,393
|
|
Net income (loss)
|
|
|
4,895
|
|
|
|
12,980
|
|
|
|
(8,305
|
)
|
|
|
9,975
|
|
Net income attributable to non-controlling interest
|
|
|
1,697
|
|
|
|
477
|
|
|
|
2,096
|
|
|
|
1,185
|
|
Net income (loss) attributable to Evoqua Water Technologies Corp.
|
|
$
|
3,198
|
|
|
$
|
12,503
|
|
|
$
|
(10,401
|
)
|
|
$
|
8,790
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
104,632
|
|
|
|
113,770
|
|
|
|
104,632
|
|
|
|
113,770
|
|
Diluted
|
|
|
107,741
|
|
|
|
119,215
|
|
|
|
104,632
|
|
|
|
119,543
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.11
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.08
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
0.10
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
CONSOLIDATED BALANCE SHEETS
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
September 30, 2017
|
|
March 31, 2018
|
ASSETS
|
|
|
|
|
Current assets
|
|
$
|
512,240
|
|
|
$
|
530,872
|
|
Cash and cash equivalents
|
|
|
59,254
|
|
|
|
75,742
|
|
Receivables, net
|
|
|
245,248
|
|
|
|
217,852
|
|
Inventories, net
|
|
|
120,047
|
|
|
|
136,251
|
|
Cost and earnings in excess of billings on uncompleted contracts
|
|
|
66,814
|
|
|
|
74,792
|
|
Prepaid and other current assets
|
|
|
20,046
|
|
|
|
25,394
|
|
Income tax receivable
|
|
|
831
|
|
|
|
841
|
|
Property, plant, and equipment, net
|
|
|
280,043
|
|
|
|
285,687
|
|
Goodwill
|
|
|
321,913
|
|
|
|
329,898
|
|
Intangible assets, net
|
|
|
333,746
|
|
|
|
323,515
|
|
Deferred income taxes
|
|
|
2,968
|
|
|
|
7,140
|
|
Other non-current assets
|
|
|
22,399
|
|
|
|
22,747
|
|
Total assets
|
|
$
|
1,473,309
|
|
|
$
|
1,499,859
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities
|
|
$
|
291,899
|
|
|
$
|
282,645
|
|
Accounts payable
|
|
|
114,932
|
|
|
|
138,454
|
|
Current portion of debt
|
|
|
11,325
|
|
|
|
11,057
|
|
Billings in excess of costs incurred
|
|
|
27,124
|
|
|
|
25,040
|
|
Product warranties
|
|
|
11,164
|
|
|
|
8,746
|
|
Accrued expenses and other liabilities
|
|
|
121,923
|
|
|
|
91,998
|
|
Income tax payable
|
|
|
5,431
|
|
|
|
7,350
|
|
Non-current liabilities
|
|
|
964,835
|
|
|
|
856,138
|
|
Long-term debt
|
|
|
878,524
|
|
|
|
775,984
|
|
Product warranties
|
|
|
6,110
|
|
|
|
3,790
|
|
Other non-current liabilities
|
|
|
67,673
|
|
|
|
66,080
|
|
Deferred income taxes
|
|
|
12,528
|
|
|
|
10,284
|
|
Total liabilities
|
|
|
1,256,734
|
|
|
|
1,138,783
|
|
Commitments and Contingent Liabilities
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
Common stock, par value $0.01: authorized 1,000,000 shares; issued
105,359 shares, outstanding 104,949 shares at September 30, 2017;
issued 114,710 shares, outstanding 113,769 shares at March 31, 2018.
|
|
|
1,054
|
|
|
|
1,142
|
|
Treasury stock: 410 shares at September 30, 2017 and 941 shares at
March 31, 2018.
|
|
|
(2,607
|
)
|
|
|
(2,837
|
)
|
Additional paid-in capital
|
|
|
388,986
|
|
|
|
525,997
|
|
Retained deficit
|
|
|
(170,006
|
)
|
|
|
(161,216
|
)
|
Accumulated other comprehensive loss, net of tax
|
|
|
(5,989
|
)
|
|
|
(6,782
|
)
|
Total Evoqua Water Technologies Corp. equity
|
|
|
211,438
|
|
|
|
356,304
|
|
Non-controlling interest
|
|
|
5,137
|
|
|
|
4,772
|
|
Total shareholders’ equity
|
|
|
216,575
|
|
|
|
361,076
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,473,309
|
|
|
$
|
1,499,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
(in thousands)
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Six Months Ended
|
|
|
March 31, 2017
|
|
March 31, 2018
|
Operating activities
|
|
|
|
|
Net (loss) income
|
|
$
|
(8,305
|
)
|
|
$
|
9,975
|
|
Reconciliation of net (loss) income to cash flows from operating
activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
37,520
|
|
|
|
40,363
|
|
Amortization of deferred financing costs (includes $2,075 and $2,994
write off of deferred financing fees)
|
|
|
4,576
|
|
|
|
4,145
|
|
Deferred income taxes
|
|
|
(11,015
|
)
|
|
|
(6,013
|
)
|
Share based compensation
|
|
|
1,020
|
|
|
|
6,862
|
|
Gain on sale of property, plant and equipment
|
|
|
(446
|
)
|
|
|
102
|
|
Foreign currency losses on intracompany loans
|
|
|
5,095
|
|
|
|
(2,934
|
)
|
Changes in assets and liabilities
|
|
|
|
|
Accounts receivable
|
|
|
(5,093
|
)
|
|
|
28,946
|
|
Inventories
|
|
|
(8,826
|
)
|
|
|
(14,936
|
)
|
Cost and earnings in excess of billings on uncompleted contracts
|
|
|
1,401
|
|
|
|
(7,848
|
)
|
Prepaids and other current assets
|
|
|
(1,090
|
)
|
|
|
(5,156
|
)
|
Accounts payable
|
|
|
(1,552
|
)
|
|
|
22,821
|
|
Accrued expenses and other liabilities
|
|
|
(13,152
|
)
|
|
|
(30,810
|
)
|
Billings in excess of costs incurred
|
|
|
(1,205
|
)
|
|
|
(2,032
|
)
|
Income taxes
|
|
|
(3,497
|
)
|
|
|
1,849
|
|
Other non-current assets and liabilities
|
|
|
4,223
|
|
|
|
(3,483
|
)
|
Net cash (used in) provided by operating activities
|
|
|
(346
|
)
|
|
|
41,851
|
|
Investing activities
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(27,229
|
)
|
|
|
(31,670
|
)
|
Purchase of intangibles
|
|
|
(410
|
)
|
|
|
(291
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
425
|
|
|
|
539
|
|
Acquisitions, net of cash received of $0
|
|
|
(10,730
|
)
|
|
|
(10,224
|
)
|
Net cash used in investing activities
|
|
|
(37,944
|
)
|
|
|
(41,646
|
)
|
Financing activities
|
|
|
|
|
Issuance of debt
|
|
|
150,000
|
|
|
|
—
|
|
Capitalized deferred issuance costs related to refinancing
|
|
|
(4,198
|
)
|
|
|
(1,792
|
)
|
Borrowings under credit facility
|
|
|
33,000
|
|
|
|
6,000
|
|
Repayment of debt
|
|
|
(132,738
|
)
|
|
|
(111,161
|
)
|
Repayment of capital lease obligation
|
|
|
(2,656
|
)
|
|
|
(5,489
|
)
|
Shares of common stock issued in initial public offering, net of
offering costs
|
|
|
4,151
|
|
|
|
137,605
|
|
Taxes paid related to net share settlements of share-based
compensation awards
|
|
|
—
|
|
|
|
(7,368
|
)
|
Stock repurchases
|
|
|
(543
|
)
|
|
|
(230
|
)
|
Distribution to non-controlling interest
|
|
|
(3,500
|
)
|
|
|
(1,550
|
)
|
Net cash provided by financing activities
|
|
|
43,516
|
|
|
|
16,015
|
|
Effect of exchange rate changes on cash
|
|
|
(586
|
)
|
|
|
268
|
|
Change in cash and cash equivalents
|
|
|
4,640
|
|
|
|
16,488
|
|
Cash and cash equivalents
|
|
|
|
|
Beginning of period
|
|
|
50,362
|
|
|
|
59,254
|
|
End of period
|
|
$
|
55,002
|
|
|
$
|
75,742
|
|
|
|
|
|
|
Adjusted EBITDA
We use 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. EBITDA of the reportable segments does not include certain
unallocated charges that are presented within Corporate activities.
These unallocated charges include certain restructuring and other
business transformation charges that have been incurred to align and
reposition the Company to the current reporting structure, acquisition
related costs (including transaction costs, integration costs and
recognition of backlog intangible assets recorded in purchase
accounting) and stock-based compensation charges.
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 (unaudited, amounts in thousands):
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Net income (loss)
|
|
$
|
4,895
|
|
|
$
|
12,980
|
|
|
$
|
(8,305
|
)
|
|
$
|
9,975
|
|
Interest expense
|
|
11,898
|
|
|
10,810
|
|
|
26,651
|
|
|
28,053
|
|
Income tax (benefit) expense
|
|
(4,812
|
)
|
|
2,018
|
|
|
(11,907
|
)
|
|
(2,393
|
)
|
Depreciation and amortization
|
|
18,873
|
|
|
20,480
|
|
|
37,520
|
|
|
40,363
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
30,854
|
|
|
46,288
|
|
|
43,959
|
|
|
75,998
|
|
Restructuring and related business transformation costs (a)
|
|
9,875
|
|
|
8,228
|
|
|
23,033
|
|
|
16,343
|
|
Purchase accounting adjustment costs (b)
|
|
10
|
|
|
—
|
|
|
229
|
|
|
—
|
|
Share-based compensation (c)
|
|
554
|
|
|
4,250
|
|
|
1,020
|
|
|
6,862
|
|
Sponsor fees (d)
|
|
1,000
|
|
|
—
|
|
|
2,000
|
|
|
333
|
|
Transaction costs (e)
|
|
2,400
|
|
|
846
|
|
|
3,759
|
|
|
1,360
|
|
Other gains, losses and expenses (f)
|
|
(764
|
)
|
|
(1,912
|
)
|
|
7,171
|
|
|
(3,215
|
)
|
Adjusted EBITDA
|
|
$
|
43,929
|
|
|
$
|
57,700
|
|
|
$
|
81,171
|
|
|
$
|
97,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________________
(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 “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)
$5.7 million and $15.9 million for the three and six months ended
March 31, 2017, respectively, and $0.0 million and $0.3 million
for the three months and six months ended March 31, 2018,
respectively, (all of which is reflected as a component of
Restructuring charges in “Note 11-Restructuring and Related
Charges” to our unaudited condensed consolidated financial
statements to be included in our Quarterly Report on Form 10-Q for
the period ended March 31, 2018) related to our voluntary
separation plan pursuant to which approximately 220 employees
accepted separation packages, and (B) $1.5 million and $2.7
million for the three and six months ended March 31, 2017,
respectively, reflected as a components of Cost of product sales
and services ($0.9 million and $1.7 million for the three and six
month periods, respectively), and General and administrative
expense ($0.6 million and $1.0 million for the three and six month
periods, respectively); and $1.9 million and $5.4 million for the
three and six month periods ended March 31, 2018, respectively,
reflected as components of Cost of product sales and services
($0.3 million and $1.6 million for the three and six month
periods, respectively), Research and development expense ($0.2
million and $0.5 million for the three and six month periods,
respectively), Sales and marketing expense ($0.2 million and $0.5
million for the three and six month periods, respectively) and
General and administrative expense ($1.2 million and $2.8 million
for the three and six month periods, respectively) (all of which
is reflected as a component of Restructuring charges in “Note
11-Restructuring and Related Charges” to our unaudited condensed
consolidated financial statements to be included in our Quarterly
Report on Form 10-Q for the period ended March 31, 2018) related
to various other initiatives implemented to restructure and
reorganize our business with the appropriate management team and
cost structure);
|
|
|
|
|
|
(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
($0.3 million and $0.8 million for the three and six months ended
March 31, 2017, respectively, reflected as components of Cost of
product sales and services ($0.1 million and $0.2 million for the
three and six month periods, respectively) and General and
administrative expense ($0.2 million and $0.6 million for the
three and six month periods, respectively), and $0.9 million and
$1.0 million for the three and six months ended March 31, 2018,
reflected as components of Cost of product sales and services
($0.3 million and $0.4 million for the three and six month
periods, respectively) and General and administrative expense
($0.6 million and $0.6 million for the three and six month
periods, respectively));
|
|
|
|
|
|
(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 ($2.3 million and $3.7
million for the three and six months ended March 31, 2017,
primarily reflected as components of Cost of product sales and
services ($1.2 million and $1.7 million for the three and six
month periods, respectively), Sales and marketing expense ($0.2
million and $0.5 million for the three and six month periods,
respectively) and General and administrative expense ($0.9 million
and $1.5 million for the three and six month periods,
respectively), and $3.4 million and $4.7 million in the three and
six months ended March 31, 2018, primarily reflected as components
of Cost of product sales and services ($1.2 million and $2.2
million for the three and six month periods, respectively), Sales
and marketing expense ($0.1 million for the three and six months
periods, respectively) and General and administrative expense
($2.1 million and $2.4 million for the three and six month
periods, respectively)); and
|
|
|
|
|
|
(iv)
|
|
costs incurred by us in connection with our IPO and secondary
offering, including consultant costs and public company compliance
costs ($2.0 million and $5.0 million for the three and six months
ended March 31, 2018, respectively, 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 acquisition of Magneto.
|
|
|
|
|
(c)
|
|
|
Represents non-cash stock-based compensation expenses related to
option awards. See “Note 14-Share Based Compensation” to our
unaudited condensed consolidated financial statements to be
included in our Quarterly Report on Form 10-Q for the period ended
March 31, 2018 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 provided
ongoing advisory and consulting services to us pursuant to the
management agreement. In connection with the IPO, the management
agreement was terminated effective November 6, 2017. See “Note
16-Related-Party Transactions” to our unaudited condensed
consolidated financial statements to be included in our Quarterly
Report on Form 10-Q for the period ended March 31, 2018 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 ($2.4 million and $3.8
million in the three and six months ended March 31, 2017,
respectively, and $0.8 million and $1.4 million in the three and
six months ended March 31, 2018, respectively).
|
|
|
|
|
(f)
|
|
|
Represents:
|
|
|
|
|
|
(i)
|
|
impact of foreign exchange gains and losses ($2.5 million gain and
$5.2 million loss in the three and six months ended March 31,
2017, respectively, and $2.1 million gain and $3.7 million gain in
the three and six months ended March 31, 2018, respectively);
|
|
|
|
|
|
(ii)
|
|
foreign exchange impact related to headquarter allocations ($0.9
million loss and $1.1 million loss for the three and six months
ended March 31, 2017, respectively, and $0.2 million gain for the
three and six months ended March 31, 2018, respectively); and
|
|
|
|
|
|
(iii)
|
|
expenses related to maintaining non-operational business locations
($0.6 million and $0.7 million in the three and six months ended
March 31, 2017, respectively, and $0.5 million $0.7 million in the
three and six months ended March 31, 2018, respectively).
|
|
|
|
|
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 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, as filed with the SEC December 4, 2017, and in
other periodic reports we file with the SEC. Additionally, any forward
looking statements made in this press release speak only as of the date
of this release. 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 the date of this release.