PITTSBURGH--(BUSINESS WIRE)--Evoqua Water Technologies Corp. (NYSE:AQUA) today reported results for
its third quarter of fiscal 2018.
Revenues for the third quarter of fiscal 2018 were $342.5 million, an
increase of $31.3 million or 10.1% as compared to the third quarter of
the prior year. Revenue growth was led by an increase in the Industrial
segment related to capital projects in the power market, remediation
projects and revenues from recently acquired businesses. Additionally,
the Products segment delivered year-over-year growth through volume
increases across multiple divisions and the benefit of foreign exchange.
This growth was somewhat offset by a decline in Municipal segment
revenues related to large retrofit project revenues recognized in the
third quarter of the prior year and the timing of aftermarket activity.
Net income for the quarter was $1.0 million, a decline of $(0.8) million
year-over-year. Diluted EPS for the quarter was $0.01 per share on 119.0
million weighted average shares outstanding. Net income includes $8.8
million of non-cash foreign currency loss from intra-company loans,
versus a prior year non-cash foreign currency gain of $7.1 million.
Adjusted EBITDA was $58.0 million in the third quarter of fiscal 2018,
an increase of $2.9 million or 5.2% year-over-year. The improvement in
Adjusted EBITDA was driven by the increase in revenues and related
profit.
“Through the quarter we experienced strong order book and broad-based
revenue growth in the Industrial capital business and across most
divisions in the Products segment, enhanced by our ongoing merger and
acquisition efforts,” said Ron Keating, Evoqua CEO. “Inflationary
impacts and price realization materialized essentially as we expected.
We continue to see strong capital project growth, which presents
attractive service and aftermarket follow-on opportunities in the
future. Our opportunity pipeline and order book continues to outpace
revenues and supports the achievement of our expectations.”
Mr. Keating continued, “Evoqua continues to invest in strengthening our
position as the solutions provider of choice for capital, service and
aftermarket opportunities in water treatment. Key vertical markets are
trending positively and we are seeing more customers looking to
outsource their water treatment systems, which supports the national
roll out of our IoT enabled Water One® Assurance platform in September.
The recent addition of ProAct Services also provides significant
capabilities and broadens our portfolio of water service offerings into
the Industrial markets, further strengthening our position as a leading
provider of outsourced water solutions. For 2018, we continue to expect
revenues to be in the range of $1.34 billion and $1.37 billion and
Adjusted EBITDA to be in the range of $235.0 million and $245.0 million.”
Third 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 $27.6 million, or 17.9%, to
$182.3 million in the third quarter of fiscal 2018 as compared to $154.7
million in the same period in the prior year -
-
Capital revenues increased $17.2 million, primarily in the power
market and with remediation projects.
-
Service revenues were down slightly due to temporary down-time from
the redeployment of mobile treatment assets to new locations resulting
from the completion of a large remediation project.
-
Acquisitions contributed $11.1 million of revenue from the additions
of ADI, Noble and Pure Water.
Operating profit in the Industrial segment decreased $(1.2) million, or
(4.5)%, to $24.4 million in the third quarter of fiscal 2018 from $25.6
million in the same period of the prior year -
-
$6.4 million of profit was driven by revenue volume, net of product
mix, as well as price realization and contributions from acquisitions.
-
Based on the positive performance of the Noble and ADI acquisitions,
the Company recognized an additional charge of $(2.6) million related
to the full achievement of earn-out targets established during the
respective acquisitions.
-
Negative temporary absorption, productivity and inflation impacted
profit by $(2.8) million, primarily driven by mobile fleet
redeployment, system upgrades related to our Service branch
technologies, higher commodity costs, and general inflation and other
miscellaneous cost impacts.
-
Profitability was also offset by $(2.2) million related to higher
depreciation and amortization driven by capital investment in service
assets and the acquisitions mentioned above.
Adjusted EBITDA increased $3.6 million, or 10.5%, to $38.4 million in
the three months ended June 30, 2018 as compared to $34.8 million in the
three months ended June 30, 2017. The increase in Adjusted EBITDA
resulted from the same factors which impacted operating profit, less the
change in depreciation and amortization, and also excludes the charge of
$(2.6) million related to the achievement of earn-out targets associated
with the Noble and ADI acquisitions that was discrete to the Industrial
segment. There were no comparable charges incurred in the same period of
the prior year that would impact Adjusted EBITDA for the Industrial
segment.
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 decreased by $(4.2) million, or (5.8)%, to $68.5
million for the third quarter of fiscal 2018, as compared to $72.7
million for the comparable period in the prior year -
-
Large retrofit project revenues decreased $(3.7) million and
aftermarket revenues declined by $(1.3) million as compared to the
same period, driven by timing of projects year over year.
-
Service revenue experienced growth of $0.8 million.
Operating profit in the Municipal segment increased $2.1 million, or
20.2%, to $12.7 million for the third quarter of fiscal 2018 from $10.6
million for the same period in the prior year -
-
$7.0 million of gain was recognized from the sale of land at our
Windsor, Australia location.
-
Operating profit decreased by $(5.0) million as a result of the lower
aftermarket sales volume, as well as the mix shift to capital projects.
Adjusted EBITDA decreased ($4.3) million, or (34.2)%, to $8.3 million in
the three months ended June 30, 2018 as compared to $12.6 million in the
three months ended June 30, 2017. Adjusted EBITDA performance was driven
by the same factors which impacted operating profit, less the change
from depreciation and amortization, and also excludes the $7.0 million
gain on sale of land at our Windsor, Australia location as well as a
charge of $(0.8) million for restructuring and realignment costs
incurred during the period that was discrete to the Municipal segment.
There were no comparable charges incurred in the same period of the
prior year that would impact Adjusted EBITDA for the Municipal segment.
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 commercial 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 $8.0 million, or 9.5%, to $91.7 million in
the third quarter of fiscal 2018 from $83.7 million in the comparable
period of the prior year -
-
Growth of $3.4 million in revenues across the segment, comprised of
contributions from four of the five divisions.
-
Acquisitions contributed $2.1 million from the additions of Olson and
Pacific Ozone.
-
The positive impact of foreign currency was $2.5 million, primarily
related to transactions denominated in euro and pound sterling.
Operating profit in the Products segment increased $1.6 million, or
8.4%, to $20.7 million for the third quarter of fiscal 2018 as compared
to $19.1 million in the prior year period -
-
Overall increased volume and mix of product offerings as well as
operational efficiency and the impact of foreign currency and recent
acquisitions delivered $2.8 million of operating profit.
-
Profitability was offset by $(1.2) million of increased depreciation
and amortization, mainly related to increased amortization associated
with the acquisitions.
Adjusted EBITDA increased $4.7 million, or 22.2%, to $25.9 million in
the three months ended June 30, 2018 as compared to $21.2 million in the
three months ended June 30, 2017. The increase in Adjusted EBITDA
resulted from the same factors which impacted operating profit, less the
change in depreciation and amortization, and also excludes a $(1.6)
million charge related to remediation of a manufacturing defect caused
by a third party vendor as well as a charge of $(0.3) million for
restructuring and realignment costs incurred during the period that was
discrete to the Products segment. There were no comparable charges
incurred in the same period of the prior year that would impact Adjusted
EBITDA for the Products segment.
Third Quarter 2018 Earnings Call and Webcast
The Company will hold its third quarter earnings conference call
Tuesday, August 7, 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
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Revenue from product sales and services
|
|
$311,142
|
|
|
$342,475
|
|
|
$890,916
|
|
|
$973,215
|
|
Cost of product sales and services
|
|
(210,715
|
)
|
|
(240,468
|
)
|
|
(614,088
|
)
|
|
(674,832
|
)
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
100,427
|
|
|
102,007
|
|
|
276,828
|
|
|
298,383
|
|
General and administrative expense
|
|
(31,136
|
)
|
|
(56,961
|
)
|
|
(120,534
|
)
|
|
(140,767
|
)
|
Sales and marketing expense
|
|
(36,946
|
)
|
|
(33,888
|
)
|
|
(108,729
|
)
|
|
(102,459
|
)
|
Research and development expense
|
|
(5,592
|
)
|
|
(3,682
|
)
|
|
(15,684
|
)
|
|
(12,356
|
)
|
Total operating expenses
|
|
(73,674
|
)
|
|
(94,531
|
)
|
|
(244,947
|
)
|
|
(255,582
|
)
|
Other operating (expense) income
|
|
(329
|
)
|
|
7,362
|
|
|
981
|
|
|
7,674
|
|
Interest expense
|
|
(12,466
|
)
|
|
(12,370
|
)
|
|
(39,117
|
)
|
|
(40,423
|
)
|
Income (loss) before income taxes
|
|
13,958
|
|
|
2,468
|
|
|
(6,255
|
)
|
|
10,052
|
|
Income tax (expense) benefit
|
|
(12,202
|
)
|
|
(1,433
|
)
|
|
(295
|
)
|
|
960
|
|
Net income (loss)
|
|
1,756
|
|
|
1,035
|
|
|
(6,550
|
)
|
|
11,012
|
|
Net income attributable to non-controlling interest
|
|
253
|
|
|
242
|
|
|
2,348
|
|
|
1,427
|
|
Net income (loss) attributable to Evoqua Water Technologies Corp.
|
|
$1,503
|
|
|
$793
|
|
|
($8,898
|
)
|
|
$9,585
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
104,821
|
|
|
113,842
|
|
|
104,821
|
|
|
113,842
|
|
Diluted
|
|
107,985
|
|
|
119,047
|
|
|
104,821
|
|
|
119,936
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.08
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
CONSOLIDATED BALANCE SHEETS
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
September 30, 2017
|
|
June 30, 2018
|
ASSETS
|
|
|
|
|
Current assets
|
|
$
|
512,240
|
|
|
$
|
536,835
|
|
Cash and cash equivalents
|
|
|
59,254
|
|
|
|
57,307
|
|
Receivables, net
|
|
|
245,248
|
|
|
|
228,330
|
|
Inventories, net
|
|
|
120,047
|
|
|
|
140,467
|
|
Cost and earnings in excess of billings on uncompleted contracts
|
|
|
66,814
|
|
|
|
84,900
|
|
Prepaid and other current assets
|
|
|
20,046
|
|
|
|
24,888
|
|
Income tax receivable
|
|
|
831
|
|
|
|
943
|
|
Property, plant, and equipment, net
|
|
|
280,043
|
|
|
|
289,178
|
|
Goodwill
|
|
|
321,913
|
|
|
|
324,272
|
|
Intangible assets, net
|
|
|
333,746
|
|
|
|
319,276
|
|
Deferred income taxes
|
|
|
2,968
|
|
|
|
7,049
|
|
Other non-current assets
|
|
|
22,399
|
|
|
|
22,611
|
|
Total assets
|
|
$
|
1,473,309
|
|
|
$
|
1,499,221
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities
|
|
$
|
291,899
|
|
|
$
|
278,602
|
|
Accounts payable
|
|
|
114,932
|
|
|
|
140,434
|
|
Current portion of debt
|
|
|
11,325
|
|
|
|
9,708
|
|
Billings in excess of costs incurred
|
|
|
27,124
|
|
|
|
21,259
|
|
Product warranties
|
|
|
11,164
|
|
|
|
7,760
|
|
Accrued expenses and other liabilities
|
|
|
121,923
|
|
|
|
90,395
|
|
Income tax payable
|
|
|
5,431
|
|
|
|
9,046
|
|
Non-current liabilities
|
|
|
964,835
|
|
|
|
857,403
|
|
Long-term debt
|
|
|
878,524
|
|
|
|
780,430
|
|
Product warranties
|
|
|
6,110
|
|
|
|
3,545
|
|
Other non-current liabilities
|
|
|
67,673
|
|
|
|
64,837
|
|
Deferred income taxes
|
|
|
12,528
|
|
|
|
8,591
|
|
Total liabilities
|
|
|
1,256,734
|
|
|
|
1,136,005
|
|
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 114,771 shares, outstanding 113,811 shares at June 30, 2018
|
|
|
1,054
|
|
|
|
1,143
|
|
Treasury stock: 410 shares at September 30, 2017 and 960 shares at
June 30, 2018
|
|
|
(2,607
|
)
|
|
|
(2,837
|
)
|
Additional paid-in capital
|
|
|
388,986
|
|
|
|
529,992
|
|
Retained deficit
|
|
|
(170,006
|
)
|
|
|
(160,421
|
)
|
Accumulated other comprehensive loss, net of tax
|
|
|
(5,989
|
)
|
|
|
(8,800
|
)
|
Total Evoqua Water Technologies Corp. equity
|
|
|
211,438
|
|
|
|
359,077
|
|
Non-controlling interest
|
|
|
5,137
|
|
|
|
4,139
|
|
Total shareholders’ equity
|
|
|
216,575
|
|
|
|
363,216
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,473,309
|
|
|
$
|
1,499,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVOQUA WATER TECHNOLOGIES CORP.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Nine Months Ended
|
|
|
June 30, 2017
|
|
June 30, 2018
|
Operating activities
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6,550
|
)
|
|
$
|
11,012
|
|
Reconciliation of net (loss) income to cash flows from operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
55,813
|
|
|
61,924
|
|
Amortization of deferred financing costs (includes $2,075 and $2,994
write off of deferred financing fees)
|
|
5,970
|
|
|
4,926
|
|
Deferred income taxes
|
|
(107
|
)
|
|
(8,072
|
)
|
Share based compensation
|
|
1,634
|
|
|
11,257
|
|
Loss (gain) on sale of property, plant and equipment
|
|
349
|
|
|
(6,507
|
)
|
Foreign currency losses on intracompany loans
|
|
(1,489
|
)
|
|
5,059
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
Accounts receivable
|
|
(6,454
|
)
|
|
14,509
|
|
Inventories
|
|
(7,964
|
)
|
|
(20,385
|
)
|
Cost and earnings in excess of billings on uncompleted contracts
|
|
(8,900
|
)
|
|
(18,519
|
)
|
Prepaids and other current assets
|
|
(9,139
|
)
|
|
(5,559
|
)
|
Accounts payable
|
|
(1,009
|
)
|
|
26,910
|
|
Accrued expenses and other liabilities
|
|
(10,678
|
)
|
|
(33,548
|
)
|
Billings in excess of costs incurred
|
|
249
|
|
|
(5,567
|
)
|
Income taxes
|
|
(1,181
|
)
|
|
3,471
|
|
Other non-current assets and liabilities
|
|
5,248
|
|
|
(4,123
|
)
|
Net cash provided by operating activities
|
|
15,792
|
|
|
36,788
|
|
Investing activities
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
(40,475
|
)
|
|
(54,569
|
)
|
Purchase of intangibles
|
|
(4,175
|
)
|
|
(1,536
|
)
|
Proceeds from sale of property, plant and equipment
|
|
5,221
|
|
|
13,247
|
|
Proceeds from sale of business
|
|
—
|
|
|
430
|
|
Acquisitions, net of cash received of $0 and $28
|
|
(77,837
|
)
|
|
(10,235
|
)
|
Net cash used in investing activities
|
|
(117,266
|
)
|
|
(52,663
|
)
|
Financing activities
|
|
|
|
|
|
|
Issuance of debt
|
|
157,100
|
|
|
5,398
|
|
Capitalized deferred issuance costs related to refinancing
|
|
(4,198
|
)
|
|
(2,004
|
)
|
Borrowings under credit facility
|
|
113,000
|
|
|
46,812
|
|
Repayment of debt
|
|
(156,306
|
)
|
|
(154,752
|
)
|
Payment of earn-out related to previous acquisitions
|
|
—
|
|
|
(1,719
|
)
|
Repayment of capital lease obligation
|
|
(4,842
|
)
|
|
(5,990
|
)
|
Shares of common stock issued in initial public offering, net of
offering costs
|
|
5,521
|
|
|
137,605
|
|
Taxes paid related to net share settlements of share-based
compensation awards
|
|
—
|
|
|
(7,767
|
)
|
Stock repurchases
|
|
(1,076
|
)
|
|
(230
|
)
|
Distribution to non-controlling interest
|
|
(4,750
|
)
|
|
(2,425
|
)
|
Net cash provided by financing activities
|
|
104,449
|
|
|
14,928
|
|
Effect of exchange rate changes on cash
|
|
680
|
|
|
(1,000
|
)
|
Change in cash and cash equivalents
|
|
3,655
|
|
|
(1,947
|
)
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning of period
|
|
50,362
|
|
|
59,254
|
|
End of period
|
|
$54,017
|
|
|
$57,307
|
|
|
|
|
|
|
|
|
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
and Adjusted EBITDA of each reportable segment to evaluate the operating
performance of such segments. EBITDA and Adjusted EBITDA of the
reportable segments does not include certain charges that are presented
within Corporate activities. These 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
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Net income (loss)
|
|
$
|
1,756
|
|
|
$
|
1,035
|
|
$
|
(6,550
|
)
|
|
$
|
11,012
|
|
Income tax expense (benefit)
|
|
12,202
|
|
|
1,433
|
|
295
|
|
|
(960
|
)
|
Interest expense
|
|
12,466
|
|
|
12,370
|
|
39,117
|
|
|
40,423
|
|
Operating profit
|
|
26,424
|
|
|
14,838
|
|
32,862
|
|
|
50,475
|
|
Depreciation and amortization
|
|
18,293
|
|
|
21,561
|
|
55,813
|
|
|
61,924
|
|
EBITDA
|
|
44,717
|
|
|
36,399
|
|
88,675
|
|
|
112,399
|
|
Restructuring and related business transformation costs (a)
|
|
13,349
|
|
|
8,930
|
|
36,382
|
|
|
25,273
|
|
Purchase accounting adjustment costs (b)
|
|
—
|
|
|
—
|
|
229
|
|
|
—
|
|
Share-based compensation (c)
|
|
614
|
|
|
4,405
|
|
1,634
|
|
|
11,257
|
|
Sponsor fees (d)
|
|
1,042
|
|
|
—
|
|
3,042
|
|
|
333
|
|
Transaction costs (e)
|
|
1,899
|
|
|
4,655
|
|
5,659
|
|
|
6,014
|
|
Other (gains), losses and expenses (f)
|
|
(6,490
|
)
|
|
3,624
|
|
682
|
|
|
405
|
|
Adjusted EBITDA
|
|
$
|
55,131
|
|
|
$
|
58,013
|
|
$
|
136,303
|
|
|
$
|
155,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________________
(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) $3.3 million
and $19.2 million for the three and nine months ended June 30, 2017,
respectively, and $0.0 million and $0.3 million for the three and
nine months ended June 30, 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 included in our Quarterly Report
on Form 10-Q for the period ended June 30, 2018) related to our
voluntary separation plan pursuant to which approximately 220
employees accepted separation packages, and (B) $3.8 million and
$6.5 million for the three and nine months ended June 30, 2017,
respectively, (of which $0.4 million and $2.9 million for the three
and nine months ended June 30, 2017, respectively, is reflected as a
component of Restructuring charges in "Note 11. Restructuring and
Related Charges" to our Unaudited condensed consolidated financial
statements included in our Quarterly Report on Form 10-Q for the
period ended June 30, 2018), reflected as a components of Cost of
product sales and services ($1.7 million and $3.4 million for the
three and nine month periods, respectively), Sales and marketing
expense ($1.0 million and $1.0 million for the three and nine month
periods, respectively), and General and administrative expense ($1.1
million and $2.0 million for the three and nine month periods,
respectively); and $1.7 million and $7.1 million for the three and
nine month periods ended June 30, 2018, respectively, reflected as
components of Cost of product sales and services ($0.6 million and
$2.2 million for the three and nine month periods, respectively),
Research and development expense ($0.1 million and $0.6 million for
the three and nine month periods, respectively), Sales and marketing
expense ($0.0 million and $0.5 million for the three and nine month
periods, respectively) and General and administrative expense ($1.0
million and $3.8 million for the three and nine 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
June 30, 2018) 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 "Note 11. Restructuring and
Related Charges" to our Unaudited condensed consolidated financial
statements included in our Quarterly Report on Form 10-Q for the
period ended June 30, 2018, and amounts reflected in this adjustment
relate primarily to consulting costs and other charges related to
implementing such initiatives that have primarily been recorded as
components of Cost of product sales and services ($1.4 million),
Sales and marketing expense ($1.0 million) and General and
administrative expense ($1.0 million) in the three and nine months
ended June 30, 2017;
|
|
|
|
|
|
|
|
(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
($1.0 million and $1.8 million for the three and nine months ended
June 30, 2017, respectively, reflected as components of Cost of
product sales and services ($0.1 million and $0.3 million for the
three and nine month periods, respectively) and General and
administrative expense ($0.9 million and $1.5 million for the three
and nine month periods, respectively), and $1.0 million and $2.0
million for the three and nine months ended June 30, 2018, reflected
as components of Cost of product sales and services ($0.7 million
and $1.1 million for the three and nine month periods, respectively)
and General and administrative expense ($0.3 million and $0.9
million for the three and nine 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 ($1.0 million and $4.7 million
for the three and nine months ended June 30, 2017, primarily
reflected as components of Cost of product sales and services ($0.4
million and $2.1 million for the three and nine month periods,
respectively), Sales and marketing expense ($0.1 million and $0.7
million for the three and nine month periods, respectively),
Research and development expense ($0.0 million and $(0.1) million
for the three and nine month periods, respectively) and General and
administrative expense ($0.4 million and $1.9 million for the three
and nine month periods, respectively), and $5.5 million and $10.2
million in the three and nine months ended June 30, 2018, primarily
reflected as components of Cost of product sales and services ($1.0
million and $3.3 million for the three and nine month periods,
respectively), Sales and marketing expense ($0.0 million for the
three and nine months periods, respectively) and General and
administrative expense ($4.1 million and $6.5 million for the three
and nine 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 ($4.3 million for both the three and nine months ended June
30, 2017, primarily reflected as components of Cost of product sales
and services ($0.1 million for the three and nine month periods,
respectively), Sales and marketing expense ($1.9 million for the
three and nine month periods, respectively), and General and
administrative expense ($2.3 million for the three and nine month
periods, respectively) and $0.6 million and $5.6 million for the
three and nine months ended June 30, 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
June 30, 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 June 30, 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 ($1.9 million and $5.7
million in the three and nine months ended June 30, 2017,
respectively, and $4.7 million and $6.0 million in the three and
nine months ended June 30, 2018, respectively).
|
|
|
|
(f)
|
|
Represents:
|
|
|
|
|
|
|
|
(i)
|
|
impact of foreign exchange gains and losses ($(7.1) million gain and
$(2.1) million gain in the three and nine months ended June 30,
2017, respectively, and $8.8 million loss and $5.2 million loss in
the three and nine months ended June 30, 2018, respectively);
|
|
|
|
|
|
|
|
(ii)
|
|
foreign exchange impact related to headquarter allocations ($(0.1)
million gain and $1.0 million loss for the three and nine months
ended June 30, 2017, respectively, and $(0.3) million gain for the
nine months ended June 30, 2018); and
|
|
|
|
|
|
|
|
(iii)
|
|
expenses related to maintaining non-operational business locations
($0.6 million and $1.8 million in the three and nine months ended
June 30, 2017, respectively, and $0.5 million $1.2 million in the
three and nine months ended June 30, 2018, respectively).
|
|
|
|
|
|
|
|
(iv)
|
|
expenses incurred by the Company related to the remediation of
manufacturing defects caused by a third party vendor for which the
Company is seeking restitution ($1.6 million for both the three and
nine months ended June 30, 2018, respectively, all reflected as a
component of Cost of product sales and services).
|
|
|
|
|
|
|
|
(v)
|
|
gain on the sale of assets related to the disposition of land at our
Windsor, Australia location ($(7) million for both the three and
nine months ended June 30, 2018, respectively, all reflected as a
component of Other Income/Expense).
|
|
|
|
|
|
Adjusted EBITDA on a segment basis is defined as earnings before
interest expense, income tax expense (benefit) and depreciation and
amortization, adjusted for the impact of certain other items that have
been reflected at the segment level. The following is a reconciliation
of our segment operating profit to Adjusted EBITDA:
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2017
|
|
2018
|
|
|
Industrial
|
|
Municipal
|
|
Products
|
|
Industrial
|
|
Municipal
|
|
Products
|
|
|
(in thousands)
|
Operating Profit
|
|
$
|
25,567
|
|
|
$
|
10,562
|
|
|
$
|
19,112
|
|
|
$
|
24,415
|
|
|
$
|
12,698
|
|
|
$
|
20,720
|
|
Depreciation and amortization
|
|
(9,191
|
)
|
|
(1,994
|
)
|
|
(2,084
|
)
|
|
(11,390
|
)
|
|
(1,736
|
)
|
|
(3,269
|
)
|
EBITDA
|
|
$
|
34,758
|
|
|
$
|
12,556
|
|
|
$
|
21,196
|
|
|
$
|
35,805
|
|
|
$
|
14,434
|
|
|
$
|
23,989
|
|
Restructuring and related business transformation costs (a)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
820
|
|
|
293
|
|
Transaction costs (b)
|
|
—
|
|
—
|
|
—
|
|
2,612
|
|
|
—
|
|
—
|
Other gains, losses and expenses (c)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(6,990
|
)
|
|
1,609
|
|
Adjusted EBITDA
|
|
$
|
34,758
|
|
|
$
|
12,556
|
|
|
$
|
21,196
|
|
|
$
|
38,417
|
|
|
$
|
8,264
|
|
|
$
|
25,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
|
2017
|
|
2018
|
|
|
Industrial
|
|
Municipal
|
|
Products
|
|
Industrial
|
|
Municipal
|
|
Products
|
|
|
(in thousands)
|
Operating Profit
|
|
$
|
74,501
|
|
|
$
|
23,525
|
|
|
$
|
44,348
|
|
|
$
|
85,402
|
|
|
$
|
25,472
|
|
|
$
|
48,290
|
|
Depreciation and amortization
|
|
(27,632
|
)
|
|
(6,119
|
)
|
|
(8,722
|
)
|
|
(32,244
|
)
|
|
(5,312
|
)
|
|
(9,345
|
)
|
EBITDA
|
|
$
|
102,133
|
|
|
$
|
29,644
|
|
|
$
|
53,070
|
|
|
$
|
117,646
|
|
|
$
|
30,784
|
|
|
$
|
57,635
|
|
Restructuring and related business transformation costs (a)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
820
|
|
|
293
|
|
Transaction costs (b)
|
|
—
|
|
—
|
|
—
|
|
2,612
|
|
|
—
|
|
—
|
Other gains, losses and expenses (c)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(6,990
|
)
|
|
1,609
|
|
Adjusted EBITDA
|
|
$
|
102,133
|
|
|
$
|
29,644
|
|
|
$
|
53,070
|
|
|
$
|
120,258
|
|
|
$
|
24,614
|
|
|
$
|
59,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________________
(a)
|
|
Represents costs and expenses in connection with restructuring
initiatives distinct to our Municipal segment and Products
segment, respectively, incurred in the three months ended June 30,
2018. Such expenses are primarily composed of severance and
relocation costs.
|
|
|
|
(b)
|
|
Represents costs associated with the full achievement in the three
months ended June 30, 2018 of earn-out targets established during
the Noble and ADI acquisitions, distinct to our Industrial segment.
|
|
|
|
(c)
|
|
Represents:
|
|
|
|
|
|
(i)
|
gain on the sale of assets distinct to our Municipal segment related
to the disposition of land at our Windsor, Australia location for
the three months ended June 30, 2018; and
|
|
|
|
|
|
(ii)
|
expenses incurred by the Company in the three months ended June 30,
2018, distinct to our Products segment related to the remediation of
manufacturing defects caused by a third party vendor for which the
Company is seeking restitution.
|
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 execute projects in a timely manner; our ability to
accurately predict the timing of contract awards; material and other
cost inflation and our ability to mitigate the impact of inflation by
increasing selling prices and improving our productivity efficiencies;
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, in the "Management's Discussion and Analysis of Financial
Condition and Results of Operation" section in our Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2018, 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.