NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Apergy Corporation is a leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Our products provide efficient functioning throughout the lifecycle of a well—from drilling to completion to production. We report our results of operations in the following reporting segments: Production & Automation Technologies and Drilling Technologies. Our Production & Automation Technologies segment offerings consist of artificial lift equipment and solutions, including rod pumping systems, electric submersible pump systems, progressive cavity pumps and drive systems and plunger lifts, as well as a full automation and digital offering consisting of equipment, software and Industrial Internet of Things solutions for downhole monitoring, wellsite productivity enhancement and asset integrity management. Our Drilling Technologies segment offerings provide market leading polycrystalline diamond cutters and bearings that result in cost effective and efficient drilling.
Separation and Distribution
On May 9, 2018, Apergy became an independent, publicly traded company as a result of the distribution by Dover Corporation (“Dover”) of 100% of the outstanding common stock of Apergy to Dover’s stockholders. Dover’s Board of Directors approved the distribution on April 18, 2018 and Apergy’s Registration Statement on Form 10 was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on April 19, 2018. On May 9, 2018, Dover’s stockholders of record as of the close of business on the record date of April 30, 2018 received one share of Apergy stock for every two shares of Dover stock held at the close of business on the record date (the “Separation”). Following the Separation, Dover retained no ownership interest in Apergy. Apergy’s common stock began “regular-way” trading on the New York Stock Exchange (“NYSE”) under the “APY” symbol on May 9, 2018.
Basis of Presentation
Our consolidated financial statements were prepared in U.S. dollars and in accordance with U.S. generally accepted accounting principles (“GAAP”).
Prior to the Separation, our results of operations, financial position and cash flows were derived from the consolidated financial statements and accounting records of Dover and reflect the combined historical results of operations, financial position and cash flows of certain Dover entities conducting its upstream oil and gas energy business within Dover’s Energy segment, including an allocated portion of Dover’s corporate costs. These financial statements have been presented as if such businesses had been combined for all periods prior to the Separation. All intercompany transactions and accounts within Dover were eliminated. The assets and liabilities were reflected on a historical cost basis since all of the assets and liabilities presented were wholly owned by Dover and were transferred within the Dover consolidated group. The statements of income also include expense allocations for certain corporate functions historically performed by Dover and not allocated to its operating segments, including corporate executive management, human resources, information technology, facilities, tax, shared services, finance and legal, including the costs of salaries, benefits and other related costs. These expense allocations were based on direct usage or benefit where identifiable, with the remainder allocated on the basis of revenue, headcount or other measures. These pre-Separation combined financial statements may not include all of the actual expenses that would have been incurred had we been a stand-alone public company during the periods presented prior to the Separation and consequently may not reflect our results of operations, financial position and cash flows had we been a stand-alone public company during the periods presented prior to the Separation. Actual costs that would have been incurred if we had been a stand-alone public company would depend on a variety of factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
Prior to the Separation, transactions between Apergy and Dover, with the exception of transactions discussed in Note 3—Related Party Transactions, are reflected in the combined statements of cash flows as a financing activity in “Distributions to Dover Corporation, net.” See Note 3—Related Party Transactions for additional information.
No portion of Dover’s third-party debt was historically held by an Apergy entity or was transferred to Apergy; therefore, no interest expense was presented in the combined statements of income for each of the periods presented prior to the Separation. Intercompany notes payable to Dover were presented within “Net parent investment in Apergy” in our combined balance sheet because the notes were not settled in cash. Accordingly, no interest expense related to intercompany debt was presented in the combined statements of income for each of the periods presented prior to the Separation.
All financial information presented after the Separation represents the consolidated results of operations, financial position and cash flows of Apergy. Accordingly, our results of operations and cash flows consist of the consolidated results of Apergy from May 9, 2018 to December 31, 2019, and the combined results of operations and cash flows for periods prior to May 9, 2018. Our balance sheets as of December 31, 2019 and 2018, reflect the consolidated balances of Apergy. Our management believes the assumptions underlying these consolidated financial statements, including the assumptions regarding the allocation of corporate expenses from Dover for periods prior to the Separation, are reasonable.
The legal transfer of the upstream oil and gas energy businesses from Dover to Apergy occurred on May 9, 2018; however, for ease of reference, and unless otherwise stated or the context otherwise requires, all references to “Apergy Corporation,” “Apergy,” “we,” “us” or “our” refer (i) prior to the Separation, to the Apergy businesses, consisting of entities, assets and liabilities conducting the upstream oil and gas business within Dover’s Energy segment and (ii) after the Separation, to Apergy Corporation and its consolidated subsidiaries.
Significant Accounting Policies
Use of estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Such estimates include, but are not limited to, net realizable value of inventories, allowance for doubtful accounts, pension and post-retirement plans, future cash flows associated with impairment testing of goodwill, indefinite-lived intangible assets and other long-lived assets, estimates related to income taxes and estimates related to contingencies.
Cash and cash equivalents—Cash equivalents are highly liquid, short-term investments with original maturities of three months or less from their date of purchase.
Receivables, net of allowances—An allowance for doubtful accounts is provided on receivables equal to the estimated uncollectible amounts. This estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable.
Inventories—Inventories for the majority of our subsidiaries, including all international subsidiaries, are stated at the lower of cost, determined on the first-in, first-out (FIFO) basis, or net realizable value. Other domestic inventories are stated at the lower of cost, determined on the last-in, first-out (LIFO) basis, or market. Under the LIFO method, the cost assigned to items sold is based on the cost of the most recent items purchased. As a result, the costs of the first items purchased remain in inventory and are used to value ending inventory.
Property, plant and equipment—Property, plant and equipment is recorded at cost. Depreciation is provided on the straight-line basis over the estimated useful lives of our assets as follows: buildings and improvements 5 to 31.5 years; machinery and equipment 1 to 7 years; and software 3 to 10 years. Expenditures for maintenance and repairs are expensed as incurred. Gains and losses are realized upon the sale or disposition of assets and are recorded in “Other expense, net” on our consolidated statements of income.
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of the long-lived asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that an impairment loss has occurred, the impairment loss is measured as the amount by which the carrying value of the long-lived asset exceeds its fair value.
Goodwill and other intangible assets—Goodwill is not subject to amortization but is tested for impairment on an annual basis or more frequently if impairment indicators arise. We have established October 1 as the date of our annual test for impairment of goodwill. A quantitative test is used to determine the existence of goodwill impairment and the amount of the impairment loss at the reporting unit level. The quantitative test compares the fair value of a reporting unit with its carrying amount, including goodwill. We use an income-based valuation method, determining the present value of estimated future cash flows, to estimate the fair value of a reporting unit. Significant assumptions used in estimating our reporting unit fair values include (i) annual revenue growth rates; (ii) operating margins; (iii) risk-adjusted discount rate; and (iv) terminal value determined using a long-term growth rate. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to the reporting unit.
Our finite-lived acquired intangible assets are amortized on a straight-line basis over their estimated useful lives, which generally range from 5 to 15 years. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the intangible asset may not be recoverable. The carrying amount of an intangible asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that an impairment loss has occurred, the loss is measured as the amount by which the carrying amount of the intangible asset exceeds its fair value. We have one intangible asset with an indefinite life which is tested annually for impairment.
Revenue Recognition—Prior to January 1, 2018, revenue was recognized when all of the following conditions were satisfied: a) persuasive evidence of an arrangement exists, b) price is fixed or determinable, c) collectability is reasonably assured and d) delivery has occurred or services have been rendered. Beginning in 2018, and in connection with the adoption of ASC Topic 606, revenue is recognized to depict the transfer of control of the related goods and services to the customer. The majority of our revenue is generated through the manufacture and sale of a broad range of specialized products and components, with revenue recognized upon transfer of title and risk of loss, which is generally upon shipment. We account for shipping and handling activities performed after control of a good has been transferred to the customer as a contract fulfillment cost rather than a separate performance obligation. In limited cases, revenue arrangements with customers require delivery, installation, testing, or other acceptance provisions to be satisfied before revenue is recognized. Service revenue is recognized as the services are performed. Software product revenue is recorded when the software product is shipped to the customer or over the term of the contract on a subscription based model.
Estimates are used to determine the amount of variable consideration in contracts, as well as the determination of the standalone selling price among separate performance obligations. Some contracts with customers include variable consideration primarily related to volume rebates. We estimate variable consideration at the most likely amount to determine the total consideration which we expect to be entitled. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are largely based on an assessment of our anticipated performance and all information that is reasonably available. We exclude all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (e.g., sales, use, value added, and some excise taxes) from the determination of the transaction price.
Lessor accounting—Our lease arrangements generally allow customers to rent equipment on a daily basis with no stated end date. Customers may return the equipment at any point subsequent to the lease commencement date without penalty. We account for these arrangements as a daily renewal option beginning on the lease commencement date, with the lease term determined as the period in which it is reasonably certain the option will be exercised. Based on our assessment of the lease classification criteria, our lease arrangements have been classified as operating leases. Our lease arrangements generally include lease and non-lease components for which revenue is recognized based on each component’s standalone price. Lease revenue is recognized on a straight-line basis over the term of the lease and is included in “Other revenue” in the consolidated statement of income. Non-lease revenue related to our lease arrangements is recognized in accordance with our revenue recognition accounting policy. Assets in our lease program are reported in “Property, plant, and equipment, net” on our consolidated balance sheets and are depreciated over their estimated useful lives to an estimated salvage value. Leased equipment damaged in operation is generally charged to the customer. Charges for damaged leased equipment is recorded as “Product revenue” and the remaining net book value of the leased asset is expensed as “Costs of goods and services” in the consolidated statements of income.
Lessee accounting—Lease liabilities are measured at the lease commencement date and are based on the present value of remaining payments contractually required under the contract. Payments that are variable in nature are excluded from the measurement of our lease liabilities and are recorded as an expense as incurred. Options to renew or extend a lease are included in the measurement of our lease liabilities only when it is reasonably certain that we will exercise these rights. In estimating the
present value of our lease liabilities, payments are discounted at our incremental borrowing rate (“IBR”), which has been applied utilizing a portfolio approach. We utilized information publicly available from companies within our industry with similar credit profiles to construct a company-specific yield curve in order to estimate the rate of interest we would pay to borrow at various lease terms. At lease commencement, we recognize a lease right-of-use asset equal to our lease liability, adjusted for lease payments paid to the lessor prior to the lease commencement date, and any initial direct costs incurred. Operating lease expense is recorded on a straight-line basis over the lease term. For finance leases, we amortize our right-of-use assets on a straight-line basis over the shorter of the asset’s useful life or the lease term. Additionally, interest expense is recognized each period related to the accretion of our lease liabilities over their respective lease terms.
Refer to Note 2 for additional information related to practical expedients and elections made under ASC Topic 842.
Stock-based compensation—Prior to the Separation, our employees participated in Dover’s stock-based compensation plans. Stock-based compensation was allocated to us by Dover based on the awards and terms previously granted to our employees.
The cost of stock-based awards is measured at the grant date and are based on the fair value of the award. The value of the portion of the award that is expected to ultimately vest is recognized as expense on a straight-line basis, generally over the explicit service period and is included in selling, general and administrative expense in our consolidated statements of income. Forfeitures are accounted for as they occur. Expense for awards granted to retirement-eligible employees is recorded over the period from the date of grant through the date the employee first becomes eligible to retire and is no longer required to provide service.
Employee benefit plans—Prior to the Separation, Apergy participated in defined benefit plans and non-qualified supplemental retirement plans sponsored by Dover that were accounted for as multi-employer plans in the consolidated financial statements. Apergy also sponsored a defined benefit plan and non-qualified plan during the pre-Separation period. These plans were accounted for as single employer plans in the consolidated financial statements.
Research and development costs—Research and development costs are expensed as incurred and amounted to $12.9 million, $16.0 million and $18.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Income Taxes—Prior to the Separation, our operations were historically included in Dover’s consolidated federal tax return and certain combined state returns. The income tax expense in our consolidated financial statements for these pre-Separation periods was determined on a stand-alone return basis which requires the recognition of income taxes using the liability method. Under this method, we assume to have historically filed a return separate from Dover, reporting our taxable income or loss and paying applicable tax based on our separate taxable income and associated tax attributes in each tax jurisdiction. Income taxes payable prior to Separation, computed under the stand-alone return basis, were classified in “Net parent investment in Apergy” on our consolidated balance sheet since Dover is legally liable for the tax. Accordingly, changes in income taxes payable for periods prior to the Separation are presented as a component of financing activities in the statement of cash flows. The calculation of income taxes on the separate return basis requires considerable judgment and the use of both estimates and allocations. As a result, our effective tax rate and deferred tax balances will significantly differ from those in the periods prior to the Separation.
The Tax Reform Act, enacted on December 22, 2017, significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Tax Reform Act also provided for a one-time deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits through the year ended December 31, 2017. The Global Intangible Low-Taxed Income (“GILTI”) provisions require us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. We have elected to account for GILTI tax in the period in which it is incurred.
Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record valuation allowances related to our deferred tax assets when we determine it is more likely than not the benefits will not be realized. Interest and penalties related to unrecognized tax benefits are recorded as a component of our provision for income taxes. We do not provide deferred taxes on undistributed earnings of our foreign subsidiaries as it is management’s intention to permanently reinvest these earnings to support the expansion of our international operations. If we were to make distributions from the subsidiaries, we would be subject to withholding tax on the remittances in various jurisdictions.
Earnings per share (“EPS”)—Basic EPS is computed using the weighted-average number of common shares outstanding during the year. We use the treasury stock method to compute diluted EPS which gives effect to the potential dilution of earnings that could have occurred if additional shares were issued for awards granted under our incentive compensation and stock plan. The treasury stock method assumes proceeds that would be obtained upon exercise of awards granted under our incentive compensation and stock plan are used to purchase outstanding common stock at the average market price during the period.
Fair value measurements—We record our financial assets and financial liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities, with the exception of certain assets and liabilities measured using the net asset value practical expedient, which are not required to be leveled. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
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•
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Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
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•
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Level 2: Observable inputs other than quoted prices included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
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•
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Level 3: Unobservable inputs reflecting management’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
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Derivative financial instruments—Prior to the Separation, we used derivative financial instruments to hedge our exposure to foreign currency exchange rate risk. For derivatives hedging the fair value of assets or liabilities, the changes in fair value of both the derivatives and the hedged items are recorded in earnings. We do not enter into derivative financial instruments for speculative purposes.
Foreign currency—Financial statements of operations for which the U.S. dollar is not the functional currency, and are located in non-highly inflationary countries, are translated into U.S. dollars prior to consolidation. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date, while income statement accounts are translated at the weighted-average monthly exchange rates. For these operations, translation gains and losses are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity until the foreign entity is sold or liquidated. Assets and liabilities of an entity that are denominated in currencies other than an entity’s functional currency are remeasured into the functional currency using end of period exchange rates or historical rates when applicable to certain balances. Gains and losses related to these re-measurements are recorded in our consolidated statements of income as a component of “Other expense, net”.
Change in accounting estimate—Effective January 1, 2019, we changed our estimate of the useful lives for surface equipment used within our leased asset program in our Production & Automation Technologies segment to better reflect the estimated periods in which the assets will remain in service. The estimated useful lives of the equipment, previously estimated at three years, was increased to five years. The effect of this change in estimate for the year ended December 31, 2019, was a reduction in depreciation expense of $8.8 million, an increase in net income of $6.7 million, and an increase in basic and diluted earnings per share of $0.09 per share.
Reclassifications—Certain prior-year amounts have been reclassified to conform to the current year presentation.
Revisions—We revised our previously issued financial statements for the years ended December 31, 2018 and December 31, 2017, to correct immaterial errors related to: (i) the assessing and recording of liabilities for state sales tax and associated penalties and interest, primarily resulting in an understatement of our selling, general, and administrative expense and interest expense of $3.1 million and $2.0 million for the years ended December 31, 2018 and 2017, respectively, and (ii) previously recorded amounts including, but not limited to, the write-off of inventory and leased assets, timing of revenue recognition, and revenue classification, that the Company concluded were immaterial to our previously filed consolidated financial statements. See the following tables for the impact of the corrections on the consolidated financial statements:
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|
|
Year Ended December 31, 2018
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|
(in thousands, except per share data)
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As Reported
|
|
Adjustments
|
|
As Revised
|
Product revenue
|
$
|
1,085,471
|
|
|
$
|
4,747
|
|
|
$
|
1,090,218
|
|
Other revenue (1)
|
131,175
|
|
|
(3,237
|
)
|
|
127,938
|
|
Total revenue
|
1,216,646
|
|
|
1,510
|
|
|
1,218,156
|
|
Cost of goods and services
|
800,347
|
|
|
805
|
|
|
801,152
|
|
Gross profit
|
416,299
|
|
|
705
|
|
|
417,004
|
|
Selling, general and administrative expense
|
262,625
|
|
|
2,322
|
|
|
264,947
|
|
Interest expense, net
|
27,440
|
|
|
208
|
|
|
27,648
|
|
Other expense, net
|
2,943
|
|
|
113
|
|
|
3,056
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|
Income before income taxes
|
123,291
|
|
|
(1,938
|
)
|
|
121,353
|
|
Provision for income taxes
|
28,796
|
|
|
(634
|
)
|
|
28,162
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|
Net income
|
94,495
|
|
|
(1,304
|
)
|
|
93,191
|
|
Net income attributable to noncontrolling interest
|
454
|
|
|
—
|
|
|
454
|
|
Net income attributable to Apergy
|
$
|
94,041
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|
|
$
|
(1,304
|
)
|
|
$
|
92,737
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|
|
|
|
|
|
|
Earnings per share attributable to Apergy:
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|
|
|
|
|
Basic
|
$
|
1.22
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|
|
$
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(0.02
|
)
|
|
$
|
1.20
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Diluted
|
$
|
1.21
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|
|
$
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(0.02
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)
|
|
$
|
1.19
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|
|
|
|
|
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Comprehensive income
|
$
|
81,741
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|
|
$
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(1,304
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)
|
|
$
|
80,437
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|
Comprehensive income attributable to Apergy
|
$
|
81,287
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|
|
$
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(1,304
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)
|
|
$
|
79,983
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|
_______________________
(1) Includes “Service revenue” and “Lease and other revenue” as reported in the consolidated statement of income for the year ended December 31, 2018.
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Year Ended December 31, 2017
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(in thousands, except per share data)
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As Reported
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|
Adjustments
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As Revised
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Product revenue
|
$
|
919,669
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|
|
$
|
3,023
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|
|
$
|
922,692
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Other revenue (1)
|
90,797
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(3,023
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)
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|
87,774
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Total revenue
|
1,010,466
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|
|
—
|
|
|
1,010,466
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Cost of goods and services
|
689,990
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|
|
408
|
|
|
690,398
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|
Gross profit
|
320,476
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|
|
(408
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)
|
|
320,068
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|
Selling, general and administrative expense
|
218,558
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|
|
2,849
|
|
|
221,407
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|
Interest expense, net
|
753
|
|
|
110
|
|
|
863
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|
Other expense, net
|
10,377
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|
|
(934
|
)
|
|
9,443
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|
Income before income taxes
|
90,788
|
|
|
(2,433
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)
|
|
88,355
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|
Benefit from income taxes
|
(21,876
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)
|
|
(288
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)
|
|
(22,164
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)
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Net income
|
112,664
|
|
|
(2,145
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)
|
|
110,519
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|
Net income attributable to noncontrolling interest
|
930
|
|
|
—
|
|
|
930
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|
Net income attributable to Apergy
|
$
|
111,734
|
|
|
$
|
(2,145
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)
|
|
$
|
109,589
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|
|
|
|
|
|
|
Earnings per share attributable to Apergy:
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|
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|
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Basic
|
$
|
1.44
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|
|
$
|
(0.02
|
)
|
|
$
|
1.42
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|
Diluted
|
$
|
1.43
|
|
|
$
|
(0.02
|
)
|
|
$
|
1.41
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
119,905
|
|
|
$
|
(2,145
|
)
|
|
$
|
117,760
|
|
Comprehensive income attributable to Apergy
|
$
|
118,975
|
|
|
$
|
(2,145
|
)
|
|
$
|
116,830
|
|
_______________________
(1) Includes “Service revenue” and “Lease and other revenue” as reported in the consolidated statement of income for the year ended December 31, 2017.
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|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
Assets
|
|
|
|
|
|
Receivables, net
|
$
|
249,948
|
|
|
$
|
1,488
|
|
|
$
|
251,436
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|
Inventories, net
|
218,319
|
|
|
1,102
|
|
|
219,421
|
|
Prepaid expenses and other current assets
|
20,211
|
|
|
(1,677
|
)
|
|
18,534
|
|
Total current assets
|
530,310
|
|
|
913
|
|
|
531,223
|
|
Other non-current assets
|
8,445
|
|
|
447
|
|
|
8,892
|
|
Total assets
|
1,971,756
|
|
|
1,360
|
|
|
1,973,116
|
|
Liabilities and Equity
|
|
|
|
|
|
Accounts payable
|
131,058
|
|
|
9,067
|
|
|
140,125
|
|
Current portion of finance lease liabilities (1)
|
—
|
|
|
4,320
|
|
|
4,320
|
|
Accrued expenses and other current liabilities (1)
|
30,391
|
|
|
(1,630
|
)
|
|
28,761
|
|
Total current liabilities
|
201,995
|
|
|
11,757
|
|
|
213,752
|
|
Long-term debt
|
666,108
|
|
|
(2,901
|
)
|
|
663,207
|
|
Deferred income taxes
|
101,724
|
|
|
(1,952
|
)
|
|
99,772
|
|
Total liabilities
|
990,229
|
|
|
6,904
|
|
|
997,133
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Capital in excess of par value of common stock
|
965,372
|
|
|
(4,599
|
)
|
|
960,773
|
|
Retained earnings
|
55,829
|
|
|
(945
|
)
|
|
54,884
|
|
Total stockholders’ equity
|
979,069
|
|
|
(5,544
|
)
|
|
973,525
|
|
Total equity
|
981,527
|
|
|
(5,544
|
)
|
|
975,983
|
|
Total liabilities and equity
|
$
|
1,971,756
|
|
|
$
|
1,360
|
|
|
$
|
1,973,116
|
|
_______________________
(1) “Current portion of finance lease liabilities” has been reclassified to a separate line consistent with the consolidated balance sheet as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
Total equity at December 31, 2016
|
$
|
1,551,218
|
|
|
$
|
(2,714
|
)
|
|
$
|
1,548,504
|
|
Net income
|
112,664
|
|
|
(2,145
|
)
|
|
110,519
|
|
Net transfers to Dover
|
(29,526
|
)
|
|
(17
|
)
|
|
(29,543
|
)
|
Total equity at December 31, 2017
|
1,640,385
|
|
|
(4,876
|
)
|
|
1,635,509
|
|
Net income
|
94,495
|
|
|
(1,304
|
)
|
|
93,191
|
|
Net transfers to/from Dover
|
(742,690
|
)
|
|
636
|
|
|
(742,054
|
)
|
Total equity at December 31, 2018
|
$
|
981,527
|
|
|
$
|
(5,544
|
)
|
|
$
|
975,983
|
|
NOTE 2—NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
Effective January 1, 2019, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842).” This update requires a lessee to recognize in the statement of financial position a right-of-use asset representing its right to use the underlying asset for the lease term and a liability for future lease payments. Similar to past guidance, the update continues to differentiate between finance leases and operating leases; however, this distinction now primarily relates to differences in the manner of expense recognition over time. Additionally, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors is now based on an assessment of whether a lease contract is economically similar to the purchase of a non-financial asset from the perspective of control. The update also requires quantitative and qualitative disclosures to enable users to understand the amount, timing, and judgments related to leases and the related cash flows. We applied the provisions of this ASU to our lease contracts as of January 1, 2019, using the modified retrospective method of adoption. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting
policies. As of January 1, 2019, we recorded operating lease right-of-use assets of $27.0 million and operating lease liabilities of $27.0 million as a result of the adoption of this guidance.
We have applied the following practical expedients and elections under the new standard:
|
|
•
|
We elected to utilize the package of transition practical expedients, which permitted us (i) to not reassess whether any expired or existing contracts are or contain a lease, (ii) to not reassess our historical lease classifications for existing leases, and (iii) to not reassess initial direct costs for existing leases.
|
|
|
•
|
For contracts in which we are a lessee, we have elected for each of our asset classes to account for each lease component and its associated non-lease components as a single lease component.
|
|
|
•
|
We elected to utilize the short term lease exemption for lease contracts with a term of less than 12 months. These contracts are excluded from the measurement of our right-of-use assets and lease liabilities and are recognized in earnings on a straight-line basis over their lease term.
|
|
|
•
|
We elected to utilize the practical expedient to exclude sales tax from the measurement of lease revenue.
|
See Note 14—Leases for additional information related to our lease accounting. See Note 22—Cash Flow Information for additional information regarding the presentation of our leases within our consolidated statements of cash flows.
Effective July 1, 2019, we adopted ASU 2018-15, “Intangibles—Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The amendments in this update have been applied prospectively to all implementation costs incurred after the date of adoption. The impact of adopting the new standard was not material to our financial statements for the year ended December 31, 2019.
Effective December 31, 2019 we adopted ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendment modifies certain disclosure requirements for defined benefit plans. Among other requirements and modifications, the amendment requires an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The impact of adopting the new standard was not material to our financial statements for the year ended December 31, 2019.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The update amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which may result in earlier recognition of losses related to financial instruments. The guidance will be effective for us on January 1, 2020. We are currently evaluating the impact of this guidance and are in the process of:
|
|
•
|
collecting historical data that will be used in the calculation of expected credit losses;
|
|
|
•
|
documenting relevant assumptions to calculate expected losses; and
|
|
|
•
|
updating policies, procedures and internal controls.
|
We do not expect the adoption of this update to have a material impact on our financial statements.
NOTE 3—RELATED PARTY TRANSACTIONS
Dover Corporation
Prior to the Separation, Dover provided certain services to us, including corporate executive management, human resources, information technology, facilities, tax, shared services, finance and legal services. Dover continued to provide us certain of these services on a temporary basis following the Separation under a transition services agreement. Under the transition services agreement, Apergy paid a fee to Dover for services under the transition services agreement, which fee was intended to allow Dover to recover all of its direct and indirect costs generally without profit. The transition services agreement was terminated on January 31, 2019, consistent with the initial term provided within the agreement.
Financial information presented prior to the Separation does not include all the expenses that would have been incurred had Apergy been a stand-alone public company. The corporate expenses allocated by Dover to these financial statements were $7.4 million and $23.0 million for the years ended December 31, 2018 and 2017, respectively, which were recorded in “Selling, general and administrative expense” in the consolidated statements of income.
For periods prior to the Separation, transactions between Apergy and Dover, with the exception of transactions discussed below with Dover’s affiliates, are reflected in “Distributions to Dover Corporation, net” in the consolidated statements of cash flows for the years ended December 31, 2018, and 2017, as a financing activity. Revenue with Dover and its affiliates were not material for the periods presented. We recognized royalty expense of $2.3 million and $9.8 million for the years ended December 31, 2018, and 2017, respectively, related to the use of Dover’s intellectual property and patents which are included in “Other expense, net” in the consolidated statements of income. On April 1, 2018, patents and other intangibles owned by Dover related to our operations transferred to Apergy, and consequently, Apergy no longer incurred royalty charges related to these assets from Dover.
Noncontrolling Interest
For the years ended December 31, 2018, and 2017, we declared and paid $2.7 million and $1.2 million, respectively, of distributions to the noncontrolling interest holder in Apergy Middle East Services LLC, a subsidiary in the Sultanate of Oman. We have a commission arrangement with our noncontrolling interest for 5% of certain annual product sales.
NOTE 4—EARNINGS PER SHARE
On May 9, 2018, 77,339,828 shares of our common stock were distributed to Dover stockholders in conjunction with the Separation. See Note 1—Basis of Presentation and Summary of Significant Accounting Policies for additional information. For comparative purposes, and to provide a more meaningful calculation of weighted-average shares outstanding, we have assumed the shares issued in conjunction with the Separation to be outstanding as of the beginning of each period prior to the Separation. In addition, we have assumed the potential dilutive securities outstanding as of May 8, 2018, were outstanding and fully dilutive in each of the periods with positive income prior to the Separation.
A reconciliation of the number of shares used for the basic and diluted earnings per share calculation was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands, except per share data)
|
2019
|
|
2018
|
|
2017
|
Net income attributable to Apergy
|
$
|
52,164
|
|
|
$
|
92,737
|
|
|
$
|
109,589
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding
|
77,427
|
|
|
77,342
|
|
|
77,340
|
|
Dilutive effect of stock-based compensation
|
197
|
|
|
350
|
|
|
550
|
|
Total shares and dilutive securities
|
77,624
|
|
|
77,692
|
|
|
77,890
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Apergy
|
$
|
0.67
|
|
|
$
|
1.20
|
|
|
$
|
1.42
|
|
Diluted earnings per share attributable to Apergy
|
$
|
0.67
|
|
|
$
|
1.19
|
|
|
$
|
1.41
|
|
NOTE 5—ACQUISITIONS
On July 31, 2019, Apergy entered into an asset purchase agreement to acquire certain assets, which meet the definition of a business, used in the manufacturing of downhole monitoring systems. The acquisition is included among the consolidated subsidiaries reported in our Production & Automation Technologies segment and provides digital technology strategic to our artificial lift product offering.
The acquisition-date fair value of the consideration transferred consisted of the following:
|
|
|
|
|
(in thousands)
|
|
Cash
|
$
|
12,500
|
|
Contingent consideration (1)
|
1,500
|
|
Total consideration transferred
|
$
|
14,000
|
|
_______________________
(1) Contingent consideration is payable to the seller based on the acquired business exceeding a revenue target over an eighteen month period ending January 2021. Achievement of the revenue target is considered probable.
The following table summarizes the final fair values of the assets acquired at the acquisition date:
|
|
|
|
|
(in thousands)
|
|
Inventory
|
$
|
1,840
|
|
Customer relationships
|
2,650
|
|
Technology - Technical know-how
|
4,000
|
|
Goodwill
|
5,510
|
|
Total assets acquired
|
$
|
14,000
|
|
The amortization period is 15 years for acquired customer relationships and technology. The goodwill recognized as a result of the acquisition is tax deductible and primarily reflects the expected benefits to be derived from operational synergies.
In October 2017, Apergy acquired 100% of the voting stock of PCP Oil Tools S.A. and Ener Tools S.A. (“PCP Tools”), a supplier of progressive cavity pump products and services for total consideration of $8.8 million, net of cash acquired. This acquisition is a part of our Production & Automation Technologies segment and broadens our ability to supply customers in Argentina. We recorded non-deductible goodwill of $5.1 million, customer intangible assets of $4.5 million, and net working capital that is not material to the consolidated financial statements. The goodwill recorded as a result of the acquisition reflects the benefits expected to be derived from product line expansion and operational synergies. The intangible assets acquired are being amortized over nine years.
Results of operations of the acquired businesses have been included in our consolidated financial statements from their acquisition dates. Pro forma results of operations have not been presented as the effects of the acquisitions are not material to our consolidated financial statements.
NOTE 6—DISPOSITIONS
During March 2019, we classified our pressure vessel manufacturing business in our Production & Automated Technologies segment as held for sale. We recognized an impairment loss of $1.7 million, which was recorded in “Selling, general and administrative expense” in the consolidated statements of income, to adjust the carrying amount of the disposal group to fair value. See Note 19—Fair Value Measurements for additional information. In June 2019, we completed the sale of our pressure vessel manufacturing business and made a cash payment of $2.2 million, resulting in a loss on disposition of $2.5 million, which was recorded in “Other expense, net” in the consolidated statements of income for the year ended December 31, 2019.
NOTE 7—INVENTORIES
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2019
|
|
December 31, 2018
|
Raw materials
|
$
|
50,099
|
|
|
$
|
53,677
|
|
Work in progress
|
13,325
|
|
|
11,416
|
|
Finished goods
|
175,774
|
|
|
180,106
|
|
|
239,198
|
|
|
245,199
|
|
LIFO and valuation adjustments
|
(27,856
|
)
|
|
(25,778
|
)
|
Inventories, net
|
$
|
211,342
|
|
|
$
|
219,421
|
|
As of December 31, 2019 and 2018, approximately 23% and 24%, respectively, of our total net inventories were accounted for using the LIFO method. The current replacement costs of LIFO inventories exceeded their carrying value by approximately $15.8 million and $12.9 million at December 31, 2019 and 2018, respectively. There were no reductions to the base LIFO inventories in 2019 or 2018.
NOTE 8—PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2019
|
|
December 31, 2018
|
Land
|
$
|
13,498
|
|
|
$
|
13,607
|
|
Buildings and improvements
|
107,914
|
|
|
105,036
|
|
Software
|
15,323
|
|
|
14,553
|
|
Machinery, equipment and other
|
538,168
|
|
|
503,476
|
|
|
674,903
|
|
|
636,672
|
|
Accumulated depreciation
|
(426,722
|
)
|
|
(392,344
|
)
|
Property, plant and equipment, net
|
$
|
248,181
|
|
|
$
|
244,328
|
|
Depreciation expense was $68.6 million, $72.6 million and $59.2 million for the years ended December 31, 2019, 2018, and 2017, respectively.
NOTE 9—GOODWILL AND INTANGIBLE ASSETS
Goodwill
The carrying amount, including changes therein, of goodwill by reporting segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Production & Automation Technologies
|
|
Drilling Technologies
|
|
Total
|
December 31, 2017
|
$
|
808,952
|
|
|
$
|
101,136
|
|
|
$
|
910,088
|
|
Purchase price adjustment(1)
|
(53
|
)
|
|
—
|
|
|
(53
|
)
|
Foreign currency translation
|
(5,050
|
)
|
|
—
|
|
|
(5,050
|
)
|
December 31, 2018
|
803,849
|
|
|
101,136
|
|
|
904,985
|
|
Acquisitions
|
5,510
|
|
|
—
|
|
|
5,510
|
|
Foreign currency translation
|
618
|
|
|
—
|
|
|
618
|
|
December 31, 2019
|
$
|
809,977
|
|
|
$
|
101,136
|
|
|
$
|
911,113
|
|
_______________________
(1) Purchase price adjustment related to our 2017 acquisition of PCP Oil Tools S.A. and Ener Tools S.A.
We recorded $5.5 million of acquired goodwill in 2019. See Note 5—Acquisitions for additional information. We did not recognize any impairment for the years ended December 31, 2019 and 2018, as the fair values of our reporting units exceeded their carrying amounts.
Intangible Assets
The components of our definite- and indefinite-lived intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Customer intangibles
|
$
|
560,316
|
|
|
$
|
353,189
|
|
|
$
|
207,127
|
|
|
$
|
568,643
|
|
|
$
|
319,827
|
|
|
$
|
248,816
|
|
Trademarks
|
35,695
|
|
|
24,830
|
|
|
10,865
|
|
|
36,296
|
|
|
21,575
|
|
|
14,721
|
|
Patents
|
38,436
|
|
|
26,838
|
|
|
11,598
|
|
|
38,141
|
|
|
23,568
|
|
|
14,573
|
|
Unpatented technologies
|
13,700
|
|
|
9,811
|
|
|
3,889
|
|
|
9,700
|
|
|
9,700
|
|
|
—
|
|
Drawings and manuals
|
2,558
|
|
|
1,758
|
|
|
800
|
|
|
3,000
|
|
|
2,142
|
|
|
858
|
|
Other
|
5,332
|
|
|
4,504
|
|
|
828
|
|
|
5,268
|
|
|
4,148
|
|
|
1,120
|
|
|
656,037
|
|
|
420,930
|
|
|
235,107
|
|
|
661,048
|
|
|
380,960
|
|
|
280,088
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
3,600
|
|
|
—
|
|
|
3,600
|
|
|
3,600
|
|
|
—
|
|
|
3,600
|
|
Total
|
$
|
659,637
|
|
|
$
|
420,930
|
|
|
$
|
238,707
|
|
|
$
|
664,648
|
|
|
$
|
380,960
|
|
|
$
|
283,688
|
|
We recorded $6.7 million of acquired intangible assets in 2019. See Note 5—Acquisitions for additional information. Additional changes to the gross carrying amount of intangible assets during the year ended December 31, 2019 were the result of foreign currency translation adjustments.
Amortization expense related to our intangible assets was $51.4 million, $51.9 million and $53.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. Estimated future amortization expense related to intangible assets held as of December 31, 2019, is as follows:
|
|
|
|
|
(in thousands)
|
Estimated Amortization
|
2020
|
$
|
50,147
|
|
2021
|
49,319
|
|
2022
|
47,820
|
|
2023
|
33,928
|
|
2024
|
23,271
|
|
NOTE 10—DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2019
|
|
December 31, 2018
|
Revolving credit facility
|
$
|
—
|
|
|
$
|
—
|
|
Term loan facility
|
265,000
|
|
|
370,000
|
|
6.375% Senior Notes due 2026
|
300,000
|
|
|
300,000
|
|
Finance lease obligations
|
4,530
|
|
|
4,584
|
|
Total
|
569,530
|
|
|
674,584
|
|
Net unamortized discounts and issuance costs
|
(9,709
|
)
|
|
(11,377
|
)
|
Total long-term debt
|
$
|
559,821
|
|
|
$
|
663,207
|
|
Senior Notes
On May 3, 2018, and in connection with the Separation, we completed the offering of $300.0 million in aggregate principal amount of 6.375% senior notes due May 2026 (“Senior Notes”). Interest on the Senior Notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2018. Net proceeds of $293.8 million from the offering were utilized to partially fund the $700.0 million cash payment to Dover at the Separation and to pay fees and expenses incurred in connection with the Separation.
The terms of the Senior Notes are governed by the indenture dated as of May 3, 2018, between Apergy and Wells Fargo Bank, N.A., as trustee, and are guaranteed, on a senior unsecured basis, by the subsidiary guarantors of our senior secured credit facilities as described below. At any time prior to May 1, 2021, we may redeem all or part of the Senior Notes at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed plus a premium, as defined in the indenture, plus accrued and unpaid interest. Beginning on or after May 1, 2021, we may redeem the Senior Notes, in whole or in part, at certain tiered redemption prices as defined in the indenture, plus accrued and unpaid interest. The Senior Notes are our senior unsecured obligations. The Senior Notes rank equally in right of payment with our future and existing senior debt but are effectively subordinated to our future and existing debt to the extent of the assets securing such senior debt. The Senior Notes rank senior in right of payment to all of our future subordinated debt.
Senior Secured Credit Facilities
On May 9, 2018, we entered into a credit agreement (“credit agreement”) governing the terms of our senior secured credit facilities, consisting of (i) a 7-year senior secured term loan B facility (“term loan facility”) and (ii) a 5-year senior secured revolving credit facility (“revolving credit facility,” and together with the term loan facility, the “senior secured credit facilities”), with JPMorgan Chase Bank, N.A. as administrative agent. The net proceeds of the senior secured credit facilities were used (i) to pay fees and expenses in connection with the Separation, (ii) partially fund the cash payment to Dover and (iii) provide for working capital and other general corporate purposes. The senior secured credit facilities are jointly and severally guaranteed by Apergy and certain of Apergy’s wholly owned U.S. subsidiaries (“guarantors”), on a senior secured basis, and are secured by substantially all tangible and intangible assets of Apergy and the guarantors, except for certain excluded assets.
At our election, outstanding borrowings under the senior secured credit facilities will accrue interest at a per annum rate of (i) LIBOR plus a margin or (ii) a base rate plus a margin. Interest on borrowings in which interest is accrued based on LIBOR plus an applicable margin is payable in three month increments. Interest on borrowings in which interest is accrued at a base rate plus an applicable margin is payable on the last business day of each quarter. The senior secured credit facilities contain a number of customary covenants that, among other things, limit or restrict the ability of Apergy and the restricted subsidiaries to, subject to certain qualifications and exceptions, perform certain activities which include, but are not limited to (i) incur additional indebtedness, (ii) make acquisitions and (iii) pay dividends or other payments in respect of our capital stock. Additionally, Apergy is required to maintain (a) a minimum interest coverage ratio, as defined in the credit agreement, of 2.75 to 1.00 and (b) a maximum total leverage ratio, as defined in the credit agreement, of 4.00 to 1.00 through the fiscal quarter ending June 30, 2019, then 3.75 to 1.00 through the fiscal quarter ending June 30, 2020, then 3.50 to 1.00 thereafter.
Term Loan Facility. The term loan facility had an initial commitment of $415.0 million. The full amount of the term loan facility was funded on May 9, 2018. Amounts borrowed under the term loan facility that are repaid or prepaid may not be re-borrowed. The term loan facility matures in May 2025. Net proceeds of $408.7 million from the term loan facility were utilized to partially fund the cash payment to Dover at the Separation and to pay fees and expenses incurred in connection with the Separation.
The term loan is subject to mandatory amortization payments of 1% per annum of the initial commitment of $415.0 million paid quarterly. Additionally, subject to certain exceptions, the term loan facility is subject to mandatory prepayments, including the amount equal to: 100% of the net cash proceeds of all non-ordinary course asset sales subject to (i) reinvestment periods and (ii) step-downs to 75% and 50% based on certain leverage targets; and 50% of excess cash flow, as defined in the credit agreement, with step-downs to 25% and 0% based on certain leverage targets. Apergy may voluntarily prepay amounts outstanding under the term loan facility in whole or in part at any time without premium or penalty, as defined in the credit agreement.
Revolving Credit Facility. The revolving credit facility consists of a 5-year senior secured facility with aggregate commitments in an amount equal to $250.0 million, of which up to $50.0 million is available for the issuance of letters of credit. Amounts repaid under the revolving credit facility may be re-borrowed. The revolving credit facility matures in May 2023.
As of December 31, 2019, aggregate contractual future principal payments on long-term debt are as follows:
|
|
|
|
|
(in thousands)
|
Principal Payments(1)
|
2020
|
$
|
—
|
|
2021
|
—
|
|
2022
|
—
|
|
2023
|
—
|
|
2024
|
—
|
|
Thereafter
|
565,000
|
|
Total
|
$
|
565,000
|
|
_______________________
(1) Principal payments included relate to our term loan facility and senior notes. See Note 14—Leases for future payments related to finance lease obligations.
NOTE 11—COMMITMENT AND CONTINGENCIES
Lease Commitments
See Note 14—Leases for a schedule of future minimum payments on our operating and finance lease arrangements.
Guarantees and Indemnifications
We have provided indemnities in connection with sales of certain businesses and assets, including representations and warranties, covenants and related indemnities for environmental health and safety, tax and employment matters. We do not have any material liabilities recorded for these indemnifications and are not aware of any claims or other information that would give rise to material payments under such indemnities.
In connection with the Separation, we entered into agreements with Dover that govern the treatment between Dover and us for certain indemnification matters and litigation responsibility. Generally, the separation and distribution agreement provides for
cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and to place financial responsibility for the obligations and liabilities of Dover’s business with Dover. The separation and distribution agreement also establishes procedures for handling claims subject to indemnification and related matters. In addition, pursuant to the tax matters agreement, we have agreed to indemnify Dover and its affiliates against any and all tax-related liabilities incurred by them relating to the Separation and/or certain related transactions to the extent caused by an acquisition of Apergy stock or assets or by any other action or failure to act undertaken by Apergy or its affiliates.
During the year ended December 31, 2019, and pursuant to the provisions of the tax matters agreement with Dover, we recognized $3.4 million of indemnification expense within “Selling, general and administrative expense” in the consolidated statements of income with respect to certain liabilities related to tax audits for the 2012-2016 tax years. We received notification in February 2020 that the tax audits and related assessments have been completed. The difference between the indemnification liability recorded at December 31, 2019 and the final settlement amount is not material to our consolidated financial statements.
As of December 31, 2019 and 2018, we had $15.7 million and $3.6 million, respectively, of outstanding letters of credit, surety bonds and guarantees which expire at various dates through 2026. These financial instruments are primarily maintained as security for insurance, warranty and other performance obligations. Generally, we would only be liable for the amount of these letters of credit and surety bonds in the event of default in the performance of our obligations, the probability of which we believe is remote.
Litigation and Environmental Matters
We are involved in various pending or potential legal actions in the ordinary course of our business. These proceedings primarily involve claims by private parties alleging injury arising out of use of our products, patent infringement, employment matters, and commercial disputes. We review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and accrued to-date, and the availability and extent of insurance coverage. We accrue a liability for legal matters that are probable and estimable, and as of December 31, 2019 and December 31, 2018, these liabilities were not material. Management is unable to predict the ultimate outcome of these actions because of the inherent uncertainty of litigation. However, management believes the most probable, ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Prior to the Separation, groundwater contamination was discovered at the Norris Sucker Rods plant site located in Tulsa, Oklahoma ("Norris"). Initial remedial efforts were undertaken at the time of discovery of the contamination and Norris has since coordinated monitoring and remediation with the Oklahoma Department of Environmental Quality ("ODEQ"). As part of the ongoing long-term remediation process, Norris contracted an engineering and consulting firm to develop a range of possible additional remedial alternatives in order to accelerate the remediation process and associated cost estimates for the work. In October 2019, we received the firm’s preliminary remedial alternatives for consideration. Now that we have such recommendations, we expect to begin discussions with ODEQ regarding our proposed long-term remediation plan. The plan is subject to ODEQ’s review, input, and approval. Because we have not yet finalized a plan for further remediation at the site and discussions with ODEQ remain ongoing, we cannot fully anticipate the timing, outcome or possible impact of such further remedial activities, financial or otherwise. At December 31, 2019, as a result of the recommendations in the report, we have accrued liabilities for these remediation efforts of approximately $2.0 million with such charges recorded within “Selling, general and administrative expense” in the consolidated statements of income. Liabilities could increase in the future at such time as we ultimately reach agreement with ODEQ on our remediation plan and such liabilities become probable and can be reasonably estimated.
NOTE 12—STOCKHOLDERS' EQUITY
Capital stock—The following is a summary of our capital stock activity:
|
|
|
|
(in thousands)
|
Common Stock
|
December 31, 2017
|
—
|
|
Issuance of common stock at the Separation
|
77,340
|
|
Shares issued—share-based compensation
|
13
|
|
December 31, 2018
|
77,353
|
|
Shares issued—share-based compensation
|
107
|
|
December 31, 2019
|
77,460
|
|
We have 250 million shares of preferred stock authorized, with a par value of $0.01 per share. No shares of preferred stock were outstanding as of December 31, 2019, 2018 or 2017.
Accumulated other comprehensive loss—Accumulated other comprehensive loss consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Foreign Currency Translation
|
|
Defined Pension and Other Post-Retirement Benefits
|
|
Accumulated Other Comprehensive Loss
|
December 31, 2017
|
$
|
(21,936
|
)
|
|
$
|
(4,480
|
)
|
|
$
|
(26,416
|
)
|
Reclassification adjustment for cumulative effect of change in accounting principle
|
—
|
|
|
(1,315
|
)
|
|
(1,315
|
)
|
Net transfer from Dover
|
—
|
|
|
(2,421
|
)
|
|
(2,421
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
(14,210
|
)
|
|
856
|
|
|
(13,354
|
)
|
Reclassification adjustment for net losses included in net income, net of tax
|
—
|
|
|
600
|
|
|
600
|
|
Other comprehensive income (loss), net of tax
|
(14,210
|
)
|
|
1,456
|
|
|
(12,754
|
)
|
December 31, 2018
|
(36,146
|
)
|
|
(6,760
|
)
|
|
(42,906
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
936
|
|
|
(2,711
|
)
|
|
(1,775
|
)
|
Reclassification adjustment for net losses included in net income, net of tax
|
—
|
|
|
644
|
|
|
644
|
|
Other comprehensive income (loss), net of tax
|
936
|
|
|
(2,067
|
)
|
|
(1,131
|
)
|
December 31, 2019
|
$
|
(35,210
|
)
|
|
$
|
(8,827
|
)
|
|
$
|
(44,037
|
)
|
Reclassifications from accumulated comprehensive loss—Reclassification adjustments from accumulated other comprehensive loss to net income related to defined pension and other post-retirement benefits consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Affected line items on the consolidated statements of income
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
|
Amortization of actuarial loss and net transition obligation(1)
|
$
|
364
|
|
|
$
|
330
|
|
|
$
|
397
|
|
|
Other expense, net
|
Amortization of prior service cost (1)
|
2
|
|
|
1
|
|
|
2
|
|
|
Other expense, net
|
Settlement loss (1)
|
508
|
|
|
479
|
|
|
—
|
|
|
Other expense, net
|
|
874
|
|
|
810
|
|
|
399
|
|
|
Income before income taxes
|
|
(230
|
)
|
|
(210
|
)
|
|
(141
|
)
|
|
Provision for (benefit from) income taxes
|
|
$
|
644
|
|
|
$
|
600
|
|
|
$
|
258
|
|
|
Net income
|
_______________________
|
|
(1)
|
These accumulated comprehensive loss components are included in the computation of net periodic benefit cost (See Note 17—Employee Benefit Plans for additional information).
|
NOTE 13—REVENUE
Our revenue is substantially generated from product sales derived from the sale of drilling and production equipment. Service revenue is earned as technical advisory assistance and field services related to our products are provided. Lease revenue is derived from rental income of leased production equipment and is recognized ratably over the lease term.
The majority of our revenue is short cycle in nature, with shipments occurring within a year from the customer order date. A small portion of our revenue is derived from contracts extending over one year. Our payment terms generally range between 30 to 90 days and vary by the location of our businesses and the types and volumes of products manufactured and sold, among other factors. Costs incurred to obtain a customer contract are not material to us.
Disaggregation of Revenue
Revenue disaggregated by revenue type was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017 (1)
|
Product revenue
|
$
|
1,000,630
|
|
|
$
|
1,090,218
|
|
|
$
|
922,692
|
|
Service revenue
|
82,021
|
|
|
83,334
|
|
|
63,386
|
|
Lease and other revenue
|
48,600
|
|
|
44,604
|
|
|
24,388
|
|
Total revenue
|
$
|
1,131,251
|
|
|
$
|
1,218,156
|
|
|
$
|
1,010,466
|
|
Revenue disaggregated by end market in each of our reportable segments was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017 (1)
|
Drilling Technologies
|
$
|
246,887
|
|
|
$
|
285,565
|
|
|
$
|
227,653
|
|
Production & Automation Technologies:
|
|
|
|
|
|
Artificial lift
|
687,607
|
|
|
725,584
|
|
|
602,287
|
|
Digital products
|
134,660
|
|
|
119,293
|
|
|
82,093
|
|
Other production equipment
|
63,117
|
|
|
88,754
|
|
|
103,564
|
|
Intra-segment eliminations
|
(1,020
|
)
|
|
(1,040
|
)
|
|
(5,131
|
)
|
|
884,364
|
|
|
932,591
|
|
|
782,813
|
|
Total revenue
|
$
|
1,131,251
|
|
|
$
|
1,218,156
|
|
|
$
|
1,010,466
|
|
Revenue disaggregated by geography was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017 (1)
|
United States
|
$
|
861,001
|
|
|
$
|
959,167
|
|
|
$
|
770,843
|
|
Canada
|
70,314
|
|
|
79,816
|
|
|
79,186
|
|
Middle East
|
60,064
|
|
|
53,516
|
|
|
48,899
|
|
Europe
|
51,965
|
|
|
38,669
|
|
|
28,112
|
|
Latin America
|
32,408
|
|
|
33,976
|
|
|
34,350
|
|
Australia
|
30,841
|
|
|
33,247
|
|
|
23,667
|
|
Asia-Pacific and other
|
24,658
|
|
|
19,765
|
|
|
25,409
|
|
Total revenue
|
$
|
1,131,251
|
|
|
$
|
1,218,156
|
|
|
$
|
1,010,466
|
|
_______________________
(1) Revenue for the year ended December 31, 2017 is presented in accordance with accounting standards in effect prior to our adoption of ASU No. 2014-09 on January 1, 2018.
Revenue is attributed to regions based on the location of our direct customer.
Performance Obligations
The majority of our contracts have a single performance obligation which represents, in most cases, the equipment or product sold to the customer. Some contracts include multiple performance obligations, often satisfied at or near the same time, such as a product and the related installation, extended warranty and/or maintenance services. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. We typically use observable prices to determine the stand-alone selling price of a performance obligation and utilize a cost plus margin approach when observable prices are not available.
Substantially all of our performance obligations are recognized at a point in time and are primarily related to our product revenue derived from the sale of drilling and production equipment. Revenue is recognized when control transfers to the customer upon shipment or completion of installation, testing, or certification as required under the contract. Leased equipment damaged in operation is generally charged to the customer and recognized as product revenue. Revenue is recognized over time for our service and lease offerings. Service revenue is recognized over time as we provide technical advisory assistance and field services related to our products.
Warranties
The majority of our contracts contain standard warranties in connection with the sale of a product to a customer which provide a customer assurance that the related product will function for a period of time as the parties intended. In addition to our standard warranties, we also offer extended warranties to our customers. Warranties that represent a distinct service are recognized as service revenue over the related warranty period.
Remaining performance obligations
As of December 31, 2019, we did not have any contracts with an original length of greater than a year from which revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied).
Contract Balances
The beginning and ending contract asset and contract liability balances from contracts with customers were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
December 31, 2019
|
|
December 31, 2018
|
|
January 1, 2018
|
Contract assets
|
|
$
|
285
|
|
|
$
|
4,571
|
|
|
$
|
4,733
|
|
Contract liabilities
|
|
$
|
6,148
|
|
|
$
|
5,863
|
|
|
$
|
3,912
|
|
Contract assets primarily relate to work completed for performance obligations that are satisfied over time and are recorded in “prepaid expenses and other current assets” on our consolidated balance sheets. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Contract liabilities relate to our obligation to transfer goods or services to a customer for which we have received advance consideration (or an amount of consideration is due) from the customer. Current contract liabilities are recorded in other “accrued expenses and other current liabilities” on our consolidated balance sheets.
NOTE 14—LEASES
Lessee Accounting
We have operating and finance leases for real estate, vehicles and equipment. Certain of our vehicle leases include residual value guarantees, which have been excluded from the measurement of our lease liabilities as we do not believe it is probable the residual value guarantees will be paid at the end of the lease. Our real estate and vehicle leases generally include options to renew or extend the lease term at our discretion. These options are included in the measurement of our lease liabilities only when it is reasonably certain that we will exercise these rights.
Balance sheet presentation—Leases are presented in our consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
|
Balance Sheet Classification
|
|
December 31, 2019
|
Right-of Use Assets:
|
|
|
|
|
Finance leases
|
|
Property, plant, and equipment, net
|
|
$
|
9,406
|
|
Operating leases
|
|
Other non-current assets
|
|
24,289
|
|
Total lease right-of-use assets
|
|
|
|
33,695
|
|
Lease Liabilities:
|
|
|
|
|
Finance leases - current
|
|
Current portion of finance lease liabilities
|
|
4,845
|
|
Finance leases
|
|
Long-term debt
|
|
4,530
|
|
Operating leases - current
|
|
Accrued expenses and other current liabilities
|
|
7,620
|
|
Operating leases
|
|
Other long-term liabilities
|
|
19,419
|
|
Total lease liabilities
|
|
|
|
$
|
36,414
|
|
Components of total lease cost—Components of total lease cost were as follows:
|
|
|
|
|
(in thousands)
|
Year ended December 31, 2019
|
Finance lease cost:
|
|
Amortization of right-of-use assets
|
$
|
5,200
|
|
Interest on lease liabilities
|
439
|
|
Operating lease cost (1)
|
11,191
|
|
Short-term lease cost
|
3,996
|
|
Variable lease cost
|
1,049
|
|
Sublease income
|
(463
|
)
|
Total net lease cost
|
$
|
21,412
|
|
_______________________
(1) Rent expense, net of sublease rental income, for our operating leases was $16.8 million and $15.6 million for the years ended December 31, 2018, and 2017, respectively.
Lease term and discount rate—Our weighted-average remaining lease term and weighted-average discount rate for operating and finance leases are as follows:
|
|
|
|
|
December 31, 2019
|
Weighted-average remaining lease term (years):
|
|
Operating lease
|
4.6
|
|
Finance lease
|
2.1
|
|
Weighted-average discount rate:
|
|
Operating lease
|
6.7
|
%
|
Finance lease
|
5.3
|
%
|
Maturity Analysis—Future minimum payments, as determined in accordance with ASC 842, on our operating and finance leases as of December 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
Operating
|
|
Finance
|
2020
|
$
|
9,096
|
|
|
$
|
5,219
|
|
2021
|
5,939
|
|
|
3,488
|
|
2022
|
5,147
|
|
|
1,054
|
|
2023
|
4,456
|
|
|
155
|
|
2024
|
2,906
|
|
|
34
|
|
Thereafter
|
4,889
|
|
|
—
|
|
Total future minimum lease payments
|
32,433
|
|
|
9,950
|
|
Interest included within lease payments
|
(5,394
|
)
|
|
(575
|
)
|
Total lease liabilities
|
$
|
27,039
|
|
|
$
|
9,375
|
|
Lessor Accounting
Lease revenue is primarily generated from our electric submersible pump (“ESP”) leased asset program within our Production & Automation Technologies segment. An ESP rental unit has components consisting of surface, downhole and cable equipment. Our lease arrangements generally allow customers to rent equipment on a daily basis with no stated end date. Customers may return the equipment at any point subsequent to the lease commencement date without penalty. We account for these arrangements as a daily renewal option beginning on the lease commencement date, with the lease term determined as the period in which it is reasonably certain the option will be exercised. The average length of these arrangements generally range from six months to nine months. Lease revenue was $44.7 million for the year ended December 31, 2019.
Leased assets—Components of our leased asset program, all of which are included within “Property, plant, and equipment, net” on our consolidated balance sheet, are as follows:
|
|
|
|
|
|
|
(in thousands)
|
Useful life
|
|
December 31, 2019
|
Cable equipment
|
1 year
|
|
$
|
52,144
|
|
Downhole equipment
|
1 year
|
|
32,193
|
|
Surface equipment
|
5 years
|
|
69,566
|
|
Other lease equipment
|
3 - 5 years
|
|
16,090
|
|
|
|
|
169,993
|
|
Accumulated depreciation
|
|
|
(71,968
|
)
|
Leased assets, net
|
|
|
$
|
98,025
|
|
Depreciation expense on our leased assets was $37.1 million for the year ended December 31, 2019.
NOTE 15—RESTRUCTURING
We initiated various restructuring programs and incurred severance and other restructuring costs by segment as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
Production & Automation Technologies
|
$
|
4,467
|
|
|
$
|
5,632
|
|
|
$
|
6,921
|
|
Drilling Technologies
|
710
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
5,177
|
|
|
$
|
5,632
|
|
|
$
|
6,921
|
|
|
Cost of goods and services
|
$
|
3,592
|
|
|
$
|
4,693
|
|
|
$
|
6,332
|
|
Selling, general and administrative expense
|
1,585
|
|
|
939
|
|
|
589
|
|
Total
|
$
|
5,177
|
|
|
$
|
5,632
|
|
|
$
|
6,921
|
|
Restructuring charges incurred during years ended December 31, 2019, 2018, and 2017, included the following programs, which were substantially completed during those three years:
Production & Automation Technologies. Production & Automation Technologies incurred restructuring charges of $4.5 million, $5.6 million and $6.9 million during the years ended December 31, 2019, 2018 and 2017, respectively, related to various programs, primarily focused on facility closures and consolidations, exit of certain nonstrategic product lines, and workforce reductions.
Drilling Technologies. Drilling Technologies recorded $0.7 million in restructuring charges during the year ended December 31, 2019, related to various programs, primarily focused on workforce reductions to better align the cost base with the significantly lower demand environment.
NOTE 16—INCOME TAXES
Prior to the Separation, the operations of Apergy were included in Dover’s U.S. combined federal and state income tax returns. Income tax expense and deferred tax balances are presented in these financial statements as if Apergy filed its own tax returns in each jurisdiction. These statements include tax losses and tax credits that may not reflect tax positions taken by Dover. In many cases, tax losses and tax credits generated by Apergy have been utilized by Dover.
Components of income before income taxes—Domestic and foreign components of income before income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
Domestic
|
$
|
51,073
|
|
|
$
|
104,234
|
|
|
$
|
65,923
|
|
Foreign
|
8,113
|
|
|
17,119
|
|
|
22,432
|
|
Income before income tax
|
$
|
59,186
|
|
|
$
|
121,353
|
|
|
$
|
88,355
|
|
Provision for (benefit from) income taxes—The provision for (benefit from) income taxes consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
Current:
|
|
|
|
|
|
U.S. federal
|
$
|
15,327
|
|
|
$
|
24,221
|
|
|
$
|
42,690
|
|
State and local
|
1,196
|
|
|
1,598
|
|
|
4,255
|
|
Foreign
|
4,264
|
|
|
4,362
|
|
|
6,127
|
|
Total current
|
20,787
|
|
|
30,181
|
|
|
53,072
|
|
Deferred:
|
|
|
|
|
|
U.S. federal
|
(12,815
|
)
|
|
(2,255
|
)
|
|
(73,544
|
)
|
State and local
|
(1,156
|
)
|
|
2,735
|
|
|
(1,595
|
)
|
Foreign
|
(590
|
)
|
|
(2,499
|
)
|
|
(97
|
)
|
Total deferred
|
(14,561
|
)
|
|
(2,019
|
)
|
|
(75,236
|
)
|
Provision for (benefit from) income taxes
|
$
|
6,226
|
|
|
$
|
28,162
|
|
|
$
|
(22,164
|
)
|
Effective income tax rate reconciliation—The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Statutory U.S. federal income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
Net difference resulting from:
|
|
|
|
|
|
State and local taxes, net of federal income tax benefit
|
3.2
|
|
|
3.4
|
|
|
2.1
|
|
Foreign withholding tax
|
1.8
|
|
|
0.3
|
|
|
—
|
|
Foreign derived intangible income
|
(0.8
|
)
|
|
(1.9
|
)
|
|
—
|
|
Foreign operations tax effect
|
—
|
|
|
0.3
|
|
|
(2.8
|
)
|
Research and experimentation tax credits
|
(1.2
|
)
|
|
(0.6
|
)
|
|
(0.7
|
)
|
Foreign tax credit
|
(8.0
|
)
|
|
(1.5
|
)
|
|
—
|
|
Domestic manufacturing deduction
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
Nondeductible expenses
|
2.5
|
|
|
0.7
|
|
|
0.7
|
|
ESOP dividends
|
—
|
|
|
(0.1
|
)
|
|
(0.2
|
)
|
Branch income
|
0.6
|
|
|
—
|
|
|
1.1
|
|
Tax return to accrual adjustments
|
(9.4
|
)
|
|
—
|
|
|
—
|
|
State deferred taxes
|
(7.9
|
)
|
|
—
|
|
|
—
|
|
Changes due to the Tax Reform Act
|
—
|
|
|
—
|
|
|
(54.3
|
)
|
Global intangible low-taxed income
|
—
|
|
|
2.3
|
|
|
—
|
|
Change in valuation allowance
|
9.0
|
|
|
—
|
|
|
—
|
|
Other
|
(0.3
|
)
|
|
(0.7
|
)
|
|
(1.6
|
)
|
Effective income tax rate
|
10.5
|
%
|
|
23.2
|
%
|
|
(25.1
|
)%
|
Deferred tax assets and liabilities—Significant components of deferred tax assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2019
|
|
December 31, 2018
|
Deferred tax assets attributable to:
|
|
|
|
Accrued compensation
|
$
|
8,725
|
|
|
$
|
8,146
|
|
Accrued expenses, principally for state income taxes, interest and warranty
|
455
|
|
|
2,807
|
|
Net operating loss and other carryforwards
|
5,937
|
|
|
766
|
|
Inventories
|
1,380
|
|
|
—
|
|
Accounts receivable, principally due to allowance for doubtful accounts
|
1,699
|
|
|
973
|
|
Long-term liabilities, principally warranty and exit cost
|
6,178
|
|
|
505
|
|
Other assets
|
1,202
|
|
|
64
|
|
Deferred tax assets
|
25,576
|
|
|
13,261
|
|
Valuation allowance
|
(6,027
|
)
|
|
(722
|
)
|
Deferred tax assets, net of valuation allowance
|
$
|
19,549
|
|
|
$
|
12,539
|
|
Deferred tax liabilities attributable to:
|
|
|
|
Inventories
|
$
|
—
|
|
|
$
|
(2,061
|
)
|
Intangible assets, including goodwill
|
(66,736
|
)
|
|
(83,436
|
)
|
Property, plant and equipment
|
(36,873
|
)
|
|
(25,520
|
)
|
Deferred tax liabilities
|
(103,609
|
)
|
|
(111,017
|
)
|
Net deferred tax liabilities
|
$
|
(84,060
|
)
|
|
$
|
(98,478
|
)
|
|
|
|
|
Other non-current assets
|
$
|
—
|
|
|
$
|
1,294
|
|
Deferred income taxes
|
(84,060
|
)
|
|
(99,772
|
)
|
|
$
|
(84,060
|
)
|
|
$
|
(98,478
|
)
|
Effective Tax Rate. Our effective tax rate was 10.5% for 2019 compared to 23.2% for 2018. The year-over-year decrease in the effective tax rate was primarily driven by deferred tax benefits associated with the 2018 pre-Separation tax return and a reduction in the combined state tax rate from 2018 to 2019 reflecting lower than estimated state income tax.
Net operating loss carryforwards. As of December 31, 2019, our deferred tax asset balance included non-U.S. net operating loss carryforwards of $1.8 million. This entire balance is available to be carried forward and will expire during the years 2024 through 2038. We have established valuation allowances by jurisdiction against the full amount of our net operating loss carryforwards as it is more likely that not these assets will not be realized.
Foreign tax credit carryforwards. As of December 31, 2019, our deferred tax asset balance included U.S. foreign tax credit carryforwards of $4.2 million. This entire balance is available to be carried forward and will expire during 2029. We maintain a valuation allowance against the full amount of our U.S. foreign tax credit carryforwards as it is more likely than not that these assets will not be realized.
Tax Reform Act. The Tax Reform Act, enacted on December 22, 2017, reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S. corporate income tax rate, we revalued our ending net deferred tax liabilities as of December 31, 2017, and recognized a provisional tax benefit of $53.2 million. The Tax Reform Act also imposed a tax for a one-time deemed repatriation of post-1986 unremitted foreign earnings and profits through the year ended December 31, 2017. We recorded a provisional tax expense related to the deemed repatriation of $3.9 million during the year ended December 31, 2017. We completed our accounting for the income tax effects of the Tax Reform Act in 2018 with no change to the provisional amounts recorded during the year ended December 31, 2017.
The GILTI provisions of the Tax Reform Act require us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. We elected to account for GILTI tax in the period in which it is incurred, and therefore did not provide any deferred tax impacts of GILTI in our consolidated financial statements for the year ended December 31, 2019. The impact of GILTI (net of foreign tax credits) had an immaterial impact to our income tax provision for the year ended December 31, 2019.
Unrecognized tax benefits. We file federal, state, and local tax returns in the United States as well as foreign tax returns. We are routinely audited by the tax authorities in these jurisdictions, and a number of audits are currently underway. We believe all income tax uncertainties have been properly accounted. We have not recorded a liability for uncertain tax positions as of December 31, 2019 and 2018.
Undistributed earnings. As of December 31, 2019, we did not provide for deferred taxes associated with withholding taxes on our earnings of our subsidiaries that are permanently reinvested.
NOTE 17—EMPLOYEE BENEFIT PLANS
Prior to the Separation, certain of our employees participated in defined benefit and non-qualified plans sponsored by Dover, which included participants of other Dover subsidiaries. For periods prior to the Separation, we accounted for such plans as multi-employer benefit plans and recorded a proportionate share of the cost in our consolidated statements of income. For the years ended December 31, 2018 and 2017, costs associated with these multi-employer plans amounted to $1.6 million, and $4.6 million, respectively.
Dover provided a defined benefit pension plan for its eligible U.S. employees and retirees (“U.S. Pension Plan”). Shortly before the Separation, Apergy participants in the U.S. Pension Plan (other than Norris USW participants) fully vested in their benefits, and all participants ceased accruing benefits. In addition, Apergy did not assume any funding requirements or obligations related to the U.S. Pension Plan upon the Separation. Norris USW participants were moved to a new pension plan and continued to accrue benefits.
Dover also provided a defined benefit pension plan for its eligible salaried non-U.S. employees and retirees in Canada (“Canada Salaried Pension Plan”). The Canada Salaried Pension Plan, including all assets and liabilities, was transferred to Apergy at the Separation. Shortly before the Separation, all non-Apergy participants in this plan ceased accruing benefits nor were permitted to make contributions, as applicable. The non-Apergy participants may elect a lump sum cash payment post Separation that will be the responsibility of Apergy and will be funded out of the plan assets.
Dover provided to certain U.S. management employees, through non-qualified plans, supplemental retirement benefits in excess of qualified plan limits imposed by federal tax law. As of January 1, 2018, Apergy participants in these non-qualified plans no longer accrued benefits nor were permitted to make contributions, as applicable. We assumed the funding requirements and related obligations attributable to Apergy employees associated with these non-qualified plans upon the Separation. The non-qualified plans are unfunded and contributions are made as benefits are paid.
At the Separation, we recognized $6.1 million of liabilities and $2.4 million of accumulated other comprehensive loss, net of tax, related to plans previously accounted for as multi-employer plans prior to the Separation.
We sponsor non-qualified plans covering certain U.S. employees and retirees. The plans provide supplemental retirement benefits in excess of qualified plan limits imposed by federal tax law. The plans are closed to new hires and all benefits under the plans are frozen.
Obligations and Funded Status
The funded status of our benefit plans, together with the associated balances recognized in our consolidated balance sheets as of December 31, 2019 and 2018, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement benefits
|
(in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Projected benefit obligation at January 1
|
$
|
15,948
|
|
|
$
|
3,881
|
|
|
$
|
13,061
|
|
|
$
|
14,197
|
|
Service cost
|
760
|
|
|
598
|
|
|
—
|
|
|
—
|
|
Interest cost
|
588
|
|
|
455
|
|
|
503
|
|
|
448
|
|
Benefits paid
|
(328
|
)
|
|
(370
|
)
|
|
(1,751
|
)
|
|
(1,022
|
)
|
Actuarial (gain)/loss (1)
|
2,784
|
|
|
(530
|
)
|
|
1,398
|
|
|
(562
|
)
|
Liabilities assumed from the Separation
|
—
|
|
|
14,348
|
|
|
—
|
|
|
—
|
|
Amendments
|
250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements and curtailments
|
(2,156
|
)
|
|
(1,763
|
)
|
|
—
|
|
|
—
|
|
Foreign currency translation and other
|
503
|
|
|
(671
|
)
|
|
—
|
|
|
—
|
|
Projected benefit obligation at December 31
|
18,349
|
|
|
15,948
|
|
|
13,211
|
|
|
13,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
15,130
|
|
|
3,993
|
|
|
—
|
|
|
—
|
|
Actual return on plan assets
|
1,888
|
|
|
(76
|
)
|
|
—
|
|
|
—
|
|
Company contributions
|
1,486
|
|
|
4,740
|
|
|
1,751
|
|
|
1,022
|
|
Benefits paid
|
(328
|
)
|
|
(370
|
)
|
|
(1,751
|
)
|
|
(1,022
|
)
|
Assets assumed from the Separation
|
—
|
|
|
9,227
|
|
|
—
|
|
|
—
|
|
Settlements and curtailments
|
(2,156
|
)
|
|
(1,763
|
)
|
|
—
|
|
|
—
|
|
Foreign currency translation and other
|
467
|
|
|
(621
|
)
|
|
—
|
|
|
—
|
|
Fair value of plan assets at December 31
|
16,487
|
|
|
15,130
|
|
|
—
|
|
|
—
|
|
Funded (unfunded) status at December 31
|
$
|
(1,862
|
)
|
|
$
|
(818
|
)
|
|
$
|
(13,211
|
)
|
|
$
|
(13,061
|
)
|
|
|
|
|
|
|
|
|
Other non-current assets
|
$
|
18
|
|
|
$
|
146
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued compensation and employee benefits
|
—
|
|
|
—
|
|
|
(1,592
|
)
|
|
(1,598
|
)
|
Other long-term liabilities
|
(1,880
|
)
|
|
(964
|
)
|
|
(11,619
|
)
|
|
(11,463
|
)
|
Funded (unfunded) status
|
$
|
(1,862
|
)
|
|
$
|
(818
|
)
|
|
$
|
(13,211
|
)
|
|
$
|
(13,061
|
)
|
|
|
|
|
|
|
|
|
Accumulated benefit obligations
|
$
|
16,235
|
|
|
$
|
14,076
|
|
|
$
|
13,211
|
|
|
$
|
13,061
|
|
_______________________
(1) Actuarial losses incurred for year ended December 31, 2019 primarily relate to change in discount rate assumption utilized in estimating the projected benefit obligation.
The following table summarizes the pre-tax amounts in accumulated other comprehensive loss as of December 31, 2019 and 2018 that have not been recognized as components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement
benefits
|
(in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Pre-tax amounts recognized in accumulated other comprehensive loss (income):
|
|
|
|
|
|
|
|
Unrecognized net actuarial loss
|
$
|
4,699
|
|
|
$
|
3,586
|
|
|
$
|
6,883
|
|
|
$
|
5,685
|
|
Unrecognized prior service cost
|
274
|
|
|
25
|
|
|
—
|
|
|
—
|
|
Unrecognized net transition asset
|
(10
|
)
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
Accumulated other comprehensive loss
|
$
|
4,963
|
|
|
$
|
3,603
|
|
|
$
|
6,883
|
|
|
$
|
5,685
|
|
The following table summarizes the accumulated benefit obligations and fair values of plan assets where the accumulated benefit obligation exceeds the fair value of plan assets as of December 31, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement benefits
|
(in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Aggregate accumulated benefit obligation
|
$
|
4,108
|
|
|
$
|
3,722
|
|
|
$
|
13,211
|
|
|
$
|
13,061
|
|
Aggregate fair value of plan assets
|
3,449
|
|
|
3,672
|
|
|
—
|
|
|
—
|
|
The following table summarizes the projected benefit obligations and fair values of plan assets where the projected benefit obligation exceeds the fair value of plan assets as of December 31, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement benefits
|
(in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Aggregate projected benefit obligation
|
$
|
13,834
|
|
|
$
|
12,334
|
|
|
$
|
13,211
|
|
|
$
|
13,061
|
|
Aggregate fair value of plan assets
|
11,954
|
|
|
11,370
|
|
|
—
|
|
|
—
|
|
Net Periodic Benefit Cost
Components of the net periodic benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement benefits
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Service cost
|
$
|
760
|
|
|
$
|
598
|
|
|
$
|
106
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
588
|
|
|
455
|
|
|
137
|
|
|
503
|
|
|
448
|
|
|
621
|
|
Expected return on plan assets
|
(733
|
)
|
|
(593
|
)
|
|
(198
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of prior service cost
|
2
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss
|
162
|
|
|
127
|
|
|
68
|
|
|
200
|
|
|
202
|
|
|
330
|
|
Amortization of transition obligation
|
2
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlement loss
|
508
|
|
|
479
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Net periodic benefit cost
|
$
|
1,289
|
|
|
$
|
1,068
|
|
|
$
|
114
|
|
|
$
|
703
|
|
|
$
|
650
|
|
|
$
|
950
|
|
Assumptions
The following weighted-average assumptions were used to determine the benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement benefits
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Discount rate
|
3.11
|
%
|
|
3.90
|
%
|
|
3.00
|
%
|
|
4.10
|
%
|
The following weighted-average assumptions were used to determine the net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
Other post-retirement benefits
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Discount rate
|
3.85
|
%
|
|
3.68
|
%
|
|
3.75
|
%
|
|
4.10
|
%
|
|
3.35
|
%
|
|
3.55
|
%
|
Expected return on plan assets
|
4.89
|
%
|
|
4.80
|
%
|
|
5.50
|
%
|
|
|
|
|
|
|
Plan Assets
The primary financial objective of the plans is to secure participant retirement benefits. Accordingly, the key objective in the plans’ financial management is to promote stability and, to the extent appropriate, growth in the funded status. We have retained professional investment managers to manage the plans’ assets and implement the investment process. The investment managers have the authority and responsibility to select appropriate investments in the asset classes specified by the terms of their applicable prospectus or investment manager agreements with the plans. The assets of the plans are invested to achieve an appropriate return for the plans consistent with a prudent level of risk. The asset return objective is to achieve, as a minimum over time, the passively managed return earned by market index funds, weighted in the proportions outlined by the asset class exposures identified in the plans’ strategic allocation.
Our pension plan assets measured at fair value on a recurring basis are presented below. Refer to “Fair value measurements” in Note 1 to these consolidated financial statements for a description of the levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
December 31, 2019
|
|
December 31, 2018
|
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Mutual funds
|
$
|
5,170
|
|
|
$
|
7,868
|
|
|
$
|
—
|
|
|
$
|
13,038
|
|
|
$
|
4,775
|
|
|
$
|
6,683
|
|
|
$
|
—
|
|
|
$
|
11,458
|
|
Cash and cash equivalents
|
3,449
|
|
|
—
|
|
|
—
|
|
|
3,449
|
|
|
3,672
|
|
|
—
|
|
|
—
|
|
|
3,672
|
|
Total
|
$
|
8,619
|
|
|
$
|
7,868
|
|
|
$
|
—
|
|
|
$
|
16,487
|
|
|
$
|
8,447
|
|
|
$
|
6,683
|
|
|
$
|
—
|
|
|
$
|
15,130
|
|
Mutual funds are categorized as either Level 1 or 2 depending on the nature of the observable inputs. We had no Level 3 plan assets as of December 31, 2019 and 2018. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.
Expected contributions in 2020 are $1.1 million. The non-qualified plans are unfunded and contributions are made as benefits are paid.
Estimated Future Benefit Payments
Estimated future benefit payments to retirees from our various pension and other post-retirement benefit plans are outlined in the table below. Actual benefit payments may differ from these expected payments.
|
|
|
|
|
|
|
|
|
(in thousands)
|
Pensions
|
|
Other Post-retirement benefits
|
2020
|
$
|
1,139
|
|
|
$
|
1,592
|
|
2021
|
857
|
|
|
1,424
|
|
2022
|
941
|
|
|
1,295
|
|
2023
|
785
|
|
|
1,167
|
|
2024
|
782
|
|
|
1,040
|
|
2025-2029
|
5,427
|
|
|
3,557
|
|
Defined Contribution Plan
We offer a defined contribution retirement plan which covers the majority of our U.S. employees, as well as employees in certain other countries. Expense relating to defined contribution plans was $9.0 million, $9.6 million and $8.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
NOTE 18—EQUITY AND CASH INCENTIVE PROGRAMS
Prior to the Separation, Dover granted share-based awards to its officers and other key employees, including certain Apergy individuals. The principal awards issued under Dover’s stock-based compensation plans included stock options, stock-settled stock appreciation rights, restricted stock units and performance share awards. All awards granted under the program consisted of Dover common shares and are not necessarily indicative of the results that Apergy would have experienced as a stand-alone public company for the periods presented prior to the Separation. Effective with the Separation, outstanding Dover share-based awards were converted to Apergy share-based awards, with the exception of outstanding Dover performance share awards that relate to performance periods ending after the Separation. Such performance share awards were cancelled effective with the Separation.
In connection with the Separation, the Board of Directors of Apergy adopted the Apergy Corporation 2018 Equity and Cash Incentive Plan (“2018 Plan”). The 2018 Plan was also approved by Dover in its capacity as the sole stockholder of Apergy at the time of adoption. A total of 6.5 million shares of common stock are reserved for issuance under the 2018 Plan, subject to customary adjustments arising from stock splits and other similar changes.
The 2018 Plan authorized the grant of stock options, stock-settled stock appreciation rights (“SARs”), restricted stock awards, restricted stock units, performance share awards, cash performance awards, directors’ shares and deferred stock units. The Apergy Compensation Committee determines the exercise price for options and the base price of SARs, which may not be less than the fair market value of Apergy common stock on the date of grant. Generally, stock options or SARs vest after three years of service and expire at the end of ten years. Performance share awards vest if Apergy achieves certain pre-established performance targets based on specified performance criteria over a performance period of not less than three years.
Stock-based compensation expense is reported within “selling, general and administrative expense” in the consolidated statements of income. Stock-based compensation expense relating to all stock-based incentive plans was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Stock-based compensation expense
|
$
|
10,250
|
|
|
$
|
5,375
|
|
|
$
|
2,236
|
|
Tax benefit
|
(2,153
|
)
|
|
(1,141
|
)
|
|
(774
|
)
|
Stock-based compensation expense, net of tax
|
$
|
8,097
|
|
|
$
|
4,234
|
|
|
$
|
1,462
|
|
SARs
We did not issue SARs during 2019 and 2018. In 2017, SARs were granted by Dover and the fair value of each SAR granted was estimated on the grant date using a Black-Scholes option-pricing model utilizing the following assumptions:
|
|
|
|
|
|
2017
|
Risk-free interest rate
|
1.80
|
%
|
Dividend yield
|
2.27
|
%
|
Expected life (years)
|
4.6
|
|
Volatility
|
21.90
|
%
|
Grant price
|
$
|
79.28
|
|
Fair value at date of grant
|
$
|
12.63
|
|
A summary of activity relating to SARs outstanding for the year ended December 31, 2019, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
(in thousands)
|
Outstanding at January 1, 2019
|
477,950
|
|
|
$
|
29.43
|
|
|
|
|
|
Forfeited / expired
|
(7,030
|
)
|
|
34.13
|
|
|
|
|
|
Exercised
|
(48,559
|
)
|
|
25.95
|
|
|
|
|
|
Outstanding at December 31, 2019
|
422,361
|
|
|
29.75
|
|
|
6.1
|
|
$
|
1,799
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2019
|
253,901
|
|
|
$
|
26.84
|
|
|
5.4
|
|
$
|
1,799
|
|
Unrecognized compensation expense related to SARs not yet exercisable was not material to our consolidated financial statements as of December 31, 2019.
Other information regarding the exercise of SARs is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
SARs:
|
|
|
|
|
|
Fair value of SARs that became exercisable
|
$
|
662
|
|
|
$
|
310
|
|
|
$
|
1,239
|
|
Aggregate intrinsic value of SARs exercised
|
629
|
|
|
40
|
|
|
2,787
|
|
Performance Share Awards - Dover
Performance shares granted by Dover were cancelled effective with the Separation. Performance share awards granted prior to the Separation were considered performance condition awards as attainment was based on Dover’s performance relative to established internal metrics. The fair value of these awards was determined using Dover’s closing stock price on the date of grant. The expected attainment of the internal metrics for these awards was analyzed each reporting period, and the related expense was adjusted based on expected attainment. The cumulative effect on current and prior periods of a change in expected attainment is recognized in stock-based compensation expense in the period of change.
The fair value and average attainment used in determining stock-based compensation expense of the performance shares issued in 2017 are as follows:
|
|
|
|
|
Performance shares:
|
2017
|
Fair value per share at date of grant
|
$
|
79.28
|
|
Average attainment rate reflected in expense
|
0.0
|
%
|
Performance Share Awards - Apergy
Market Vesting Conditions
We granted 46,459 and 86,817 performance share awards subject to market vesting conditions during 2019 and 2018, respectively, under the 2018 Plan. These awards vest if Apergy achieves certain pre-established performance targets based on specified performance criteria over a performance period of not less than three years. The performance targets for these awards are classified as a market vesting condition, therefore the compensation cost was calculated using the grant date fair market value, as estimated using a Monte Carlo simulation, and is not subject to change based on future events. The fair value used in determining stock-based compensation expense of the performance share awards issued in 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
Performance shares:
|
2019
|
|
2018
|
Fair value per share at date of grant
|
$
|
57.43
|
|
|
$
|
56.32
|
|
Performance Vesting Conditions
We granted 46,460 performance share awards subject to performance vesting conditions during 2019 under the 2018 Plan. These awards are considered performance condition awards as attainment is based on Apergy’s performance relative to established internal metrics. The fair value of these awards was determined using Apergy’s closing stock price on the date of grant. The expected attainment of the internal metrics for these awards is analyzed each reporting period, and the related expense is adjusted based on expected attainment. The cumulative effect on current and prior periods of a change in expected attainment is recognized in stock-based compensation expense in the period of change.
The fair value and average attainment used in determining stock-based compensation expense of the performance shares issued in 2019 are as follows:
|
|
|
|
|
Performance shares:
|
2019
|
Fair value per share at date of grant
|
$
|
40.22
|
|
Average attainment rate reflected in expense
|
100.0
|
%
|
A summary of activity for Apergy’s performance share awards for the year ended December 31, 2019, is as follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
Unvested at January 1, 2019
|
86,817
|
|
|
$
|
56.32
|
|
Granted
|
92,919
|
|
|
48.83
|
|
Forfeited
|
(5,010
|
)
|
|
52.60
|
|
Vested
|
—
|
|
|
—
|
|
Unvested at December 31, 2019
|
174,726
|
|
|
$
|
52.44
|
|
Unrecognized compensation expense related to unvested performance share awards as of December 31, 2019, was $5.3 million, which will be recognized over a weighted average period of 1.8 years.
Restricted Stock Units
Restricted stock units may be granted at no cost to certain officers and key employees. Restricted stock units generally vest over a three-or-four-year period.
A summary of activity for restricted stock units for the year ended December 31, 2019, is as follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
Unvested at January 1, 2019
|
414,840
|
|
|
$
|
41.91
|
|
Granted
|
183,143
|
|
|
37.82
|
|
Forfeited
|
(16,498
|
)
|
|
40.74
|
|
Vested
|
(141,437
|
)
|
|
39.35
|
|
Unvested at December 31, 2019
|
440,048
|
|
|
$
|
41.07
|
|
Unrecognized compensation expense relating to unvested restricted stock as of December 31, 2019, was $12.6 million, which will be recognized over a weighted average period of 1.5 years.
NOTE 19—FAIR VALUE MEASUREMENTS
We had no outstanding derivative contracts as of December 31, 2019 and 2018. Other assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018, were not significant; thus, no fair value disclosures are presented.
The fair value, based on Level 1 quoted market rates, of our Senior Notes was approximately $316.7 million as of December 31, 2019, as compared to the $300.0 million face value of the debt. The fair value, based on Level 2 quoted market rates, of our term loan facility was approximately $266.2 million as of December 31, 2019, as compared to the $265.0 million face value of the debt.
The carrying amounts of cash and cash equivalents, trade receivables, and accounts payable, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value due to their short-term nature.
Impairment of Assets Held For Sale
In March 2019, we classified our pressure vessel manufacturing business in our Production & Automation Technologies segment as held for sale and recognized an impairment loss of $1.7 million to adjust the carrying amount of the disposal group to fair value. The fair value was determined by a negotiated selling price through a non-binding expression of interest with a third party, a Level 3 input. We completed the sale of our pressure vessel manufacturing business in June 2019. See Note 6—Dispositions for additional information.
Acquisition
On July 31, 2019, Apergy entered into an asset purchase agreement to acquire certain assets, which meet the definition of a business. See Note 5—Acquisitions for additional information. The fair value of the contingent consideration is based on the probability of the acquired business achieving an eighteen month revenue target, a Level 3 input. As of December 31, 2019, the estimated fair value of the contingent consideration liability was $1.5 million, as attainment of the revenue target was deemed probable.
Credit Risk
By their nature, financial instruments involve risk, including credit risk, for non-performance by counterparties. Financial instruments that potentially subject us to credit risk primarily consist of trade receivables. We manage credit risk on trade receivables by transacting only with what management believes are financially secure counterparties, requiring credit approvals and credit limits, and monitoring counterparties’ financial condition. Our maximum exposure to credit loss in the event of non-performance by a customer is limited to the amount drawn and outstanding on account. Allowances for losses on trade receivables are established based on collectability assessments.
NOTE 20—SEGMENT INFORMATION
We report our results of operations in the following reporting segments: Production & Automation Technologies and Drilling Technologies. Management’s determination of our reporting segments was made on the basis of our strategic priorities within each segment and corresponds to the manner in which our chief operating decision maker reviews and evaluates operating performance to make decisions about resources to be allocated to the segment. In addition to our strategic priorities, segment reporting is also based on differences in the products and services we provide.
Our reporting segments are:
|
|
•
|
Production & Automation Technologies—designs, manufactures, markets and services a full range of artificial lift equipment, end-to-end digital automation solutions, as well as other production equipment. Production & Automation Technologies’ products are sold under a collection of brands including Harbison-Fischer, Norris, Alberta Oil Tool, Oil Lift Technology, PCS Ferguson, Pro-Rod, Upco, Unbridled ESP, Norriseal-Wellmark, Quartzdyne, Spirit, Theta, Timberline and Windrock.
|
|
|
•
|
Drilling Technologies—designs, manufactures and markets polycrystalline diamond cutters and bearings for use in oil and gas drill bits under the US Synthetic brand.
|
Segment revenue and segment operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
Segment revenue:
|
|
|
|
|
|
Production & Automation Technologies
|
$
|
884,364
|
|
|
$
|
932,591
|
|
|
$
|
782,813
|
|
Drilling Technologies
|
246,887
|
|
|
285,565
|
|
|
227,653
|
|
Total revenue
|
$
|
1,131,251
|
|
|
$
|
1,218,156
|
|
|
$
|
1,010,466
|
|
|
|
|
|
|
|
Income before income taxes:
|
|
|
|
|
|
Segment operating profit:
|
|
|
|
|
|
Production & Automation Technologies
|
$
|
54,024
|
|
|
$
|
74,187
|
|
|
$
|
24,567
|
|
Drilling Technologies
|
73,497
|
|
|
98,620
|
|
|
74,317
|
|
Total segment operating profit
|
127,521
|
|
|
172,807
|
|
|
98,884
|
|
Corporate expense and other (1)
|
29,034
|
|
|
23,806
|
|
|
9,666
|
|
Interest expense, net
|
39,301
|
|
|
27,648
|
|
|
863
|
|
Income before income taxes
|
$
|
59,186
|
|
|
$
|
121,353
|
|
|
$
|
88,355
|
|
_______________________
|
|
(1)
|
Corporate expense and other includes costs not directly attributable or allocated to our reporting segments such as corporate executive management and other administrative functions, costs related to our Separation from Dover and the results attributable to our noncontrolling interest.
|
Segment assets
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2019
|
|
2018
|
Production & Automation Technologies
|
$
|
1,668,319
|
|
|
$
|
1,702,396
|
|
Drilling Technologies
|
209,880
|
|
|
231,438
|
|
Corporate
|
44,626
|
|
|
39,282
|
|
Total assets
|
$
|
1,922,825
|
|
|
$
|
1,973,116
|
|
Geographic segment information
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2019
|
|
2018
|
Property, plant, and equipment, net:
|
|
|
|
United States
|
$
|
238,464
|
|
|
$
|
233,809
|
|
Middle East
|
2,760
|
|
|
3,616
|
|
Canada
|
5,749
|
|
|
6,299
|
|
Australia
|
789
|
|
|
254
|
|
Latin & South America
|
419
|
|
|
350
|
|
Total property, plant, and equipment, net
|
$
|
248,181
|
|
|
$
|
244,328
|
|
See Note 13—Revenue for information related to revenue by geography and end markets.
Other business segment information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
Years Ended December 31,
|
|
Depreciation & Amortization
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Production & Automation Technologies
|
$
|
30,291
|
|
|
$
|
45,190
|
|
|
$
|
28,483
|
|
|
$
|
110,131
|
|
|
$
|
112,955
|
|
|
$
|
100,912
|
|
Drilling Technologies
|
9,061
|
|
|
11,123
|
|
|
8,171
|
|
|
9,263
|
|
|
11,037
|
|
|
11,950
|
|
Corporate
|
428
|
|
|
1,605
|
|
|
—
|
|
|
544
|
|
|
469
|
|
|
—
|
|
Total
|
$
|
39,780
|
|
|
$
|
57,918
|
|
|
$
|
36,654
|
|
|
$
|
119,938
|
|
|
$
|
124,461
|
|
|
$
|
112,862
|
|
NOTE 21—CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Apergy Corporation has senior notes outstanding, the payment obligations of which are fully and unconditionally guaranteed by certain 100-percent-owned subsidiaries of Apergy on a joint and several basis. The following financial information presents the results of operations, financial position and cash flows for:
|
|
•
|
Apergy Corporation (issuer)
|
|
|
•
|
100-percent-owned guarantor subsidiaries
|
|
|
•
|
All other non-guarantor subsidiaries
|
|
|
•
|
Adjustments and eliminations necessary to present Apergy results on a consolidated basis.
|
This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and related notes. As disclosed in Note 1—Basis Of Presentation And Summary Of Significant Accounting Policies, we have revised prior period financial statements for the years ended December 31, 2018 and 2017. The errors, which were immaterial to our previously filed consolidated financial statements, are not material to this disclosure. We have revised the Condensed Consolidating Statements of Income for the years ended December 31, 2018 and 2017 for Apergy Corporation, Subsidiary Guarantors, Subsidiary Non-guarantors, and Adjustments and eliminations. We have revised the Condensed Consolidating Balance Sheet as of December 31, 2018 for Apergy Corporation, Subsidiary Guarantors, Subsidiary Non-guarantors, and Adjustments and eliminations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Product revenue
|
$
|
—
|
|
|
$
|
884,355
|
|
|
$
|
116,275
|
|
|
$
|
—
|
|
|
$
|
1,000,630
|
|
Other revenue
|
—
|
|
|
120,677
|
|
|
53,830
|
|
|
(43,886
|
)
|
|
130,621
|
|
Total revenue
|
—
|
|
|
1,005,032
|
|
|
170,105
|
|
|
(43,886
|
)
|
|
1,131,251
|
|
Cost of goods and services
|
—
|
|
|
654,440
|
|
|
143,962
|
|
|
(44,255
|
)
|
|
754,147
|
|
Gross profit
|
—
|
|
|
350,592
|
|
|
26,143
|
|
|
369
|
|
|
377,104
|
|
Selling, general and administrative expense
|
271
|
|
|
251,834
|
|
|
23,909
|
|
|
—
|
|
|
276,014
|
|
Interest expense, net
|
38,673
|
|
|
594
|
|
|
34
|
|
|
—
|
|
|
39,301
|
|
Other expense, net
|
—
|
|
|
937
|
|
|
1,666
|
|
|
—
|
|
|
2,603
|
|
Income (loss) before income taxes and equity in earnings of affiliates
|
(38,944
|
)
|
|
97,227
|
|
|
534
|
|
|
369
|
|
|
59,186
|
|
Provision for (benefit from) income taxes
|
(8,906
|
)
|
|
13,934
|
|
|
1,122
|
|
|
76
|
|
|
6,226
|
|
Income (loss) before equity in earnings of affiliates
|
(30,038
|
)
|
|
83,293
|
|
|
(588
|
)
|
|
293
|
|
|
52,960
|
|
Equity in earnings of affiliates
|
82,202
|
|
|
4,313
|
|
|
9,294
|
|
|
(95,809
|
)
|
|
—
|
|
Net income
|
52,164
|
|
|
87,606
|
|
|
8,706
|
|
|
(95,516
|
)
|
|
52,960
|
|
Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
796
|
|
|
—
|
|
|
796
|
|
Net income attributable to Apergy
|
$
|
52,164
|
|
|
$
|
87,606
|
|
|
$
|
7,910
|
|
|
$
|
(95,516
|
)
|
|
$
|
52,164
|
|
Comprehensive income attributable to Apergy
|
$
|
51,033
|
|
|
$
|
86,077
|
|
|
$
|
8,296
|
|
|
$
|
(94,373
|
)
|
|
$
|
51,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Product revenue
|
$
|
—
|
|
|
$
|
965,057
|
|
|
$
|
125,161
|
|
|
$
|
—
|
|
|
$
|
1,090,218
|
|
Other revenue
|
—
|
|
|
126,508
|
|
|
45,112
|
|
|
(43,682
|
)
|
|
127,938
|
|
Total revenue
|
—
|
|
|
1,091,565
|
|
|
170,273
|
|
|
(43,682
|
)
|
|
1,218,156
|
|
Cost of goods and services
|
—
|
|
|
696,874
|
|
|
147,255
|
|
|
(42,977
|
)
|
|
801,152
|
|
Gross profit
|
—
|
|
|
394,691
|
|
|
23,018
|
|
|
(705
|
)
|
|
417,004
|
|
Selling, general and administrative expense
|
1,614
|
|
|
241,796
|
|
|
21,537
|
|
|
—
|
|
|
264,947
|
|
Interest expense, net
|
26,973
|
|
|
633
|
|
|
42
|
|
|
—
|
|
|
27,648
|
|
Other expense, net
|
—
|
|
|
1,322
|
|
|
1,733
|
|
|
1
|
|
|
3,056
|
|
Income before income taxes and equity in earnings of affiliates
|
(28,587
|
)
|
|
150,940
|
|
|
(294
|
)
|
|
(706
|
)
|
|
121,353
|
|
Benefit from income taxes
|
(8,727
|
)
|
|
38,395
|
|
|
(1,358
|
)
|
|
(148
|
)
|
|
28,162
|
|
Income before equity in earnings of affiliates
|
(19,860
|
)
|
|
112,545
|
|
|
1,064
|
|
|
(558
|
)
|
|
93,191
|
|
Equity in earnings of affiliates
|
112,597
|
|
|
25,652
|
|
|
45,308
|
|
|
(183,557
|
)
|
|
—
|
|
Net income
|
92,737
|
|
|
138,197
|
|
|
46,372
|
|
|
(184,115
|
)
|
|
93,191
|
|
Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
454
|
|
|
—
|
|
|
454
|
|
Net income attributable to Apergy
|
$
|
92,737
|
|
|
$
|
138,197
|
|
|
$
|
45,918
|
|
|
$
|
(184,115
|
)
|
|
$
|
92,737
|
|
Comprehensive income attributable to Apergy
|
$
|
79,983
|
|
|
$
|
136,893
|
|
|
$
|
34,466
|
|
|
$
|
(171,359
|
)
|
|
$
|
79,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Product revenue
|
$
|
—
|
|
|
$
|
799,337
|
|
|
$
|
123,355
|
|
|
$
|
—
|
|
|
$
|
922,692
|
|
Other revenue
|
—
|
|
|
82,725
|
|
|
41,152
|
|
|
(36,103
|
)
|
|
87,774
|
|
Total revenue
|
—
|
|
|
882,062
|
|
|
164,507
|
|
|
(36,103
|
)
|
|
1,010,466
|
|
Cost of goods and services
|
—
|
|
|
585,592
|
|
|
140,717
|
|
|
(35,911
|
)
|
|
690,398
|
|
Gross profit
|
—
|
|
|
296,470
|
|
|
23,790
|
|
|
(192
|
)
|
|
320,068
|
|
Selling, general and administrative expense
|
—
|
|
|
201,797
|
|
|
19,610
|
|
|
—
|
|
|
221,407
|
|
Interest expense, net
|
—
|
|
|
834
|
|
|
29
|
|
|
—
|
|
|
863
|
|
Other expense, net
|
—
|
|
|
10,169
|
|
|
(726
|
)
|
|
—
|
|
|
9,443
|
|
Income before income taxes and equity in loss of affiliates
|
—
|
|
|
83,670
|
|
|
4,877
|
|
|
(192
|
)
|
|
88,355
|
|
Benefit from income taxes
|
—
|
|
|
(10,510
|
)
|
|
(11,587
|
)
|
|
(67
|
)
|
|
(22,164
|
)
|
Income before equity in loss of affiliates
|
—
|
|
|
94,180
|
|
|
16,464
|
|
|
(125
|
)
|
|
110,519
|
|
Equity in earnings of affiliates
|
109,589
|
|
|
21,294
|
|
|
10,335
|
|
|
(141,218
|
)
|
|
—
|
|
Net income
|
109,589
|
|
|
115,474
|
|
|
26,799
|
|
|
(141,343
|
)
|
|
110,519
|
|
Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
930
|
|
|
—
|
|
|
930
|
|
Net income attributable to Apergy
|
$
|
109,589
|
|
|
$
|
115,474
|
|
|
$
|
25,869
|
|
|
$
|
(141,343
|
)
|
|
$
|
109,589
|
|
Comprehensive income attributable to Apergy
|
$
|
116,830
|
|
|
$
|
118,354
|
|
|
$
|
30,231
|
|
|
$
|
(148,585
|
)
|
|
$
|
116,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
108
|
|
|
$
|
21,705
|
|
|
$
|
13,477
|
|
|
$
|
—
|
|
|
$
|
35,290
|
|
Receivables
|
572
|
|
|
190,101
|
|
|
39,000
|
|
|
(9,799
|
)
|
|
219,874
|
|
Inventories, net
|
—
|
|
|
181,596
|
|
|
31,015
|
|
|
(1,269
|
)
|
|
211,342
|
|
Prepaid expenses and other current assets
|
40
|
|
|
25,571
|
|
|
1,323
|
|
|
—
|
|
|
26,934
|
|
Total current assets
|
720
|
|
|
418,973
|
|
|
84,815
|
|
|
(11,068
|
)
|
|
493,440
|
|
Property, plant and equipment, net
|
—
|
|
|
236,295
|
|
|
11,886
|
|
|
—
|
|
|
248,181
|
|
Goodwill
|
—
|
|
|
639,281
|
|
|
271,832
|
|
|
—
|
|
|
911,113
|
|
Advances due from affiliates
|
495,699
|
|
|
20,582
|
|
|
87,686
|
|
|
(603,967
|
)
|
|
—
|
|
Investment in subsidiaries
|
1,095,712
|
|
|
683,003
|
|
|
552,386
|
|
|
(2,331,101
|
)
|
|
—
|
|
Intangible assets, net
|
—
|
|
|
168,711
|
|
|
69,996
|
|
|
—
|
|
|
238,707
|
|
Other assets
|
3,074
|
|
|
20,426
|
|
|
7,884
|
|
|
—
|
|
|
31,384
|
|
Total assets
|
1,595,205
|
|
|
2,187,271
|
|
|
1,086,485
|
|
|
(2,946,136
|
)
|
|
1,922,825
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
60
|
|
|
102,120
|
|
|
27,910
|
|
|
(9,799
|
)
|
|
120,291
|
|
Accrued compensation and employee benefits
|
—
|
|
|
31,974
|
|
|
6,496
|
|
|
—
|
|
|
38,470
|
|
Current portion of finance lease liabilities
|
—
|
|
|
4,745
|
|
|
100
|
|
|
—
|
|
|
4,845
|
|
Accrued expenses and other current liabilities
|
3,639
|
|
|
28,627
|
|
|
5,078
|
|
|
(1,269
|
)
|
|
36,075
|
|
Total current liabilities
|
3,699
|
|
|
167,466
|
|
|
39,584
|
|
|
(11,068
|
)
|
|
199,681
|
|
Advances due to affiliates
|
—
|
|
|
583,386
|
|
|
20,581
|
|
|
(603,967
|
)
|
|
—
|
|
Long-term debt
|
555,292
|
|
|
4,388
|
|
|
141
|
|
|
—
|
|
|
559,821
|
|
Deferred income taxes
|
—
|
|
|
68,286
|
|
|
15,774
|
|
|
—
|
|
|
84,060
|
|
Other long-term liabilities
|
—
|
|
|
36,610
|
|
|
6,439
|
|
|
—
|
|
|
43,049
|
|
Total liabilities
|
558,991
|
|
|
860,136
|
|
|
82,519
|
|
|
(615,035
|
)
|
|
886,611
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ capital
|
1,036,214
|
|
|
1,336,012
|
|
|
1,035,872
|
|
|
(2,331,101
|
)
|
|
1,076,997
|
|
Accumulated other comprehensive loss
|
—
|
|
|
(8,877
|
)
|
|
(35,160
|
)
|
|
—
|
|
|
(44,037
|
)
|
Total stockholders’ equity
|
1,036,214
|
|
|
1,327,135
|
|
|
1,000,712
|
|
|
(2,331,101
|
)
|
|
1,032,960
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
3,254
|
|
|
—
|
|
|
3,254
|
|
Total equity
|
1,036,214
|
|
|
1,327,135
|
|
|
1,003,966
|
|
|
(2,331,101
|
)
|
|
1,036,214
|
|
Total liabilities and equity
|
$
|
1,595,205
|
|
|
$
|
2,187,271
|
|
|
$
|
1,086,485
|
|
|
$
|
(2,946,136
|
)
|
|
$
|
1,922,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
108
|
|
|
$
|
27,533
|
|
|
$
|
14,191
|
|
|
$
|
—
|
|
|
$
|
41,832
|
|
Receivables
|
1,743
|
|
|
231,718
|
|
|
35,019
|
|
|
(17,044
|
)
|
|
251,436
|
|
Inventories, net
|
—
|
|
|
190,117
|
|
|
30,936
|
|
|
(1,632
|
)
|
|
219,421
|
|
Prepaid expenses and other current assets
|
24,583
|
|
|
15,387
|
|
|
3,106
|
|
|
(24,542
|
)
|
|
18,534
|
|
Total current assets
|
26,434
|
|
|
464,755
|
|
|
83,252
|
|
|
(43,218
|
)
|
|
531,223
|
|
Property, plant and equipment, net
|
—
|
|
|
231,373
|
|
|
12,955
|
|
|
—
|
|
|
244,328
|
|
Goodwill
|
—
|
|
|
633,771
|
|
|
271,214
|
|
|
—
|
|
|
904,985
|
|
Advances due from affiliates
|
600,802
|
|
|
14,185
|
|
|
82,889
|
|
|
(697,876
|
)
|
|
—
|
|
Investment in subsidiaries
|
1,008,325
|
|
|
682,545
|
|
|
540,622
|
|
|
(2,231,492
|
)
|
|
—
|
|
Intangible assets, net
|
—
|
|
|
198,531
|
|
|
85,157
|
|
|
—
|
|
|
283,688
|
|
Other assets
|
3,996
|
|
|
2,818
|
|
|
2,078
|
|
|
—
|
|
|
8,892
|
|
Total assets
|
1,639,557
|
|
|
2,227,978
|
|
|
1,078,167
|
|
|
(2,972,586
|
)
|
|
1,973,116
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
22
|
|
|
123,812
|
|
|
33,335
|
|
|
(17,044
|
)
|
|
140,125
|
|
Accrued compensation and employee benefits
|
—
|
|
|
35,278
|
|
|
5,268
|
|
|
—
|
|
|
40,546
|
|
Current portion of finance lease liabilities
|
—
|
|
|
4,320
|
|
|
—
|
|
|
—
|
|
|
4,320
|
|
Accrued expenses and other current liabilities
|
4,929
|
|
|
46,458
|
|
|
3,548
|
|
|
(26,174
|
)
|
|
28,761
|
|
Total current liabilities
|
4,951
|
|
|
209,868
|
|
|
42,151
|
|
|
(43,218
|
)
|
|
213,752
|
|
Intercompany notes payable
|
—
|
|
|
683,700
|
|
|
14,176
|
|
|
(697,876
|
)
|
|
—
|
|
Long-term debt
|
658,623
|
|
|
4,462
|
|
|
122
|
|
|
—
|
|
|
663,207
|
|
Deferred income taxes
|
—
|
|
|
79,344
|
|
|
20,428
|
|
|
—
|
|
|
99,772
|
|
Other long-term liabilities
|
—
|
|
|
19,441
|
|
|
961
|
|
|
—
|
|
|
20,402
|
|
Total liabilities
|
663,574
|
|
|
996,815
|
|
|
77,838
|
|
|
(741,094
|
)
|
|
997,133
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ capital
|
975,983
|
|
|
1,238,517
|
|
|
1,033,423
|
|
|
(2,231,492
|
)
|
|
1,016,431
|
|
Accumulated other comprehensive loss
|
—
|
|
|
(7,354
|
)
|
|
(35,552
|
)
|
|
—
|
|
|
(42,906
|
)
|
Total stockholders’ equity
|
975,983
|
|
|
1,231,163
|
|
|
997,871
|
|
|
(2,231,492
|
)
|
|
973,525
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
2,458
|
|
|
—
|
|
|
2,458
|
|
Total equity
|
975,983
|
|
|
1,231,163
|
|
|
1,000,329
|
|
|
(2,231,492
|
)
|
|
975,983
|
|
Total liabilities and equity
|
$
|
1,639,557
|
|
|
$
|
2,227,978
|
|
|
$
|
1,078,167
|
|
|
$
|
(2,972,586
|
)
|
|
$
|
1,973,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Cash provided (required) by operating activities
|
$
|
(48,970
|
)
|
|
$
|
204,877
|
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
|
$
|
155,899
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (required) by investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(37,725
|
)
|
|
(2,055
|
)
|
|
—
|
|
|
(39,780
|
)
|
Proceeds from sale of property, plant and equipment
|
—
|
|
|
4,580
|
|
|
18
|
|
|
—
|
|
|
4,598
|
|
Payment on sale of business
|
—
|
|
|
(2,194
|
)
|
|
—
|
|
|
—
|
|
|
(2,194
|
)
|
Acquisitions
|
—
|
|
|
(12,500
|
)
|
|
—
|
|
|
—
|
|
|
(12,500
|
)
|
Net cash required by investing activities
|
—
|
|
|
(47,839
|
)
|
|
(2,037
|
)
|
|
—
|
|
|
(49,876
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash provided (required) by financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt, net of discounts
|
36,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,500
|
|
Repayment of long-term debt
|
(141,500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(141,500
|
)
|
Advances due to (from) affiliates
|
153,970
|
|
|
(155,578
|
)
|
|
1,608
|
|
|
—
|
|
|
—
|
|
Payments on capital lease obligations
|
—
|
|
|
(5,493
|
)
|
|
(62
|
)
|
|
—
|
|
|
(5,555
|
)
|
Payments related to taxes withheld on stock-based
|
—
|
|
|
(1,795
|
)
|
|
(53
|
)
|
|
—
|
|
|
(1,848
|
)
|
Net cash provided (required) by financing activities
|
48,970
|
|
|
(162,866
|
)
|
|
1,493
|
|
|
—
|
|
|
(112,403
|
)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(162
|
)
|
|
—
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
Net (increase) decrease in cash and cash equivalents
|
—
|
|
|
(5,828
|
)
|
|
(714
|
)
|
|
—
|
|
|
(6,542
|
)
|
Cash and cash equivalents at beginning of period
|
108
|
|
|
27,533
|
|
|
14,191
|
|
|
—
|
|
|
41,832
|
|
Cash and cash equivalents at end of period
|
$
|
108
|
|
|
$
|
21,705
|
|
|
$
|
13,477
|
|
|
$
|
—
|
|
|
$
|
35,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Cash provided (required) by operating activities
|
$
|
(51,728
|
)
|
|
$
|
200,907
|
|
|
$
|
15,720
|
|
|
$
|
(999
|
)
|
|
$
|
163,900
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (required) by investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(55,070
|
)
|
|
(2,848
|
)
|
|
—
|
|
|
(57,918
|
)
|
Proceeds from sale of property, plant and equipment
|
—
|
|
|
1,127
|
|
|
60
|
|
|
—
|
|
|
1,187
|
|
Proceeds from the sale of businesses
|
—
|
|
|
2,473
|
|
|
—
|
|
|
—
|
|
|
2,473
|
|
Purchase price adjustments on acquisition
|
—
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
Net cash required by investing activities
|
—
|
|
|
(51,470
|
)
|
|
(2,735
|
)
|
|
—
|
|
|
(54,205
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash provided (required) by financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt, net of discounts
|
713,963
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
713,963
|
|
Payment of debt issue costs
|
(16,006
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,006
|
)
|
Repayment of long-term debt
|
(45,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,000
|
)
|
Advances due to (from) affiliates
|
(600,802
|
)
|
|
621,109
|
|
|
(20,307
|
)
|
|
—
|
|
|
—
|
|
Distributions to Dover Corporation, net
|
(319
|
)
|
|
(744,258
|
)
|
|
7,021
|
|
|
999
|
|
|
(736,557
|
)
|
Distribution to noncontrolling interest
|
—
|
|
|
—
|
|
|
(2,720
|
)
|
|
—
|
|
|
(2,720
|
)
|
Payments on capital lease obligations
|
—
|
|
|
(4,518
|
)
|
|
—
|
|
|
—
|
|
|
(4,518
|
)
|
Net cash provided (required) by financing activities
|
51,836
|
|
|
(127,667
|
)
|
|
(16,006
|
)
|
|
999
|
|
|
(90,838
|
)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(737
|
)
|
|
—
|
|
|
(737
|
)
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
108
|
|
|
21,770
|
|
|
(3,758
|
)
|
|
—
|
|
|
18,120
|
|
Cash and cash equivalents at beginning of period
|
—
|
|
|
5,763
|
|
|
17,949
|
|
|
—
|
|
|
23,712
|
|
Cash and cash equivalents at end of period
|
$
|
108
|
|
|
$
|
27,533
|
|
|
$
|
14,191
|
|
|
$
|
—
|
|
|
$
|
41,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
(in thousands)
|
Apergy
Corporation
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-guarantors
|
|
Adjustments
and
eliminations
|
|
Total
|
Cash provided by operating activities
|
$
|
—
|
|
|
$
|
64,422
|
|
|
$
|
11,561
|
|
|
$
|
67
|
|
|
$
|
76,050
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (required) by investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(35,008
|
)
|
|
(1,646
|
)
|
|
—
|
|
|
(36,654
|
)
|
Acquisitions, net of cash and cash equivalents acquired
|
—
|
|
|
—
|
|
|
(8,842
|
)
|
|
—
|
|
|
(8,842
|
)
|
Proceeds from sale of property, plant and equipment
|
—
|
|
|
3,433
|
|
|
114
|
|
|
—
|
|
|
3,547
|
|
Net cash required by investing activities
|
—
|
|
|
(31,575
|
)
|
|
(10,374
|
)
|
|
—
|
|
|
(41,949
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash provided (required) by financing activities:
|
|
|
|
|
|
|
|
|
|
Change in borrowings, net
|
—
|
|
|
—
|
|
|
(599
|
)
|
|
—
|
|
|
(599
|
)
|
Distributions to Dover Corporation, net
|
—
|
|
|
(27,124
|
)
|
|
(4,001
|
)
|
|
(67
|
)
|
|
(31,192
|
)
|
Distribution to noncontrolling interest
|
—
|
|
|
—
|
|
|
(1,212
|
)
|
|
—
|
|
|
(1,212
|
)
|
Payments of capital lease obligations
|
—
|
|
|
(3,690
|
)
|
|
—
|
|
|
—
|
|
|
(3,690
|
)
|
Net cash required by financing activities
|
—
|
|
|
(30,814
|
)
|
|
(5,812
|
)
|
|
(67
|
)
|
|
(36,693
|
)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
277
|
|
|
—
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
—
|
|
|
2,033
|
|
|
(4,348
|
)
|
|
—
|
|
|
(2,315
|
)
|
Cash and cash equivalents at beginning of period
|
—
|
|
|
3,730
|
|
|
22,297
|
|
|
—
|
|
|
26,027
|
|
Cash and cash equivalents at end of period
|
$
|
—
|
|
|
$
|
5,763
|
|
|
$
|
17,949
|
|
|
$
|
—
|
|
|
$
|
23,712
|
|
NOTE 22—CASH FLOW INFORMATION
Cash payments for income taxes and cash payments for interest incurred related to our debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2019
|
|
2018
|
|
2017
|
Cash information:
|
|
|
|
|
|
Cash paid for income taxes
|
$
|
26,464
|
|
|
$
|
27,191
|
|
|
$
|
8,698
|
|
Cash paid for interest
|
36,085
|
|
|
21,899
|
|
|
—
|
|
Supplemental cash flow information related to our lease liabilities is as follows:
|
|
|
|
|
|
|
(in thousands)
|
Statement of Cash Flows Classification
|
|
December 31, 2019
|
Cash paid for amounts included in measurement of lease liabilities:
|
|
|
|
Operating leases (1)
|
Operating
|
|
$
|
12,026
|
|
Finance leases - interest
|
Operating
|
|
439
|
|
Finance leases - principal
|
Financing
|
|
5,555
|
|
Supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets:
|
|
|
|
Operating leases (2)
|
Non-cash
|
|
$
|
38,225
|
|
Finance leases (3)
|
Non-cash
|
|
6,412
|
|
_______________________
(1) Cash required by operating leases is reported net of operating lease expense in the operating section of our consolidated statements of cash flows in “Accrued expenses and other liabilities.”
(2) Operating lease additions include lease liabilities recognized at the time of adoption. Refer to Note 2—New Accounting Standards for additional information.
(3) Capital lease additions were $4.4 million and $4.6 million for the years ended December 31, 2018 and 2017, respectively.
Lease Program
Our ESP leased asset program is reported in our Production & Automation Technologies segment. At the time of purchase, assets are recorded to inventory and are transferred to property, plant, and equipment when a customer contracts for an asset under our lease program. During the year ended December 31, 2019 and 2018, we transferred $75.7 million and $97.0 million of inventory into property, plant, and equipment as a result of assets entering our lease program.
Expenditures for surface equipment are reported in “Capital expenditures” in the investing section of our consolidated statement of cash flows. During the years ended December 31, 2019, 2018, and 2017 we made cash payments of $16.0 million, $26.7 million, and $14.5 million, respectively, for surface equipment. Expenditures for cable and downhole equipment are reported in “Leased assets” in the operating section of our consolidated statement of cash flows. Additionally, the recovery of the carrying value from the sale of assets on lease is presented in “Leased assets” in the operating section of our consolidated statements of cash flows.
Sale of Property
In March 2019, we completed the sale of an individual property previously classified as held for sale in our Production & Automation Technologies segment. Net proceeds of $2.1 million were received upon the close of the transaction, resulting in a gain that was not material to the consolidated statement of income during the year ended December 31, 2019.
In December 2019, we completed the sale of an individual property in our Production & Automation Technologies segment. Net proceeds of $0.8 million were received upon the close of the transaction, resulting in a gain of $0.6 million during the year ended December 31, 2019.
Sale of Business
Refer to Note 6—Dispositions for information related to our sale of our pressure vessel manufacturing business in our Production & Automation Technologies segment in June 2019.
In October 2018, we closed on the sale of our Fisher Pump business and related property. Net proceeds of $2.5 million were received upon the close of the transaction, resulting in a gain of $1.3 million during the year ended December 31, 2018.
NOTE 23—SUBSEQUENT EVENTS
On February 14, 2020, Apergy amended its credit agreement, which among other things (i) provides for the incurrence of an additional $150 million of revolving commitments under the amended credit agreement, upon consummation of the Merger as described in Part 1, Item 1, (ii) permits the consummation of the Merger and the incurrence of a senior secured term loan facility in an aggregate amount up to $537 million by ChampionX, and (iii) continues to provide that all obligations under the amended agreement continue to be guaranteed by certain of Apergy’s wholly owned U.S. subsidiaries.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
(in thousands, except per share data)
|
4th Qtr.
|
|
3rd Qtr.
|
|
2nd Qtr.
|
|
1st Qtr.
|
|
4th Qtr.
|
|
3rd Qtr.
|
|
2nd Qtr.
|
|
1st Qtr.
|
Revenue
|
$
|
247,748
|
|
|
$
|
276,839
|
|
|
$
|
306,170
|
|
|
$
|
300,494
|
|
|
$
|
313,133
|
|
|
$
|
316,171
|
|
|
$
|
305,747
|
|
|
$
|
283,105
|
|
Gross profit
|
72,634
|
|
|
92,699
|
|
|
108,760
|
|
|
103,011
|
|
|
106,595
|
|
|
112,327
|
|
|
104,090
|
|
|
93,992
|
|
Net income (loss)
|
(1,574
|
)
|
|
11,588
|
|
|
23,008
|
|
|
19,938
|
|
|
23,347
|
|
|
24,015
|
|
|
21,879
|
|
|
23,950
|
|
Net income (loss) attributable to Apergy
|
(1,823
|
)
|
|
11,394
|
|
|
22,937
|
|
|
19,656
|
|
|
23,187
|
|
|
23,961
|
|
|
21,816
|
|
|
23,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share (1)
|
$
|
(0.02
|
)
|
|
$
|
0.15
|
|
|
$
|
0.30
|
|
|
$
|
0.25
|
|
|
$
|
0.30
|
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
$
|
0.31
|
|
Diluted earnings (loss) per share (1)
|
$
|
(0.02
|
)
|
|
$
|
0.15
|
|
|
$
|
0.30
|
|
|
$
|
0.25
|
|
|
$
|
0.30
|
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
$
|
0.31
|
|
_______________________
(1) On May 9, 2018, 77,339,828 shares of our common stock were distributed to Dover stockholders in conjunction with the Separation. For comparative purposes, we have assumed the shares issued in conjunction with the Separation to be outstanding as of the beginning of each period prior to the Separation. In addition, we have assumed the potential dilutive securities outstanding as of May 8, 2018, were outstanding and fully dilutive in each of the periods with positive income prior to Separation.
The information included in the Selected Quarterly Financial Data table above includes the impact of revision adjustments to correct immaterial errors related to: (i) the assessing and recording of liabilities for state sales tax and associated penalties and interest, primarily resulting in an understatement of our selling, general, and administrative expense and interest expense and (ii) previously recorded amounts including, but not limited to, the write-off of inventory and leased assets, timing of revenue recognition, and revenue classification, that the Company concluded were immaterial to our previously filed consolidated financial statements. See the following tables for the impact of the corrections on each historical quarterly period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2018
|
(in thousands, except per share data)
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
Total revenue
|
|
$
|
311,202
|
|
|
$
|
1,931
|
|
|
$
|
313,133
|
|
Gross profit
|
|
105,271
|
|
|
1,324
|
|
|
106,595
|
|
Net income
|
|
22,732
|
|
|
615
|
|
|
23,347
|
|
Net income attributable to Apergy
|
|
$
|
22,571
|
|
|
$
|
616
|
|
|
$
|
23,187
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Apergy:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.29
|
|
|
$
|
0.01
|
|
|
$
|
0.30
|
|
Diluted
|
|
$
|
0.29
|
|
|
$
|
0.01
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
Three Months Ended September 30, 2018
|
(in thousands, except per share data)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
Total revenue
|
$
|
278,381
|
|
|
$
|
(1,542
|
)
|
|
$
|
276,839
|
|
|
$
|
316,468
|
|
|
$
|
(297
|
)
|
|
$
|
316,171
|
|
Gross profit
|
91,519
|
|
|
1,180
|
|
|
92,699
|
|
|
113,734
|
|
|
(1,407
|
)
|
|
112,327
|
|
Net income
|
10,419
|
|
|
1,169
|
|
|
11,588
|
|
|
25,496
|
|
|
(1,481
|
)
|
|
24,015
|
|
Net income attributable to Apergy
|
$
|
10,225
|
|
|
$
|
1,169
|
|
|
$
|
11,394
|
|
|
$
|
25,264
|
|
|
$
|
(1,303
|
)
|
|
$
|
23,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Apergy:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
$
|
0.15
|
|
|
$
|
0.33
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.31
|
|
Diluted
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
$
|
0.15
|
|
|
$
|
0.33
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
Three Months Ended June 30, 2018
|
(in thousands, except per share data)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
Total revenue
|
$
|
306,054
|
|
|
$
|
116
|
|
|
$
|
306,170
|
|
|
$
|
305,850
|
|
|
$
|
(103
|
)
|
|
$
|
305,747
|
|
Gross profit
|
109,769
|
|
|
(1,009
|
)
|
|
108,760
|
|
|
103,679
|
|
|
411
|
|
|
104,090
|
|
Net income
|
23,850
|
|
|
(842
|
)
|
|
23,008
|
|
|
22,075
|
|
|
(196
|
)
|
|
21,879
|
|
Net income attributable to Apergy
|
$
|
23,779
|
|
|
$
|
(842
|
)
|
|
$
|
22,937
|
|
|
$
|
22,154
|
|
|
$
|
(338
|
)
|
|
$
|
21,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Apergy:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.31
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.30
|
|
|
$
|
0.29
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.28
|
|
Diluted
|
$
|
0.31
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.30
|
|
|
$
|
0.28
|
|
|
$
|
—
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
(in thousands, except per share data)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
Total revenue
|
$
|
301,691
|
|
|
$
|
(1,197
|
)
|
|
$
|
300,494
|
|
|
$
|
283,126
|
|
|
$
|
(21
|
)
|
|
$
|
283,105
|
|
Gross profit
|
105,549
|
|
|
(2,538
|
)
|
|
103,011
|
|
|
93,615
|
|
|
377
|
|
|
93,992
|
|
Net income
|
22,569
|
|
|
(2,631
|
)
|
|
19,938
|
|
|
24,194
|
|
|
(244
|
)
|
|
23,950
|
|
Net income attributable to Apergy
|
$
|
22,287
|
|
|
$
|
(2,631
|
)
|
|
$
|
19,656
|
|
|
$
|
24,052
|
|
|
$
|
(279
|
)
|
|
$
|
23,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Apergy:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.29
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.25
|
|
|
$
|
0.31
|
|
|
$
|
—
|
|
|
$
|
0.31
|
|
Diluted
|
$
|
0.29
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.25
|
|
|
$
|
0.31
|
|
|
$
|
—
|
|
|
$
|
0.31
|
|